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Written by: Howard Tillerman
Howard Tillerman is the Chief Marketing Officer for Step By Step Business and an award-winning marketing professional.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on October 20, 2021
Investment range
$45,000 - $140,000
Revenue potential
$400,000 - $1.5 million p.a.
Time to build
3-6 months
Profit potential
$40,000 - $150,000 p.a.
Industry trend
Growing
Commitment
Full-time
When starting your solar panel installation business, keep these essential aspects in mind:
Interactive Checklist at your fingertips—begin your solar panel installation business today!
You May Also Wonder:
How do solar installation companies make money?
The first way solar panel installers make money is through installing solar panels. You can also make money by stocking and selling solar panels while subcontracting installation to independent operators.
Is solar installation business profitable?
Yes, it is. If you only deal with installing panels for clients who pay the entire sum at a go, you can make a profit of up to $54,000 a year. It is important to mention, though, that you’ll need a steady stream of contracts. If you’re handling high-ticket commercial installation projects you can make as much as $490,000 in profit per year.
What types of solar panel systems can I install and what factors should I consider when choosing them?
There are several types of solar panel systems you can install, including grid-tied systems, off-grid systems, and hybrid systems. When choosing a system, factors to consider include energy needs, available space for installation, budget, local regulations and incentives, and the solar panel efficiency and durability.
How can I differentiate my solar panel installation business from competitors in the market?
To differentiate your solar panel installation business from competitors, you can focus on several strategies. This includes offering exceptional customer service, providing personalized consultations and tailored solutions, using high-quality and reliable solar panels and equipment, staying updated with the latest industry trends and technologies, offering competitive pricing and financing options, and showcasing your expertise and track record through customer testimonials and case studies.
The first step is to determine if starting a solar panel installation business is a viable idea. Think of it as a way to test the idea’s true potential.
In 2020, the solar industry recorded robust growth of 43%, adding 19.3 gigawatts per year to the national grid.((https://www.seia.org/research-resources/solar-market-insight-report-2020-year-review)) The exceptional growth occurred amid a pandemic that crippled most industries.
What’s more, the industry is expected to quadruple from 2020 to 2030. The driving force behind this is the government’s clean energy initiatives and growing concerns about climate change.
For instance, the government has initiated the Investment Tax Credit (ITC) scheme. Through this plan, consumers get a tax credit equivalent to 26% of the cost of installing a solar panel system from 2020 to 2022 and 22% in 2023.
Trends in the solar panel installation industry include:
Challenges in the solar panel installation industry include:
You will need between $45,000 and $140,000 to start a solar panel installation company. Startups in this sector spend around $92,500 on average to get things up and running. Most of this money goes toward buying equipment, a business truck, insurance, and marketing.
| Start-up Costs | Ballpark Range | Average |
|---|---|---|
| Licenses and permits | $500 - $1,000 | $750 |
| Insurance | $300 - $1,000 | $650 |
| Marketing and Advertising | $1,000 - $3,000 | $2,000 |
| Website | $500 - $1,000 | $750 |
| Software | $300 - $500 | $400 |
| Equipment | $2,000 - $3,000 | $2,500 |
| Inventory | $30,000 - $100,000 | $65,000 |
| Van/Truck | $10,000 - $30,000 | $20,000 |
| Miscellaneous | $400 - $500 | $450 |
| Total | $45,000 - $140,000 | $92,500 |
Residential solar panel installation projects average at $16,800, including the cost of the solar panels and installation. The average profit margin for a solar business is about 10%.
In your first year or two, working part-time you could do two installations per month for $17,000 per installation and make about $400,000 in annual revenue. This would give you about $40,000 in profit, assuming that 10% margin. As your business grows you might make five $25,000 installations each month, which would give you annual revenue of $1.5 million and a tidy profit of $150,000.
Barriers to entry for a solar panel installation company are relatively moderate. Significant challenges for new entrants include:
Now that you know what’s involved in starting a solar panel business, it’s a good idea to hone your concept in preparation to enter a competitive market.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
Research solar panel businesses in your area to examine their products and services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a solar panel firm that does rapid installation.
You might consider targeting a niche market by specializing in a certain aspect of your industry, such as selling excess energy back to the grid.
This could jumpstart your word-of-mouth marketing and attract clients right away.
Operating a solar panel installation business in the top five states mentioned above could be profitable thanks to the high demand.
In a business world where your competitor often claims to be #1, it is crucial to differentiate and build your own identity. There are three models you can adopt to help the solar panel business stand out as explained below:
Under this model, you will not stock solar panels. However, you will provide specialized solar installation services in partnership with companies that stock and sell solar panels.
