Double Digit Growth: What separates high growth solar companies from their peers

Double Digit Growth: What separates high growth solar companies from their peers

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If you believe the climate scientists, there are less than 520 weeks until we lock in a rate of warming that virtually guarantees climate catastrophe. That’s bad.

If you own a solar company, odds are high that you did it in part to be part of the solution and because fighting climate change gets you out of bed in the morning. That’s certainly true of Ipsun Solar, and we’ve done everything in our power to grow our company accordingly. However, growth at all costs is exhausting and ultimately counterproductive. Smart growth is more predictable and results in a balance that allows you to achieve your mission and achieve reliable solvency for your company.

Some companies choose not to grow, simply because they want a steady business that isn’t overinvested in trying to dominate the market or overextend itself. If that sounds like you, then God Bless You. You have chosen a work-life balance that is admirable.

For those of us who want to grow and scale our companies sustainably, there are concrete and reliable lessons to be learned from our own business (Ipsun Solar), as well as the hundreds of businesses we have worked and consulted with over the past year.

These are the top five trends we have noticed over and over for high growth solar companies:

1. Growth mindset and planning

Well this might sound obvious, right? But if you want to grow your business, you have to state it out loud. You have to state it to yourself, to your management team, to your team members, to your investors, and maybe most importantly - in your budget. If it’s not clear from your stated intentions, your mission statement, and your budget, then it’s probably not going to happen.

The companies that grow reliably 30% or more year-over-year have concrete plans for how they’re going to do it. If you’re like Ipsun Solar, more or less bootstrapping from the start, then this may be hard because it’s a young industry with sometimes incomplete data. Creating a budget is not always easy when you’re getting a company off the ground, and you don’t know what you don’t know. But as the company matures and evolves, you want to take what you’ve learned from the past year and have it inform next year’s budget - with a concrete goal for the number of projects you want to sell and install, as well as the projected revenue.

Now that’s not so easy when the cost of labor, materials and acquisition are rising. Or interest rates which are a constantly moving target. Or even new competitors are popping up. But the hard lesson is that if you don’t create a budget that makes your growth goal explicit, you will be adrift and it will ultimately impact the chances of the business succeeding. As the saying goes: “If you don’t know where you’re going, there is little chance you get there.”

Once you and your team choose the number of projects you want to sell and install for the new year’s budget, you can reverse engineer all the cost of goods and services (direct costs) as well as overhead (indirect costs). You can determine the amount of marketing dollars, installers, and project managers (for instance), to achieve this goal.

2. Excellent Human Resources

It’s not uncommon to start a solar company with everyone wearing all hats, all the time. In fact, that’s true of many if not most small businesses. However, with the solar industry growing exponentially year-over-year, you will quickly find that there is a breaking point. Managing human resources on the fly might work for 5 to 10 team members, or even up to 20 if you’re resourceful. But once you hit 30 or more team members, you really need someone who has experience in recruiting, hiring, training, coaching, performance improvement plans, benefits, terminations, and risk management.

Of the companies we have interviewed and audited, those with strong human resource departments are those who grow the fastest and most sustainably. Hiring a fractional HR manager (ideally someone who comes with many years of experience), is a great way to receive all the benefits of having someone full-time for a fraction of the cost. If you do this for no other reason, know that team member retention is the friend of growth, and turnover is the friend of stagnation.

This is so critical to growth, that we actually wrote an entire blog post just on this topic.

3. A Strong Culture

In any organization, culture comes first. Having everyone moving in the same direction with the same mission in mind does wonders for a growing company. If the goal of your company is simply for everyone to have jobs and for one person at the top to make as much money as possible, well you can still grow. In fact, we know a few companies like this. But how sustainable is it to have that kind of culture? Not very.

Eventually, if you’re going to grow to $10-100M in revenue, you will have “businesses within the business”. You will have a solar installation business, a solar sales business, a solar marketing business, a solar permitting and interconnection business, a solar administration and finance business. Each one of these departments will run somewhat independently (though ideally not too siloed), and the motivation and willingness of each to put in the extra work to meet and exceed the company’s mission - will determine how satisfied your customers are as well as how quickly you grow.

Since culture comes from the top, having a clear mission that is aligned with your goals (for example fighting climate change or promoting energy independence), and giving each and every team member the tools to succeed, will determine the success and ultimate growth of the company. We see this over and over with high growth companies we audit. Their goal is not monetary, but values based. They provide great training to each and every team member to step foot in the door. Most importantly, they promote the entire business as a team sport that is for the benefit of everyone involved. For example, having profit sharing and improved benefits over time with expanding profits is a great way to convey “rising tides”

A fast growing business promotes this type of culture with “revenue sharing” whereby each person in the company gets a monthly bonus based on the amount of revenue generated, regardless of profitability. This encourages everyone to work harder to move projects faster as one team. Another solar installer we audited does “gain-sharing” whereby any increased profits quarter-over-quarter are shared amongst everyone in the company.

Creating a culture that is “one team, one mission” is central to growth, and see it over and over with the solar companies we audit.

4. Distributed Decision-Making

There’s a reason that autocratic leadership lost its edge in the 20th century. A greater number and diversity of perspectives makes for better decisions. This isn’t just true of democracy generally, but within companies as well. It’s especially true of solar companies, where there are so many disparate functions and job roles, with ever-changing technologies, marketing and sales strategies, installation techniques, codes and standards.

