Solar Referral Programs: 5 Lessons from becoming a Referral Based Business

Becoming a referral based solar business is easy:

Start by selling one job and do amazing work. Ask that person to tell others about how great you are. Wait for referrals from them, and then do an amazing job again and again. Rinse and repeat. That’s the recipe for our friends at Buddy Solar.

Now of course:

there are hundreds if not thousands of businesses like this.

They perform every single job exquisitely and live (or die) by referrals. Their cost of acquisition is exactly $0.

Doesn’t that sound great?

Maybe no if you consider that scaling a business this way is painfully slow and unpredictable.

Of course, there is another option:

You could raise $100 million dollars for your solar company.

Then pour it all into Google ads, door knocking, content marketing, a flashy website, and purchasing leads. Fill the top of the funnel so high that it’s overflowing. You will get many, many more sales than the referral-based solar business. And if you’re good at what you do, you may even get a few referrals while you are at it!

Their cost of acquisition is approximately $5,250 or $.75/W for a 7kW system (according to Wood Mackenzie).

Does that sound fun?

Maybe not when you consider that these types of companies often have contract cancellation rates of 30% or higher.

That’s the recipe for our friends at Big Box Solar.

So which is it going to be?

Well these are the two ends of the spectrum but there are many options in between.

If you’re reading this, you probably are neither of these types of companies. The referral-only business may not even have a website, depending on how bare bones they are. The venture-funded company has a tried and true formula that basically amounts to the lowest common denominator of solar.

This article is for everyone else:

The 99% of companies that care both about becoming a referral-based business and scaling their business at the same time.

We do have a climate crisis after all, and finding the right balance is key.

Our company, Ipsun Solar is exactly that Goldilocks middle-of-the-road “sustainable growth” type of business. We have grown around 30% year-over-year, and built our referral business up by 283% at the same time. Just like Buddy Solar, we started our business by doing one job for a friend and then doing another and another.

After a year of doing that, we realized we had a knack and there was genuine market demand, so we found some seed money and hired our first person.

It was only natural from that point to invest in a nice website, a marketing person, and some radio ads. This is how most small and local businesses start growing. It’s not 100% organic like Buddy Solar, and it’s not 100% inorganic like Big Box Solar.

So how do you know if your solar business is maximizing its referral and growth potential?

The answer is relatively simple:

You look at your cost of acquisition (COA) and do everything you can to bring it down.

Here are the five lessons we have learned at Ipsun Solar in our seven years in business about how (and how not) to do that. We are not experts by any means, just a humble local business sharing our experience for all to see.

1. Solar homeowners really, really, really want to know their system is operating correctly.

The funny thing that differentiates solar from other home improvement companies is that it’s not exactly a “one and done” type of project. If you hire someone to install a dishwasher, odds are pretty good you’re never going to see them again. Then again, if you hire someone to install a central HVAC system, you’ll probably see them once or twice a year for routine maintenance. Of course, you’re not surprised to pay for it either.

When it comes to solar, you get the worst of both worlds.

The homeowner might expect to hold you accountable for their system performance day-in-day-out for the 25-year warrantied life of the panels and inverters. And of course, they want that service for free. That’s because since nearly the advent of the solar market (and still today), unscrupulous solar sales people tell homeowners that solar requires zero maintenance. The line between workmanship, labor reimbursement, manufacturer’s hardware warranties, performance guarantees, and solar insurance is also mind bogglingly confusing. (We will talk about how to solve that problem in detail in an upcoming post, subscribe below if you don't want to miss it)

What does any of this have to do with referrals?

I’ll tell you:

The single biggest liability for solar companies is also their biggest opportunity for growth and reducing COA.

This is not an exaggeration.

Happy customers are the biggest opportunity to become a referral-based business.

And unhappy customers are the single biggest threat to your solar business.

It’s that simple.

Ignoring angry customers who feel they aren’t getting what they paid for is bad business and crushes your chance of getting more referrals.

So how do you turn this liability into a growth opportunity?

You actually meet market demand by building up a knowledgeable and competent maintenance department. Now you’re probably thinking that maintenance is a black hole of overhead, and that you also don’t want to pull installers off of new installations.

That’s the old way of thinking.

Our friends at Genius Solar think of it a little differently.

They have one of the lowest COAs in the country, and here’s how they did it:

They have one person at their company whose entire job is to proactively monitor for issues and help homeowners resolve them before they even know it happened. It could be anything. Communication/wifi issues, production/performance issues, hardware and warranty issues, etc. These guys spot it immediately and resolve it before the homeowner. Every. Single. Time.

Sounds expensive, right? I mean, someone has to actually take the next steps to resolve each and every one of these issues.

Wrong.

It’s actually the highest ROI activity in the business.

These homeowners are so impressed by this kind of proactive behavior that they reward Genius Solar with boatloads of referrals. These guys are so good at their job that they literally spend more of their marketing dollars on this activity than on any “conventional” marketing.

2. Your solar homeowners want active monitoring and are willing to pay for it

Okay, by now you’re probably thinking that this article was supposed to be about referrals but is actually just about maintenance.

Well there’s a reason for that.

Genius Solar proved that the way to the lowest COA is active monitoring.

But maybe you’re skeptical about making this type of investment. How are you going to monitor systems from the 5 or 10 different inverter platforms that you’ve installed over the years? How are you going to find a technician who actually can spot issues immediately and knows how to resolve them? Is that person going to be as good at customer care and communication as they are at technical troubleshooting?

