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How to Start a Solar Panel Installation Business

Updated on April 18, 2022

How to Start a Solar Panel Installation Business

How to Start a Solar Panel Installation Business

Solar is a growing industry with a bright future. The United States has installed 108.7 gigawatts-DC (GWdc) of solar PV capacity, enough to power 18.9 million homes. The cost of installing solar panels has also dropped by more than 70% over the last 10 years, contributing to the industry’s steady growth. With such impressive statistics, now is a great time to start a solar panel installation business.

However, like any business, building a commercial solar installation company from the ground up requires proper planning and preparation. Lucky for you, this step-by-step guide provides all the insight and information you need to get on the road to entrepreneurial success!

Fast Facts

Investment range

$45k-$140k

Time to build

3-6 months

Industry trend

Growing

Revenue potential

$600k-$5.4m p.a.

Profit potential

$54k-$490k p.a.

Commitment

Full-time

Step 1: Decide if the Business Is Right for You

Black man considering decisions

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.

Pros and Cons

Pros

  • Strong chance of success due to growing demand
  • Easy access to government grants and assistance
  • You’ll be helping to save the environment!

Cons

  • Complex operations and labor-intensive fieldwork
  • Large upfront investment

Industry trends

In 2020, the solar industry recorded robust growth of 43%, adding 19.3 gigawatts per year to the national grid.[1]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.

How much does it cost to start a solar panel installation business?

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 CostsBallpark RangeAverage
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

How much can you earn from a solar panel installation business?

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 one installation per month and make about $200,000 in annual revenue. This would give you about $20,000 in profit, assuming that 10% margin. As your business grows you might make three $25,000 installations each month, which would give you annual revenue of $900,000 and a tidy profit of $90,000.

What barriers are there?

Barriers to entry for a solar panel installation company are relatively moderate. Significant challenges for new entrants include:

  • High initial investment required: Startup investment for a solar company is relatively high since most of the money goes toward buying the initial solar panel inventory.
  • Lack of product differentiation: Solar panel installation services are quite standard, leaving little room for creativity and innovation. The ripple effect is that it is challenging to stand out from your competition.
  • No switching costs – The industry lacks switching costs, making it easy for customers to switch from one company to another.
  • Learning and experience – You must know how to install solar panels to thrive in this industry. You also need a few months of hands-on experience to get started. These two factors could determine how soon you can win a client as a new entrant.

Step 2: Hone Your Idea

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.

Why? Identify an Opportunity

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.

According to the main solar panel organization, the following five states lead in solar energy installation:

  • California (3,904 MW)
  • Texas (3,425 MW)
  • Florida (2,822 MW)
  • Virginia (1,406 MW)
  • North Carolina (785 MW)

Operating a solar panel installation business in these five states could be profitable thanks to the high demand.

What? Determine your products or services

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 standout as explained below:

Model 1: Offer Specialized Installation Services

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.

Model 2: Focus on Product Sales

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.

Model 3: All-inclusive

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.

How much should you charge for solar panel installation?

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.

Who? Identify your target 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:

  • Independent homeowners
  • Homeowners associations
  • Manufacturers
  • Schools
  • Retailers – Target is a perfect example. The giant retailer has installed 500 solar panels systems on their store’s rooftop and plans to go 100% solar by 2030.
  • Nonprofit organizations and hospitals – A good example is Massachusetts General Hospital Boston. The hospital installed a 476kW solar energy system, enabling the institution to save $95,000 annually.

Where? Choose your business premises

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:

  • Central location accessible via public transport
  • Ventilated and spacious, with good natural light
  • Flexible lease that can be extended as your business grows
  • Ready-to-use space with no major renovations or repairs needed
Should you start a solar panel installation business

Step 3: Brainstorm a Business Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

  • Short, unique, and catchy names tend to stand out
  • Names that are easy to say and spell tend to do better 
  • Name should be relevant to your product or service offerings
  • Ask around — family, friends, colleagues, social media — for suggestions
  • Including keywords, such as “solar panels” or “solar installation”, boosts SEO
  • Name should allow for expansion, for ex: “Jim’s Bakery” over “Jim’s Cookies”
  • Avoid location-based names that might hinder future expansion
  • Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

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 sets 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.

