Starting a solar panel business 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 panel business.
Importantly, a critical step in starting a solar panel business 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 Panel Business:
- Choose the Name for Your Solar Panel Business
- Develop Your Solar Panel Business Plan
- Choose the Legal Structure for Your Solar Panel Business
- Secure Startup Funding for Your Solar Panel Business (If Needed)
- Secure a Location for Your Business
- Register Your Solar Panel Business 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 Panel Business
- Buy or Lease the Right Solar Panel Business Equipment
- Develop Your Solar Panel Business Marketing Materials
- Purchase and Setup the Software Needed to Run Your Solar Panel Business
- Open for Business
1. Choose the Name for Your Solar Panel Business
The first step to starting a solar panel business 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 panel 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 panel business.
2. Develop Your Solar Panel Business Plan
One of the most important steps in starting a solar panel business 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 solar panel business.
- Company Overview – this section tells the reader about the history of your solar power business and what type of solar panel business you operate. For example, are you a solar panel manufacturer, solar panel installer, or a solar panel distributor?
- 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 customers 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 panel business? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- 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 panel business 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 Panel Business
Next you need to choose a legal structure for your solar energy 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 panel business 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 businesses. It is an agreement between two or more people who want to start a solar panel 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 panel business 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 panel business 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 own solar business, 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 Panel Business (If Needed)
In developing your solar panel 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 panel business 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 panel business that they believe has high potential for growth.
5. Secure a Location for Your Business
When looking for a location to start your own business, you want to consider a few factors. You’ll need a space large enough to store your solar panels and equipment. You may also need an office to meet with potential customers. You’ll also want to consider the cost of doing business in the area, as well as the state and local laws that govern solar businesses.
6. Register Your Solar Panel Business with the IRS
Next, you need to register your 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 panel 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 panel business 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
To start a solar panel installation business, you may need a business license, a contractor’s license, zoning approval, and/or permits from your local government. Contact your local business licensing agency or zoning board for more information.
10. Get Business Insurance for Your Solar Panel Business
There are various types of insurance that are necessary to operate a solar panel business.
Some business insurance policies you should consider for your solar panel 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 Panel Business Equipment
To run a solar panel business, you will need some basic equipment, including solar panels, batteries, inverters, and charge controllers. You will also need a truck or van to transport your panels to customers.
12. Develop Your Solar Panel Business Marketing Materials
Marketing materials will be required to attract and retain customers to your solar panel business.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your solar panel 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 panel business website provides potential customers 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 panel business.
13. Purchase and Setup the Software Needed to Run Your Solar Panel Business
Solar companies require software to manage their finances, customers, and inventory. Financial software can help track income and expenses, while customer relationship management (CRM) software can keep track of contact information, purchase histories, and preferences. Inventory management software can help keep track of what products are available and when they need to be reordered.
Additionally, you may need solar panel software to manage your solar panels and track your solar energy production. There are a number of different solar panel software programs available, so be sure to choose the one that best meets your needs.
14. Open for Business
You are now ready to open your solar panel business. 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 Panel Business FAQs
Is it hard to start a solar panel business?
No, it is not hard to start a solar business. There are numerous resources available to help you get started, including online courses, books, and local workshops. Additionally, there are many companies that sell solar panels and related equipment, so finding the right products for your business should be relatively easy.
How can I start a solar panel business with no experience?
There are a few ways to start a solar panel business with no experience. One way is to research the industry. Learn about the different types of solar panels and the best way to install them. Another way is to find a mentor or an experienced solar panel business owner who can help guide you through the process. Finally, you can also attend solar panel training programs to learn the basics of starting and running a solar panel business.
What type of solar panel business is most profitable?
The profitability of a solar panel business can vary depending on location, size, and scope of the operation. In general, a profitable type of solar company is one that sells and installs solar panels for commercial and residential properties. This is because installers can pass on the cost of the solar panels to the customers in addition to charging for the labor. Additionally, this type of business can benefit from government subsidies and tax credits that are available for businesses that sell solar panels.
How much does it cost to start a solar panel business?
The cost to start a solar panel business can vary depending on the size and scope of the business. However, basic costs can include website development, marketing materials, and inventory. In general, expect to spend between $10,000 and $50,000 to get a solar panel business up and running.
What are the ongoing expenses for a solar panel business?
There are a number of ongoing expenses for a solar panel business. One of the main expenses is the price of the solar panels themselves. In order to keep a solar panel business running, you also need to pay for things like marketing, labor, and maintenance.
How does a solar panel business make money?
A solar panel business makes money by selling solar panels and installing them for customers. It can also make money by providing services such as monitoring and maintaining solar panels.
Is owning a solar panel business profitable?
Yes, owning a solar panel business can be profitable. Solar panel businesses have become more popular in recent years as the cost of solar panels has decreased and the popularity of renewable energy has increased.
Why do solar panel businesses fail?
One of the most common reasons solar power companies fail is because they don't have a comprehensive business plan. A business plan helps define its goals, strategies, and tactics for achieving those goals. Without a solid business plan in place, it's difficult to make informed decisions about the business, measure its progress, or identify areas that need improvement.
Another reason solar panel companies may fail is poor financial planning and budgeting, leading to an inability to cover overhead costs. Poor customer service and lack of product knowledge may also lead to business failure.