Starting a solar company can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful solar company.
Importantly, a critical step in starting a solar company is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
14 Steps To Start a Solar Company:
- Choose the Name for Your Solar Company
- Develop Your Solar Company Business Plan
- Choose the Legal Structure for Your Solar Company
- Secure Startup Funding for Your Solar Company (If Needed)
- Secure a Location for Your Business
- Register Your Solar Company with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Solar Company
- Buy or Lease the Right Solar Company Equipment
- Develop Your Solar Company Marketing Materials
- Purchase and Setup the Software Needed to Run Your Solar Company
- Open for Business
1. Choose the Name for Your Solar Company
The first step to starting a solar company is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your solar power business:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your solar company.
2. Develop Your Solar Company Business Plan
One of the most important steps in starting a solar company is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your own solar business.
- Company Overview – this section tells the reader about the history of your solar company and what type of solar company you operate. For example, are you a solar panel manufacturer, system installer, or a project developer?
- Industry Analysis – here you will document key information about the solar industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target market are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing products or services like the ones you will offer?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your solar company? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing efforts.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your solar company make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
3. Choose the Legal Structure for Your Solar Company
Next you need to choose a legal structure for your solar installation business and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the solar company and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
A partnership is a legal structure that is popular among small business owners. It is an agreement between two or more people who want to start a solar business together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a solar company include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a solar company is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your solar company, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
4. Secure Startup Funding for Your Solar Company (If Needed)
In developing your solar company business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for a solar company to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a solar company that they believe has high potential for growth.
5. Secure a Location for Your Business
When you’re looking for a physical location for your new business, it’s important to think about the following factors:
-The climate: You’ll want to find a location that gets a lot of sun.
-The cost of land and property: You’ll need to find a location that is affordable.
-The zoning regulations: Make sure the location you choose is zoned for commercial use.
-The availability of utilities: You’ll need to make sure the location has access to power and water.
-The local economy: Make sure the location you choose is economically viable.
Once you’ve considered these factors, you can start looking for locations that fit your needs.
6. Register Your Solar Company with the IRS
Next, you need to register your solar energy business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
7. Open a Business Bank Account
It is important to establish a bank account in your solar energy business’ name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
8. Get a Business Credit Card
You should get a business credit card for your solar company to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
9. Get the Required Business Licenses and Permits
In order to start a solar panel business, you will need a few licenses and permits. You will need a business license and a contractor’s license, which allows you to work in the construction industry. You will also need a permit before installing solar panels, which is issued by your city or county government. You may contact your local government to learn more about the specific licenses and permits you will need.
10. Get Business Insurance for Your Solar Company
The type of insurance that is needed to operate a solar energy business can vary depending on the state in which the company is located.
Some business insurance policies you should consider for your own business include:
- General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
- Auto insurance: If a vehicle is used in your business, this type of insurance will cover if a vehicle is damaged or stolen.
- Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
- Commercial property insurance: This covers damage to your property caused by fire, theft, or vandalism.
- Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
- Professional liability insurance: This protects your business against claims of professional negligence.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
11. Buy or Lease the Right Solar Company Equipment
To run a solar company, you will need the following equipment:
- Solar panels
- Charge controllers
- Mounting hardware
- Installation tools
12. Develop Your Solar Company Marketing Materials
Marketing materials will be required to attract and retain customers to your solar business.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your solar business. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional solar company website provides potential clients with information about the products and/or services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your solar company.
13. Purchase and Setup the Software Needed to Run Your Solar Company
The software you need to run a solar business is mainly accounting software and solar project management software such as SolarNexus or ENACT. Accounting software is necessary to keep track of your finances, while project management software can help you manage your projects more effectively. Other software that may be useful for solar businesses includes Customer Relationship Management (CRM) software and Computer-Aided Design (CAD) software.
14. Open for Business
You are now ready to open your solar company. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
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How to Start a Solar Company FAQs
Is it hard to start a solar company?
No, it’s not hard to start a solar power business. There are plenty of resources available to help you get started, and the technology has become more accessible over the past several years. There are also incentives available to help make your solar panel installation business affordable.
How can I start a solar company with no experience?
If you're looking to start a solar power company but don't have any experience in the industry, there are a few things you can do. First, you can reach out to solar experts who are already in the solar business and ask them for advice. You can also attend trade shows and other events related to renewable energy to learn more about the industry. Finally, you can read books and articles about solar energy to gain a better understanding of how it works.
What type of solar company is most profitable?
The most profitable solar power companies are those that install solar panels for homeowners and businesses. These companies typically have a higher profit margin because the cost of the equipment is often covered by the customer.
How much does it cost to start a solar company?
The cost of starting a solar company will vary depending on the size and scope of the business. However, some rough estimates suggest that it costs anywhere from $10,000 to $100,000 to start a solar company.
What are the ongoing expenses for a solar company?
The ongoing expenses for a solar company can include marketing and advertising, employee salaries, rent or mortgage payments, and other administrative costs. It is important to factor these expenses into your business plan when starting a solar company, in order to ensure you are able to maintain profitability over the long term.
How does a solar company make money?
Solar companies make money by selling or leasing solar panels to homeowners and businesses. Aside from residential installation, they may also offer maintenance and repair services for the solar system. Some successful businesses also generate revenue by selling the electricity generated by the solar panels to utility companies.
Is owning a solar company profitable?
Yes, owning a solar company is profitable. The main way a solar company makes money is by selling electricity, but they can also make money through government incentives, system installation and repairs, and other services. Solar companies have seen significant growth in recent years as the cost of solar technology has decreased and awareness of its benefits has increased.
Why do solar companies fail?
Many businesses fail because they are not able to generate enough revenue to cover their costs. In order to be successful, a solar company must be able to offer competitive rates while also managing its expenses. Other reasons for failure include poor management, a lack of innovation, and a failure to understand the market.