Partner Smarter, Grow Faster

The Role of Strategic Sales in Solar’s Future

BY JAKE HESS

It seems the sales field was nearly decimated with the collapse of approximately 50% of solar companies nationwide. When the installer’s cash flow was squeezed, it exposed the fragility of the business model we knew and operated on.

Financiers changed the way they funded accounts. Installers couldn’t adapt well enough to the change with their thin margins and demanding overhead.

This ultimately led to sales reps and organizations not getting paid while they watched their peers suffer, homeowners lose trust, and their install company perish.

For the installers that have been able to survive, the main priority has now become a seemingly desperate volume grab. The standing installers and EPCs have all dropped in production by significant margins. This has created a demand. The sales supply is low, and the demand for volume is at an all-time high.

Jake hess with Jeremy Miner on The Morning Energy Show

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It’s not just installers looking to get into the volume grab. Financiers have even opened up to paying sales organizations directly and bypassing installers. Software companies have shifted to selling directly to sales orgs that historically focused on selling to installers. I am watching financiers, installers, and software companies sponsor small-sized sales organization events. I have never seen this done in my 12 years of solar. Dealer programs are even being created at organizations that historically have focused on in-house sales only.

All of this said, we’ve “touched the hot stove” once, and not all are going to be likely to do it again. Sales organizations of any value in the future are going to have to be more educated, have cleaner accounts, and strong understandings and practices of their financials. I believe if a sales organization is built closer to a business with W2 employees, robust CRM systems, a strongly branded culture, and a clear understanding of adders, install timeline shifts, and the necessity for consistent volume, then they will be some of the most well-taken-care-of and highly sought-after organizations in the country.

An alignment between sales organizations and installers in customer satisfaction, customer experience, and project expectations will be the first barriers to overcome when installers are looking at sales organizations to partner with. Those organizations that understand the complexities and nuances of the installation side of the business and can empathize with the constraints an installer has will be the ones that get all the attention. Installers are valuing a healthy relationship over high amounts of volume.

Attrition, risk, bad sales practices, and constant nagging for fewer expenses and lower redlines from sales organizations is at an end. The serious installers—the ones you SHOULD partner with, the smart ones—they won’t stand for that type of business anymore. They’ve seen what it leads to.

I believe there are two reasons sales organizations have a strong and promising next six months of unmatched opportunity. The first is what businesses refer to as “G&A expenses” and the second is the necessity for partnerships today.

Jake Hess on Stage at SolarCon

I’ll start with the first, G&A expenses. General and Administrative expenses are all of the costs to run an organization. Installers have expenses that don’t frequently change. These expenses are known as fixed costs.

Take the internet bill, for example—it will likely not change for 12 months. If you were to mix in other expenses that won’t change too much each year, like W2 employee salaries, software subscriptions, lease or mortgage payments, utility bills, insurance, and truck payments, you have started a healthy list of “fixed” expenses known as G&A costs/expenses.

Now for the fun part. Let’s say an installer was doing 500 installs a month and, for easy math, let’s say their average system size was 10kw. That would mean they were installing 5,000kw (or 5,000,000 watts) per month!

Now for the last variable, if their G&A expenses were $2 million dollars per month, the math would look like this:

$2,000,000 (G&A Expenses)

/ 5,000,000 watts

= $0.40 per watt in G&A expenses

This means for every project they sell, $0.40 is going to running the company. That doesn’t include all the equipment like solar panels, racking, and inverters. However, if that same exact company were to DOUBLE in sales volume, that would turn their 5,000,000 watts into 10,000,000 watts!

The math would look like this:

$2,000,000 (G&A Expenses)

/ 10,000,000 watts

= $0.20 per watt in G&A expenses

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Because the industry has suffered significant loss, installers are left with stresses of funding overhead they aren’t used to.

By doubling the volume of sales, that install company is now $0.20 more profitable PER PROJECT than it was with half the volume.

Now, it doesn’t always look that clean. With added volume, usually added expenses aren’t too far behind. However, the expenses won’t exceed the new volume discount. Voila!

The second reason sales organizations have a strong and promising next six months is that installers are looking for partnerships. They are wanting to solidify volume being sent to their organization. The solarcoaster of the past is not a ride many want to pursue again. Strengthening the relationship with sales partners is at the forefront of their minds.

When volume shifts in and out of their install company, their profitability and G&A expenses fluctuate, making it difficult for foundational stability and growth. Incentive programs designed for long-term relationships, otherwise known as “Golden Handcuffs” (because you handcuff yourself to their business), are available if asked.

There is an art to asking for Golden Handcuffs. It’s another language outside of sales. Your proposal has to make sense. An understanding of risk, expenses, and alignment are crucial in this game. Familiarize yourself with terms like EBITDA and how it can be affected in a positive or negative way based on the quality of your sales.

This brings us back to one of my first segments: “Sales organizations of any value in the future are going to have to be more educated, have cleaner accounts, and strong understandings and practices of their financials. I believe if a sales organization is built closer to a business with W2 employees, robust CRM systems, a strongly branded culture, and a clear understanding of adders, install timeline shifts, and the necessity for consistent volume, then they will be some of the most well-taken-care-of and highly sought-after organizations in the country.”

Don’t sell yourself short! If you have something magical, think bigger! Think long term! Think of where you want to be five years from now and start executing decisions today that put you there. I see one of the largest opportunities sales organizations have had in years. The supply is low, and the demand is high.

Go get after it.

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