Solar energy is on the rise, earning a whopping $207.2 billion in 2022. With a compound annual growth rate (CAGR) projected at 13% between 2022 and 2030, the market could reach $552.4 billion by 2030. This is a great time to get involved if you’re a newcomer in the solar industry.
The solar business also comes with challenges. Navigating complex regulations, high start-up costs, and competition from established brands can dim even the brightest entrepreneurial spirit. Success requires sharp business acumen as well as technical know-how.
This guide offers insight on how to start a solar company. Topics include market research, competitive analysis, sourcing solar panels, marketing, registering an EIN, obtaining business insurance, and more. Here’s everything to know about starting a solar installation business.
1. Conduct Solar Company Market Research
Market research is an integral part of starting a solar panel business. It offers insight into your target market, local saturation, and trends among installing solar panels, and products. Market research comes in primary and secondary forms, both are important for new solar businesses.
Some details you’ll learn through market research on renewable energy include:
- In the US, solar currently accounts for just over 3% of electricity generation.
- Residential solar holds significant potential. there were over 3 million residential solar installations in the US in 2022.
- This market will grow as solar panel costs continue to fall and innovative financing options like solar leases expand access.
- Large solar farms play a crucial role in helping utilities meet renewable portfolio standards.
- Corporations are buying record amounts of solar power with over 11 GW of announced projects. This creates opportunities for solar developers and EPC contractors.
Market research helps you develop a clear business plan within the solar energy market. You’ll learn about pricing solar equipment and even marketing initiatives to try within your own solar panel business.
2. Analyze the Competition
A thorough competitive analysis is critical when entering the solar industry. With over 10,000 solar companies in the US, competition is fierce.
Use these tips to assess your competition and position your solar business for success:
- Review their website traffic and search engine ranking using tools like SEMrush.
- Study their digital marketing strategy on platforms like Facebook and YouTube for customer acquisition tactics.
- For regional competition, drive around neighborhoods and take note of lawn signs and sticker signs on existing solar homes.
- Check popular home service sites like EnergySage and Yelp to analyze customer reviews and ratings for local installers. Use this to benchmark the quality of service.
- Contact local permitting offices to request residential solar installation data over the past 1-3 years.
- Trade organizations like SEIA and state solar energy industry associations are also valuable for researching state policy impacts and solar incentives.
- Use this intel to inform business models and positioning decisions.
Understanding solar panel installation business competitors helps newcomers develop their business models. Information on pricing, services, and market trends all fall into place with thorough competitive analysis.
3. Costs to Start a Solar Company Business
Launching a solar company requires significant upfront capital investment. From licensing and permits to equipment and hiring staff, costs add up quickly. Plan for the following expenses:
- Licensing & Permits: Acquiring state electrical and construction contracting licenses run $200-$500 per license. Most states also require a specialty solar contractor license ($100-$300). In total budget $1,000-1,500 for permitting costs.
- Insurance: Contractors’ insurance (general liability & workers comp) will likely cost $3,000-$5,000 annually depending on location and payroll size. Build this expense into your operating budget.
- Hardware & Software: For project management and design you’ll need software like Aurora Solar ($199/mo) and Procore ($399+/mo). Don’t forget computers, network infrastructure, and solar sales tools adding around $15,000.
- Equipment & Inventory: Stocking parts/materials inventory and outfitting install trucks cost roughly $50,000 upfront, ranging higher for large operations. Warehouse space also runs $5-10/sq.ft.
- Hiring: Bringing on a small team of 2-3 installers ($45,000/year average salary), the sales rep ($65,000/year) and office admin ($40,000/year) costs $150,000+ in year one labor.
- Facilities & Utilities: Basic office lease and utilities total approximately $3,000 monthly plus a $5,000 security deposit.
In total, solar companies should model over $225,000 in start-up capital to properly position for growth. Be ready to self-fund or pitch investors.
- Payroll Taxes & Benefits: These additive HR costs amount to 20-30% of base salaries, so add another $45,000-$67,500 to yearly payroll expenses.
- Ongoing Training & Certifications: Solar is a quickly evolving industry. Expect to invest $5,000+ yearly on employee training and licensing to stay current.
- Sales & Marketing: Consistent brand advertising, digital campaigns, and lead generation will likely require $75,000-$150,000 annually. This drives new business growth.
- Vehicle Maintenance & Fuel: For a small truck fleet, allocate another $20,000+ for upkeep, mileage reimbursement, and rising fuel expenses.
