Well friends, the storm has arrived. If you’re like Ipsun Solar, as of this reading you’re seeing reduced leads, conversions and sales. And it’s almost entirely due to the deliberate work of the Federal Reserve, who has made reduced spending an explicit end goal of their monetary policy, to help tame inflation.
Of course, the cruel irony of the Inflation Reduction Act is that the precipice of an ITC-cliff is no longer in sight, and that also means consumers see little urgency to act quickly either, despite climbing rates, inflation, and utility prices.
There are some storms you can evacuate from; but this is not one of them. A decade of easy money has come home to roost, and we are staring persistently high interest rates in the eyes for potentially many years to come, if not the rest of the decade.
We can’t put our head in the sand, lest we disappear entirely. We have to find solutions, and this is our first draft at a playbook to survive, and maybe even thrive, in this new world.
Here are the top things to think about in selling solar in a high interest rate environment.
If you don’t have good reporting, you’re going to need it right now. How do you know exactly what’s going on with your leads and lead sources, appointments, conversions, and sales, if you don’t have good reporting on them?
We recommend HubSpot as the best CRM for reporting, and as of today, we have over 730 reports that we have created to track everything related to sales and marketing (and beyond).
That means that we know exactly where we are on all of these metrics, not just for today and yesterday, this month and last month, but the same exact time period the year prior, and the year before that. We always joke with solar installers that if you can imagine something to report on, with Hubspot, you can report on it.
Whatever you do, don’t fly blind because there are some steep mountains and foggy passes ahead. You need good data to make good decisions.
We all know that payroll is biggest piece of overhead in solar. As our leadership coach reminds us, if there’s anyone on the payroll you wouldn’t enthusiastically rehire, you need to consider giving them an opportunity somewhere else.
In an industry with razor thin margins like solar, we have to stay lean and not simply hope for the best. High rates are likely to keep the market soft for a good while, at least relative to the high growth years we have seen recently.
Any under-utilization of resources could lead to a death spiral, where sales volumes continue to drop, while overhead remains stable or fails to drop at a similar pace, leading to either zero margins or uncompetitive pricing.
That’s the recipe for disaster, and we need to get ahead of it.
Take a look at every single penny in the budget and ask if you would enthusiastically endorse that expenditure as of this moment. If the answer is no, then don’t hesitate to make tough decisions.
Service and maintenance demand is only growing, so be prepared to use this as a revenue driver in a downturn. At Ipsun Solar, we started selling the Ipsun Platinum Protection Plan (IPPP) at $.10/Watt and turned out service division profitable overnight.
We are now bringing in hundreds of thousands of dollars to grow our service division because our salespeople are training to sell the IPPP at a whopping 93% attachment rate.
By distinguishing between standard workmanship that is contractually obligated, and everything you and I both know goes well beyond that and encompasses the vast majority of service tickets, it’s an opportunity to prime your customers to pay for service calls in the future.
By utilizing Sunvoy for active monitoring, we provide a valued service for our homeowners through IPPP and still charge for service calls. We’re also on a path to taking on more external service work from customers we didn’t even install, because we now have the resources to make this a dedicated product line.
Now is the time to get creative - maybe really creative. At Ipsun Solar, we’re trying to make lemons into lemonade by using this unique moment in history for a novel experiment. We have all had the dream of recurring revenue, robust adders, and profit margins to actually write home about.
At the same time, we know that bog standard time-and-materials-solar isn’t getting us there. EPC work is a slog, and an exhausting one at that. That’s not going to change, but what if you could sell a Premium Package that includes goodies nobody else is offering, and build larger margins in than you have in your standard offering?
Well that might allow you to slim down margins on your base solar, and provide upgrades that boost your overall net margins.
That’s exactly what we’re doing. The appetite for solar at the highest prices in a decade and the highest interest rates in a decade, is low right now.
So we’re lowering our base solar cost, and offering a premium package that includes the aforementioned Ipsun Platinum Protection Plan, plus critter and snow guards, and circuit level consumption monitoring (which can be viewed right next to your Solar Production within Sunvoy).
And we’re offering it at $.50/W.
Oh, and it’s also working.
So what if we found a formula that can not only get us through the current moment, but also provide a template for a more sustainable, and profitable future solar industry? We may have done just that.
Okay, so maybe the same solar system at a 20% premium in cost and interest from the same time last year isn’t so appetizing. Not trying to beat a dead horse here. If the market doesn’t want to take on that kind of debt, it almost certainly means there’s an interest in third-party leases and power purchase agreements (PPAs).
Now, we’ve all dealt with the TPO Sharks (not fun, am I right?). But what if we built our own funds with friends and neighbors who have tax appetite and want to help provide more options to consumers. It’s possible, really it is. We’re exploring it at Ipsun Solar, and the structures are manageable. Obviously, someone else is monetizing the tax credits, and other incentives, but if it’s all in the name of passing on savings and clean energy to the homeowner - who is to argue?
The best part is that with Sunvoy, your team can actually manage an entire solar array fleet to meet the performance objectives of third party owners, because for the first time we can see how an entire fleet is performing from what is promised in our contracts to what is being produced in the real world.
So how are you navigating the new normal in the solar industry?
We’re learning a lot and so will you.
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