The first step in building distributed decision-making is actually asking your team members how to improve the business. Providing monthly surveys where folks can safely and anonymously provide their feedback, is absolutely essential. Giving everyone the opportunity to say what’s working and what’s not working is the only way to improve, because solar is constantly changing.

Having a leadership team and/or a board of directors is also essential. As your “businesses within the business” start to grow and evolve, you as the founder may become further removed from the actual work. Even if you are a master electrician (like the CEO of Ipsun Solar) and want to be in the trenches everyday wiring batteries, you will not necessarily see what’s going on in the sales department or marketing or permitting or finance. You can’t be everywhere at once, so having a leadership team that represents these key areas is critical. Voting on big decisions like how quickly you want to grow are what aligns the team toward a common goal, and having a leadership team on the same page will help nip issues in the bud early.

5. Access to Capital

What separates the “mom and pop shops” from the companies that grow has always been and probably will always be access to capital. Now this doesn’t mean that you have to sell out and hand your company decision-making over to venture capital. What it does mean, at a minimum, is that you need to have flexible lines of credit that grow over time with your company’s needs.

Why?

Because as your company grows you will have greater capital investments, like warehousing, hiring, fleet vehicles, office space, and the cash it takes to float a large volume of sales from contract signing to PTO. It’s extremely hard to do that on cash alone, especially with growing demand for solar financing, and the tendency of homeowners to want to pay the majority of their project costs once construction is complete.

Building banking relationships from the start and picking local banks that know your business and understand your needs, is crucial. Of course, if you have a big vision and need outside equity investment, there’s nothing wrong with that either. Obviously, that will help capitalize the business to invest in larger infrastructure that can catalyze innovation, growth and cost reductions, at a scale that is simply not as easy with small lines of credit, designed for operational cashflow.

However, one thing that almost certainly cannot work for large scale growth is operating purely on “cash in, cash out” - at least in a construction industry like solar that is constantly changing, growing in scale and demand, and operating on razor thin margins.

6. The Right Tech Stack

If there’s one single thing that each and every successful growth-oriented solar company has, it’s a focus on building the right tech stack early before growth occurs.

I cannot even begin to count the number of solar installers we have audited who say that they are so large that they can neither continue to operate with their current stack, nor can they grow without a change. It’s paradoxical that when you most need to invest in your tech stack of software you are younger as a company and the costs seem more daunting, but that if you wait too long the costs in both money and time will be so insurmountable that it has the potential to halt your growth and cause significant morale issues.

Nobody wants to be working in spreadsheets when a company is over $10M in revenue; that is not fun. Conversely, nobody wants to be working in a massive ERP that is unwieldy and ugly and costs $5,000/mo when they are just trying to get off the ground. This is the biggest chicken and egg problem in the solar industry, and finding the right balance is determinative of successful growth.

The most successful solar installers appear to invest heavily in a strong CRM, when they are around $3 million in revenue, and in a strong ERP, when they are around $5-7 million in revenue. In both cases, these softwares may eat into your profits - but a wise man (who also happens to run a solar company) once said “If you’re growing, you’re probably not making money.” Meaning that investing in these types of tools before your company becomes so large that it’s like steering the Titanic, is absolutely critical.

This is one thing Ipsun Solar did right, and our growth has been consistent in high double digits year over year as a result.

That being said we speak to a lot of solar installers who are even larger than Ipsun Solar ($20, $30, $50 million or even more) and realize that they are still using a CRM that has less than half the functionality that they need to continue to grow. Often times we find them in the painful process of change which sometimes takes years to actually accomplish.

Just as important as a good CRM and potentially ERP is a solution that is customer facing and powers your growth flywheel. Having a fully branded and conversion optimized customer portal that allows your customers to interact with your company, see their project development, system performance, create referrals and reviews, open tickets or review project docs - is essential to maintaining your brand equity and supporting your growth for years to come.

Why hand over your brand to a third party monitoring platform that doesn’t even show your logo?

That’s confusing and counterproductive for everyone.

The great thing about growing your business with Sunvoy is that you can resell it to your customers at a markup. Ipsun Solar started reselling Sunvoy at a few dollars beyond the retail price, with near 100% adoption. This means that we had a positive return of investment form Day 1 not even taking in mind the extra volume in additional business it generated as our customers were paying us to live within our brand ecosystem from the minute they signed their contract through the 30 year lifetime of their system.

Once we saw that success we created an “Ipsun Platinum Protection Program (IPPP)” which we sell at $.10/W and has allowed us to grow our service and maintenance department, turning it from a cost center to a profit center and delighting our customers within the process.

Conclusion:

If you want to grow, you have to be intentional about it. In your budgets, in your mission statement, in your human resources, in your leadership team, and in your tech stack. These are the common elements that we have found in talking with hundreds of large and successful solar installers over the past 12 months.

If you’re interested in chatting about any of these, but especially the tech stack, we provide free audits to solar installers every day to see where you can take advantage of growth opportunities or currently have a blind eye.

Don't underestimate the value a second set of eyes can have on your business, especially if it's coming from industry professionals that have already worked and produced results for dozens of high growth solar companies.

Get a free audit

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written byJoe MarhamatiCOOJoe is the Co-Founder and COO of Ipsun Solar – a top residential solar installer in Washington DC with 60+ employees and $10M+ in annual revenue.Read more »
Joe Marhamati

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