Offering specialized installation services is the most cost-effective way to start. Further, this model enables you to gain the installation experience required to help you find your footing.
Under this model, you will stock and sell solar panels. You will subcontract installation services in collaboration with companies that stock and sell solar panels.
Focusing on product sales is ideal if you want to simplify operations by outsourcing fieldwork from the get-go. That way, you can concentrate on the sales side of your business. Plus, you can develop a full-time team once your startup begins to generate substantial revenue.
Under this model, you will stock and sell solar panels. You’ll also offer installation services through in-house solar photovoltaic installers.
The all-inclusive model will require a significant amount of investment to enable you to purchase inventory and employ a team of reliable fieldworkers. You can also expect to incur high operating expenses, so go for this model only if you have considerable capital.
Apart from selling and installing solar panels, you can also offer auxiliary services such as consultation, repair, and maintenance. While such services may not generate much revenue, they could ensure a stream of steady customers and help build brand loyalty.
The low and high-end prices of solar panels range from $5,000 to $40,000. These figures represent the cost of panels and don’t include labor and the cost of equipment such as the inverter.
An inverter can account for up to 10% of the cost of the solar panel. As a result, you can expect to generate $1,200 by selling the inverter for an average solar panel installation project.
The labor cost of installing a solar panel system can range from 20 to 40% of the system cost depending on the project and size of your solar system. You can expect to incur labor costs of about $3,600 for a $12,000 solar panel. Overall, a solar installation project generates an average of $16,800 in revenue.
Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
To build a solid foundation for your solar panel installation startup, you must identify your ideal customer to enable you to customize your marketing appropriately. There’s a growing demand for solar panels in every consumer segment. Your target market should include:
The type of commercial space you need primarily depends on your startup strategy.
For instance, you can run your business from home if you don’t want to stock solar panels. Your business can also be home-based if you’re offering specialized installation services. But you will need to rent a warehouse and a physical storefront if you intend to sell solar panels and offer installation services.
You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices. When choosing a commercial space, you may want to follow these rules of thumb:
Here are some ideas for brainstorming your business name:
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that set your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Here are the key components of a business plan:
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to solar panels.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your solar panel business will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
Choose Your State
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.
Securing financing is your next step and there are plenty of ways to raise capital:
Bank and SBA loans are probably the best options, other than friends and family, for funding a solar panel business. You might also try crowdfunding if you have an innovative concept.
You’ll need relevant local, state, and federal government licenses and permits to be allowed to operate a solar panel installation business.
Some licenses and permits associated with solar installation include:
You may also need additional permits by your state to enable your startup to operate legally, including:
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
Interstate Renewable Energy Council (IREC) has a solar licensing database for US states.
You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.
If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your solar panel business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
Field service management software, such as ServiceTitan, Jobber, or Field Nation, will enable you to manage your field service crew and oversee client management, scheduling, invoicing, task allocations, payroll, and re-organizing.
Creating a website for your solar panel installation business is essential for establishing a professional online presence and reaching potential clients. You can opt for user-friendly website builders which offer customizable templates ideal for startups on a tight budget. Alternatively, hiring a professional web designer ensures a unique, fully optimized site, though at a higher cost. Your website should be clean, mobile-responsive, and feature clear call-to-actions (CTAs) like “Get a Free Quote,” enhancing user experience and conversion potential.
Optimizing your website for search engines, particularly local SEO, is crucial. Incorporate relevant keywords and register with Google My Business to appear in local searches. Include quality content about solar energy, customer testimonials, and contact information to establish credibility and authority. A well-developed, SEO-optimized website can significantly boost your business’s visibility and attract more customers.
Here are some effective marketing strategies to consider for a solar panel installation business:
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your solar panels meet their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your solar panel business could be:
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a solar panel business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in renewable energy for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in solar panels. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.
You may not need to hire any employees if your business involves subcontracting fieldwork since your operations are simple. However, as your business grows, you’ll likely need to hire full-time employees for various job roles. Some potential employees for a solar installation business include:
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
As the price of solar and the cost to install it continue to fall, more Americans are becoming aware of the benefits of tapping clean renewable energy. That’s why the solar market is expanding rapidly across the US, and demand is exploding in many states, especially in California and Texas. Other states leading in solar energy installation are Florida, Virginia, and North Carolina.
Now that you’ve gained all of the necessary business knowledge, you should get out there and roll up your sleeves. With proper planning and hard work, you should be on your way to becoming a successful solar panel entrepreneur.
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