Here’s what we learned at Ipsun Solar:

You don’t have to take this risk, because you can actually offer service plans with active monitoring to homeowners and they’ll gladly pay for it. We sell Active Monitoring with Sunvoy, which includes Service calls at-cost (20% off), at a flat $.10/Watt on our sales proposals. And we have a 70% attachment rate!

Now you have a win-win:

The customer gets something far more broad than their standard workmanship warranty, and you have resources to build up a service team. If you’re doing 300 projects a year, at 70% attachment and an average 10kW system, well that’s $210,000 the first year to get started.

Once you have this in place, your solar homeowners are now paying you to build up the department that is going to have the biggest impact on your COA.

3. You actually need to calculate your COA

Okay, this one sounds obvious. But have you done it? Ipsun Solar was so busy getting off the ground and doing the bare essentials, that we actually didn’t calculate COA until 4 years into the business. But it's essential that you know your numbers.

First, let’s make sure we’re operating from the same definition:

COA is your non-sales marketing dollars divided by your number of sales. Non-sales means you shouldn’t include your sales costs, like commissions, W2 income, etc. Marketing dollars means the cost of your in-house marketing salaries and advertising costs, referral bonuses, website, etc.

At Ipsun Solar, we are right at $1,000/sale. This is pretty good for a small, regional solar business like ours - doing around $10M and 300 sales per year. But our goal is to get it to $700/sale.

The most important thing is that you measure COA, and don’t forget to look at your conversion rate from the top of the funnel to the bottom. That means converting from leads to booked appointments (or “sits” in solar parlance). It also means looking at the conversion from booked appointments to sold deals. Ipsun Solar is converting about 60% of its leads to sits, and 28% of its booked appointments to sales.

That’s a top to bottom conversion rate of 17%.

Again, this is not bad but could be better! Our goal is to convert 20% of all our leads to sales. The fastest way to that goal is increasing our referrals, because our referral leads close at a rate of 30% from top to bottom.

4. Turn your solar sales team into real estate agents

I know, this sounds like very unsexy advice. But before you judge please hear me out.

Successful real estate agents are really good at one thing: referrals.

Ever wonder why your real estate agent is constantly reaching out to you by email, phone, text, fax, mail, and telegram? Because you are their marketing department. If you enjoyed your experience, you are probably going to tell your friends and family. If you do, there is a very high likelihood that they are going to use that person for their own real estate needs.

So why don’t solar salespeople do the same?

Seems easy enough.

Well first of all, successful solar salespeople sell a whole lot more solar systems in a year (generally, 100-200 deals), then a real estate agent, who might only sell 3-4 deals in a month. Solar salespeople are also just getting a massive volume of leads - sometimes so many that they can’t keep or manage to follow-up effectively with their own active leads, let alone their existing customers.

This is a critical mistake that requires coaching and support from their employers.

Meet Hello Solar. They have all their solar sales people attend at least one event per month at the community center of one of their existing customers. They do a lunch and learn, or a Solar 101 for the community to learn more about solar. They give their solar salespeople the tools to (automatically) reach out with tasks, emails and texts to their existing customer base, so that those customers never forget who installed their solar system. They also take advantage of automations in Sunvoy that remind their solar homeowners of their solar anniversaries and when they generate each megawatt hour of solar power.

When you turn your solar sales team into your marketing department, the referrals start flowing where they previously were dry.

And once your solar sales people realize that these community events and customer reengagements are absolute gold mines for leads, they will keep coming back to the well without prompting.

5. Don’t outsource your brand

Nearly every single time solar installers commission a system, they send their customers to a third party.

That’s the inverter monitoring platform that doesn’t even have their logo, brand or colors!

It’s hosted on a third party site and many times your company is only mentioned as a foot note. (If at all)

So why would you expect your customers to even remember who installed the system?

Oftentimes, they won’t.

Now this is easier said than done, because anyone and everyone who thinks they can own your customer relationship will gladly jump at the opportunity. Imagine that you sell and install the job, sometimes taking months and months, only to hand the customer relationship voluntarily to a third party manufacturer.

That’s the reason we created Sunvoy. Ipsun Solar actually built Sunvoy for itself because it realized it was sending all of its customers off to pasture with no direct connection to its brand.

Now, whenever a homeowner signs a contract for solar they live in our brand ecosystem from the moment they sign through the 30-year life of the system. Did I mention that we charge $.10/W for the active monitoring that comes along with that?

That’s right, our customers pay us for great service, active monitoring, and to interact with their project within a customer portal that displays our brand, logo, colors and is even hosted on our own website.

Those folks are not going to forget who installed the system.

Of course, only a solar installer would build a 100% white-label solution like this. Because we know the value of retaining our brand. That’s why even though it’s called “Sunvoy" - it doesn’t actually say Sunvoy anywhere in the platform. It looks like it was built by the solar installer for the homeowner. Those solar homeowners can now track their project, view their project docs, see their system performance, refer friends and family, and open service tickets - all within Sunvoy!

The result has been a 284% increase in referrals for two years in a row since Ipsun Solar started using Sunvoy. And we actually put together a value-packed cheatsheet that tells you the exact step-by-step things we implemented to achieve that referral growth:

So what are the COAs for all our friends mentioned in this article?

1. Place: Buddy Solar: $0 COA. Growth 5% year-over-year.
2. Place: Genius Solar: $700 COA. Growth 20% year-over-year
3. Place: Hello Solar: $850 COA. Growth 30% year-over-year.
4. Place: Big Box Solar: $5,250 COA. Growth 300% year-over-year. (But do you really want 30% cancellation rates?)