- Growth Investments: As you scale, be ready to spend on hiring talent, upgrading systems, and potentially expanding to new locations. Budget $100,000+.
Finance smartly and maintain robust cash flow projections right from the start. This will set up your solar business for profitability.
4. Form a Legal Business Entity
When starting a solar company, choosing the right legal structure is critical. It impacts taxes, liability, and ease of raising capital. Weigh these common options:
A sole proprietorship is the easiest and cheapest way to form a business. You simply start working under your name without needing to formally register your business. However, this offers no personal liability protection. Any legal claims or business debts can impact your assets. For hazardous work like solar installations on rooftops, that risk is too great.
A general or limited partnership lets you share ownership with other partners. You register your partnership with your Secretary of State. However similar to sole proprietors, general partners remain personally liable for debts and claims. Disagreements between partners can get messy fast without clear ownership control.
Limited Liability Company (LLC)
For solar companies, forming an LLC provides the best liability protection while retaining business flexibility. Registering an LLC better shields your assets from any installation project lawsuits or claims. LLCs also allow you to divvy ownership, take on investors, and structure shares based on different membership classes. This facilitates later equity offerings to fuel growth.
Formal corporations require the most complex company structure with directors, shareholders, and more rigid ownership policies. Unless you are planning to eventually go public or raise funding via an IPO, an LLC delivers similar liability perks without the heightened legal overhead. So initially launching your solar venture as an LLC simplifies things.
5. Register Your Business For Taxes
Before hiring employees or accepting payments, every solar company must obtain an Employer Identification Number (EIN) from the IRS. Think of it like an SSN for your business.
An EIN is required to open business bank accounts, file taxes, apply for licenses and permits, and hire workers. Without one, you can’t properly operate.
To obtain an EIN, visit the IRS.gov online EIN assistant. This streamlined process only takes minutes. You will be asked to enter basic information about your LLC such as name, address, and ownership details. There is no filing fee. At the end, you will receive your unique 9-digit EIN to use on all official business forms and tax documents.
You should also contact your state revenue or taxation department to register for local sales tax collection. If selling taxable goods or services, you must charge state + local sales tax at the time of transaction and then remit these dollars to the state on schedule.
Failure to adhere puts your business at risk for audits and tax evasion penalties. Most states provide simple online registration. Fees range between $10 to $100 one-time or annually.
With both state sales tax ID and federal EIN set up, you can confidently invoice clients, hire solar teams, and pass IRS scrutiny as an above-the-board operation.
6. Setup Your Accounting
Robust accounting practices are essential for solar companies right from launch. With multi-stage projects, equipment investments, payroll, and ongoing overheads, complexity abounds. Having air-tight finances steers clear of cash flow issues or tax quagmires.
Start by implementing small business accounting software like QuickBooks. This automates tasks like invoicing, expense tracking, bank reconciliation, and reporting. QuickBooks seamlessly syncs with bank/credit card accounts, creating a unified financial picture. Plans start at $25/month.
Hire an Accountant
While software handles daily accounting, partnering with a bookkeeping firm or accountant provides experienced guidance. A qualified bookkeeper handles accounts receivable/payable, payroll, monthly close, and financial statement generation for roughly $100-$150/hour.
Come tax season, your accountant can handle year-end filings and ensure full compliance across sales taxes, payroll returns, and business income taxes. Expect fees of $2,000+ for corporate/LLC returns. If audited, your accountant can also represent the company.
Open a Business Bank Account
Always maintain a clear separation between business and personal finances. Keep dedicated solar company accounts for all transactions rather than commingling funds which muddies reporting.
Apply for a Business Credit Card
Similarly, acquire a business credit card solely for company expenditures. This builds a distinct credit profile. With an existing LLC, approval is easier and limits are often higher compared to personal cards. Provide your EIN and corporate details when applying. Expect $500+ limits to start.
7. Obtain Licenses and Permits
Before operating any solar energy systems or interacting with customers, proper licensing is required to legally and safely conduct business. Find federal license information through the U.S. Small Business Administration. The SBA also offers a local search tool for state and city requirements.
Most states mandate a specialty solar contractor license which involves proving technical competency, insurance minimums, bonding, and passing an exam. Fees start around $300. This qualifies you for solar projects.
For any rooftop solar installation, you must pull county building permits which require passing inspection by the local code official after completion. There is usually a small fee per project but this ensures adherence to safety standards.
To access state/federal incentives like tax credits on customer behalf or sell SRECs, additional solar certifications are typically required run by organizations like The North American Board of Certified Energy Practitioners (NABCEP). Getting credentialed also builds trust.
