By Pamela Cargill, principal of Chaolysti
Did you work a lot harder in 2016 for a lot less money? Did you grow your volume of projects but not your net revenue?
That’s the real downside of the much-lauded falling cost of solar. There’s a lot less margin to go around. For example, a 30% markup on $0.45/watt modules amounts to a lot less than it did on $1.50/watt modules. And you can see the same effect across labor and BOS markup.
More so, that margin has a lot of hungry mouths to feed: office rent, truck maintenance, financing-related fees and customer acquisition, just to name a few.
Many small solar contracting business owners are plagued with similar problems no matter where they are in the United States. Of the business owners I speak to, many believe that acquiring more customers will help them offset these losses by improving cash flow.
Making up these losses in additional volume of projects is not an option. Losses compound. This is a scary race to the bottom and it’s time to turn back now. So, what are some concrete steps business owners can do to get out of the race to the bottom?
1. Are you actually customer-focused? Listen to the market.
Stop shoving an offer down the throats of prospective customers. Many solar businesses have oriented themselves around messaging and sales styles popularized by the rise of third-party ownership. If you’re not selling third-party ownership, you have an opportunity to really listen to what’s driving the consumer to consider solar and let their concerns and needs steer the conversation. Stop being so focused on creating efficient sales funnels and spend more time thinking from the perspective of a prospective customer who knows nothing about solar and nothing about construction. They don’t know what to expect. They often don’t know what they don’t know. Be nice. The time you spend educating now is the investment in referrals that will come tomorrow.
2. Evaluate Finance Dealer Fees and Related Operational Complexity
Is the tail wagging the dog? If your choice of customer finance is dictating your customer demographic, you may have better customers to target in your area but they won’t work with you because you’re not offering what they want.
Dealer fees, transaction costs and processes dictated by financing partners can create a lot of confusion, extra steps (read: overhead) and frustration and delays for you, your staff and your customer. Simpler processes lead to a shorter sale-to-PTO, which improves cash flow. Simpler processes mean simpler and less expensive software to manage your business.
3. Orient Everything Around the Customer
An easy statement, a more difficult proposition. And it’s easier to talk about customer experience than actually do something about it. But unlike other home services, homeowners are first-time purchasers of solar. They don’t know what to expect and usually don’t know someone who has done it. Simple but powerful experiences like asking the customer how they want to be contacted and the best time of day to contact them is and sticking to that go a long way. Think of the new trends we’re seeing now in call centers, where instead of sitting in a hold queue for an unknown amount of time, you can select when to have an available representative call you back. That’s being customer-centric. How can you take that approach into your company?
4. Take the Long View
When you focus on how the customer wants to interact (what types of communication and when), provide resources in the formats they want during the process and provide an honest and authentic education process, you’re on your way. But to secure potential referrals, you need to continue to genuinely engage the customer up to the moment of energizing the system and educating them for years to come. Why? Because when customers continue to learn about their system and about potential rate changes in their area, and they continue to engage with your company and their solar experience after the project is long done, they’ll remember you when a friend or neighbor asks for a recommendation. It’s a long game, but building a relationship-based book of business is the key to genuinely reducing customer acquisition costs and creating a sustainable, long-term business.
So this is all about marketing right? Not entirely. This is about creating a truly customer-focused operation from your brand all the way through to long-term customer engagement, including many operational strategies. It’s not just creating a really sleek sales experience and then dumping the customer into the black hole of project fulfillment with horribly set expectations. It takes process design, employee engagement, customer interviews, brand management, software choices, sales training, commission structure and much more. It’s a truly end-to-end process for which there is no silver bullet solution. This is the real work. Successful small installers in our industry have proven it’s a winning strategy by growing the fastest when the market leaders of the last few years have not grown as quickly.
Ready to take on this challenge? Until the end of 2016, I’m offering business owners of U.S.-based residential solar installers a free 30-minute consultation to help identify potential solutions to achieve profitability in 2017. Book your appointment today (subject to availability, first come/first served, no purchase required).