Step 4: Create a Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

  • Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
  • Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
  • Product and Services: Describe your offerings in detail.
  • Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
  • Competitive Analysis: Analyze main competitors, assessing their strengths and weaknesses, and create a list of the advantages of your services.
  • Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
  • Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
  • Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
  • Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
  • Appendix: Include any additional financial or business-related documents.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist at Fiverr to create a top-notch business plan for you.

Step 5: Register Your Business

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! 

Choose where to register your company

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. 

Choose your business structure

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:

  • Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
  • General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
  • Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
  • C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
  • S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

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 ZenBusiness’s 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.

Business structure comparison infographic

Step 6: Register for Taxes

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.

Step 7: Fund Your Business

Securing financing is your next step and there are plenty of ways to raise capital:

  • Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
  • SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
  • Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
  • Angel investors: Reach out to your entire network in search of people interested in investing in early-stage startups in exchange for a stake. Established angel investors are always looking for good opportunities. 
  • Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
  • Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
  • Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a solar panel business. You might also try crowdfunding if you have an innovative concept. 

Step 8: Apply for Licenses/Permits

work permit application on a table

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:

  • Doing Business As (DBA)
  • OSHA Health License and Permit
  • Patents
  • Trademarks
  • Other intellectual properties (IPS)

You may also need additional permits by your state to enable your startup to operate legally, including:

  • General business permit
  • Basic business license
  • Solar/general contractor license
  • Residential/home improvement contractor license

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. 

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.

Step 9: Open a Business Bank Account

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.

Step 10: Get Business Insurance

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:

  • General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
  • Business Property: Provides coverage for your equipment and supplies.
  • Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
  • Worker’s compensation: Provides compensation to employees injured on the job.
  • Property: Covers your physical space, whether it is a cart, storefront, or office.
  • Commercial auto: Protection for your company-owned vehicle.
  • Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
  • Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

Essential software and tools

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.

Online Marketing

Some of your business will come from the casual passerby or online visitors, but you should still invest in digital marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness. 

Once your website is up and running, link it to your social media accounts and vice versa. Social media is a great tool for promoting your business because you can create engaging posts that advertise your products: 

  • Facebook: Great platform for paid advertising, allows you to target specific demographics, like men under age 50 in the Cleveland area. 
  • Instagram: Same benefits as Facebook but with different target audiences.
  • Website: SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “INSTALL Now”. This can sharply increase purchases.
  • Google and Yelp: For businesses that rely on local clientele, getting listed on Yelp and Google My Business can be crucial to generating awareness and customers. 

Focus on USPs

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:

  • Save the world — install solar panels today!
  • Fast, affordable solar panel installation for your home
  • From purchase through maintenance, we cover all your solar panel dreams

Kickstart Marketing

Take advantage of your website, social media presence and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include:

  • Signage – Put up eye-catching signage at your store and website 
  • Flyering – Distribute flyers in your neighborhood and at industry events 
  • In-Person Sales – Offer your solar panels at local markets, trade shows 
  • Sponsor events – You can pay to be a sponsor at events that are relevant to your target market
  • Post a video – Post a video about your solar panels. Use humor and maybe it will go viral!
  • Seek out referrals – Offer incentives to generate customer referrals to new clients. 
  • Press releases – Do press releases about new products, sales, etc.
  • Paid ads on social media – Choose sites that will reach your target market and do targeted ads.
  • Influencer marketing – Pay people with large social media followings to promote your solar panels. You can find micro-influencers with smaller followings and lower rates.
  • Make a podcast – This allows you to make a personal connection with your customers
  • Do a webinar – Share your solar panel expertise online with a video seminar

Networking

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. 

Accounting

  • Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero
  • If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Step 12: Build Your Team

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:

  • Solar photovoltaic installer: Responsible for setting up and maintaining solar panels.
  • Sales Manager: Responsible for leading your sales team to reach targets.
  • Marketing Lead: SEO strategies, social media promotions
  • General Manager: Oversees operations, hiring and firing, budgeting

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.

 Step 13: Start Making Money!

USP venn diagram

Congratulations! You’ve gained all of the necessary business knowledge, now it’s time to get out there and become a successful solar panel entrepreneur. Thought you might want to bookmark this page, just in case.

Solar Panel Business FAQs

How much does it cost to start a solar business?

It costs $45,000 to $145,000 to start a solar business. However, startups spend roughly $92,500 on average.

A significant portion of the startup capital goes toward buying the solar panel equipment needed for your first round of installation, marketing, and hiring staff. You can reduce the cost by buying your solar panels in bulk from distributors.

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.