Most cities or counties require a basic business license to transact locally as a company. This usually only involves a small registration fee annually between $25-$100. Some regions may also mandate extra requirements like a point-of-sale system for processing taxes.
8. Get Business Insurance
Given the risks inherent in construction and field work, adequate insurance is vital for solar companies. It shields against liability claims and unexpected damages that could otherwise sink operations.
Without coverage, just a few incidents could spell the game over:
Worksite Injury – If an installer suffers an on-roof fall requiring hospitalization, associated medical bills could approach six figures without proper workers comp and exceed business assets.
Natural Disaster – An unusually strong hail storm destroys multiple active project sites damaging property and supply inventory. Lacking comprehensive coverage, the six-figure loss in gear, and illegally halted client projects could spur lawsuits or bankruptcy.
Truck Accident – At fault in a collision with a sedan that leaves 3 injured, multi-million dollar legal claims and repair costs without liability and collision policies could crush the company.
Safeguard against these scenarios by securing tailored small business insurance policies:
- Assess risks with an agent to model required coverage/limits across general liability, commercial property, workers’ compensation, etc. Quotes are often free.
- Consider add-ons like contractor E&O, flood protection, and cyber insurance as relevant.
- Research carrier ratings on sites like BBB and policy fine print before binding coverage.
- Pay premiums monthly or annually to maintain active policies. Expect yearly renewals.
For solar firms, costs typically tally between $3K – $10K+ annually based on payroll size and revenue. While not cheap, peace of mind is invaluable. Insure right!
9. Create an Office Space
An office provides solar companies with dedicated real estate for daily operations, equipment storage, and meeting customers. While home offices minimize costs, consider these options as your team expands:
A modest home office leveraging existing space keeps expenses low during launch. Expect to invest under $2,000 in outfitting a spare room with a desk, filing cabinets, phone line, and tools storage. Meet clients outside the home. Minimal noise or commuting also aids focus.
As you begin hiring, coworking spaces like WeWork offer flexible, rented desk space and infrastructure for around $300-$800 per worker monthly. With über fast wifi, conference rooms, printing/scanning, and lounge areas, these spaces cultivate productivity and opportunities to network with other small businesses onsite. No long-term lease minimizes risk.
Leasing a dedicated commercial suite makes sense once the core team reaches 10+ employees. Expect to pay $20-$30 per square foot in rental costs annually. The space can be customized to needs with conference spaces, training rooms, employee areas, and parts inventory. However, 5+ year leases are often required. Factor in $100,000+ to build out blank space.
Larger solar operations should secure warehouse space for equipment, commercial vehicles, and large-scale project staging. Expect base rents between $6-$10 per square foot. Access to transport and ample parking are key factors. An on-site office/training space proves useful for staff.
10. Source Your Equipment
Launching a solar operation requires specialized gear from trucks to PV panels and racking hardware. While buying new enables customization, significant cost savings can come from alternate acquisition models:
Ordering straight from manufacturers like Huawei and LONGi lets you hand-select premium components for maximum efficiency and lifespan. Expect to pay market rates. Having under 1 year old equipment also boosts marketing. Lead times range from 1-8 weeks during surges.
Purchasing quality used solar systems from decommissioned commercial projects, bank auctions or solar secondary markets can dramatically cut hardware costs. Facebook Marketplace and Craigslist often list local used panels and electrical accessories at 50%+ discounts. Supply is limited but great for smaller jobs.
Equipment rental makes sense for intermittent large-scale utility projects. National outfits like Sunbelt Rentals offer pneumatic panel installation tools, material elevators, and even generators for $100-$300 weekly. No storage overhead and the latest gear improves field productivity.
Multi-year equipment capital leases through solar finance firms allow scaling your fleet while easing cash flow pain. After a 10-40% down payment, secured gear loans feature 36-60 month terms tailored to your tax situation. End options include buyouts, upgrades, or returns.
11. Establish Your Brand Assets
Crafting a distinct brand identity is crucial for solar companies to stand out among thousands of regional installers. Define these core elements to aid recognition:
Getting a Business Phone Number
Acquire a dedicated business phone line through providers like RingCentral to enable professional communications. Features like vanity numbers, voicemail transcripts, and call routing prove useful for sales and ops teams. Plans start at around $30 monthly per user.
Creating a Logo and Brand Assets
A polished logo encapsulates your vision and style. When designing, consider concepts that connect with solar and sustainability. Embrace meaningful symbolism. Graphic services like Looka make professional logos easy, with options under $50.
Use brand colors, fonts, and graphic treatments cohesively across your website, presentations, signage, and collaterals for instant familiarity.
Creating Business Cards and Signage
Business cards serve as movable billboards to advance sales pipelines. Order quality cards showcasing your logo, web presence, headshot, and contact details. Bulk pricing at Vistaprint brings 500 cards under $50.
For fixed assets, install a large exterior sign at your office and yard signage on warehousing/staging areas to amplify awareness.
Purchasing a Domain Name
Secure an intuitive .com domain for the long term aligned closely to your company name. Top registrars like Namecheap offer domains for under $15 annually. Set it up to direct visitors to your business site.
Building a Website
Every solar company needs an information-rich website to share services, project photos, and bios. Those adept in web design can leverage intuitive DIY platforms like Wix for under $20 monthly. Outsource the task for $500+ on freelance networks such as Fiverr otherwise. Promote the site prominently on all assets to drive traffic.
12. Join Associations and Groups
Plugging into solar professional groups builds vital relationships and industry know-how. Actively participate in:
State solar energy industry associations like the Texas Solar Power Association and Florida Solar Energy Industries Association offer installer member benefits like training, legal resources, and legislative advocacy to strengthen regional policies. Memberships start at around $300 annually.
Attending monthly solar meetups facilitates hands-on knowledge sharing and relationship building with other regional companies. Discover upcoming events on sites like Meetup. Listen to guest speakers, showcase products/services, and exchange business cards during open networking.
With over 300 regional solar Facebook Groups, tap this digital infrastructure to crowdsource expertise on project quandaries, locate niche parts, and hire vetted talent. After building credibility by answering member questions, post service offerings to trusted communities flooding them with qualified leads.
13. How to Market a Solar Company Business
Implementing ongoing marketing propels a steady stream of qualified leads to spur solar sales. Combine digital tactics with community networking for the best results.
Start by tapping connections made during initial solar association memberships and meetups. Ask delighted customers if they would be willing to refer neighbors and friends seeking solar through word-of-mouth endorsements. In exchange, offer $100 referral bonuses or gift cards to keep motivation high.
For example, send periodic email blasts to your client list highlighting the referral program. This turns existing customers into lead-generation MVPs.
- Launch Google and Facebook ads geotargeting local home improvement searchers. Include promotional offers like free site assessments or solar tax credit consultations to boost response rates. Expect to invest at least $500 monthly per platform to compete.
- Start a YouTube channel creating weekly vlogs about solar incentives, behind-the-scenes project glimpses, and industry trends from the CEO. Optimizing titles for search drives views.
- Claim and update free profiles on home services sites like EnergySage and Yelp to gain visibility for local customers. Respond promptly to any inquiries or reviews.
- Blog regularly sharing solar wisdom, highlighting projects, and linking to credibility markers like awards or credentials. This aids SEO.
- Although less measurable, direct mail postcards and local newspaper ads still reach certain demographics. Consider small campaigns offering solar assessments or discounts to penetrate neighborhoods.
- Sponsor a local Little League team or community event for brand exposure. Show up to connect face-to-face with attendees.
- Place eye-catching yard signs with offers outside promising rooftop homes that fit ideal solar client profiles. Include QR codes to scan for instant online contact.
Stay nimble across channels but devote the largest marketing budgets to qualified digital lead generation sources providing strong ROAS.
14. Focus on the Customer
Stellar customer service must remain the sunlight that powers every solar company. How you make clients feel before, during, and after projects directly impact referrals and reviews driving future sales.
Given most homeowners only install solar once, wow them from the initial quote through to the final inspection to earn their glowing testimonial.
If, in the rare case they choose to move (taking their solar with them), you could offer them free moving services in a limited area.
For example, make site visits convenient by arriving early and dressed professionally with clear pricing folders, design sketches and your A+ BBB poster prominently displayed.
Answer all questions directly and admit if you need to follow up on complex incentive topics. Use email nurturing after to reinforce the next steps and timeline expectations.
Once panels activate, call to confirm satisfaction. Ask straight up if they would speak highly of their experience and offer to write a review on their behalf.
Before leaving, provide a small branded parting gift like a mug or hat to spark conversations about their solar choice throughout the neighborhood.
By fixating on customer happiness throughout the solar journey, you stack the deck for more five-star reviews, word-of-mouth referrals, and repeat or expanded purchases as their needs grow.