How to start a solar company? Do you want to make money through starting a solar company but you are wondering how you can do it?
Or you are still asking yourself – can I really make money with a solar business?
Yes, you can make money through starting and running a solar company, but only if you have necessary information required for you to do this.SolarEyes International, 2023
We are going to put it clear in this article, therefore, follow through.
Firstly, you need to understand that like any other business, starting a solar company requires you to have skills required for a founder – get them here. After that you need to know the necessary steps and structures you need to put in place for a successful solar company business.
But wait a minute – why should you actually start a solar company? Is it profitable? What if the demand just disappear in the near future?
See wonderful reasons below.
Why Should you Start a Solar Company?
According to the International Energy Agency, the share of modern renewables is estimated to reach around 18% of total final energy consumption in 2030. And this includes solar energy.
Thus, solar is here to stay and its uptake will surely increase – therefore the earlier you jump into this business the likely better it might be for you.
Depending on where you are based there are a number of reasons pointing to the solar business being lucrative and predicted for a near future boom.
First of all, globally there has been energy demand problems leading to power cuts and unreliable grids. This has been worsened by the rise in the utility based electricity and challenges thereof. This only is an enough push for target customers of solar companies to go solar.
Furthermore, you probably have a small solar system at your house and your neighbor has given positive feedback about going solar. Therefore, customers are there and you just need to start, learn and up your game to take more customers and make money.
More so, considering the climate change eyes, solar is amongst the best options for powering the planet. And climate funding around the globe will target such energy generation means such as solar energy.
On another note, as SolarEyes International we have been receiving a lot of friendly and consulting requests on how to start a successful solar company, hence we thought it would be good to put some of the required information for similar requests in this article.
Now let’s get back to how you can start a solar company and effectively make money through the business.
How to Start a Solar Company Startup
You need to do or setup the following for you to start a solar company business.
1. Start with a Clear Business Plan
Having a clear and well thought business plan will help in your quest to start a solar company.
Select your target market and niche. Just remember there are many ways to become a solar company.
Do your intensive research to understand the challenges in the business and the quick wins. Understand what those in the sector do, how they do it and why they do it that way. Then identify areas of improvement where you can excel and attract both existing and new customers.
Understand the costs associated with each activity and step involved in the business. Start to put in place ways of getting those things that you yourself cannot do. Do not forget labor costs as they will have an impact on your business.
Do not forget to choose an area or location for your business as this will be important in your distribution and reach to final customers. This will impact rental costs, logistics costs and future expansion so do it well at start with the future in mind.
Apart from knowing your customers you also need to know your potential suppliers and where you will get the products from. Write down all these requirements and understand the costs associated with each.
Most importantly, as part of your clear business plan you need to have your sufficient budget according to the requirements you have identified in your research and study on how to start a solar company. Your budget will help fuel your ambitions and help you realize your dream of starting a solar company.
Perhaps come back to this business plan after doing the other steps below as they will influence your business plan.
Now that you want to start a solar company, in order to bring yourself up to speed you will need to understand common abbreviations used in this sector.
2. Find a Niche within the Solar Energy Business Sector
This entails identifying a specialized segment of the solar sector that you want to focus on. If you didn’t know there is a lot that you can do in the solar energy sector, therefore you need to know your strengths and select wisely.
But before you go to the type of solar company you want to become, it is important to understand your target market. Understand the buying power as this will influence the type of company you would like to be.
Questions you should be asking your self are: What exactly do my target customers need solar for? Which products can they afford? What products are selling to them currently?
Below are the type of companies that can be done in the solar energy business. We will not focus on manufacturing of solar equipment as we are considering solar company businesses that target directly or near to the customer end.
You can become any of the following:
(a). Becoming a solar distributor – Concentrate on wholesale of solar products. For this you need to establish good relationships with solar equipment manufacturers and work as a middleman between solar manufacturers or suppliers and solar companies or installers.
This requires capital and establishment of effective distribution channels. Effective distribution skills are a backbone to this solar company type.
This solar company type also works well for pico solar systems and solar home systems.
(b). Becoming a solar installer or integrator – An installer or integrator concentrates with installation of solar systems. Usually takes different solar components from different distributors or suppliers and combine them to come up with a solar installation for an end user. Good technical understanding is required for this type.
An installer usually takes care of after sales service – that is customers will call you when there is a problem with the system you installed to them. Or you can as well make money through maintenance and services business in the solar sector. Someone might have installed and left but you can go and do maintenance to the system later and charge the customer for this.
You can still decide to be a one man business as an installer if you do not have enough capital on starting. But remember to scale and expand your business such that you can realize more profits.
(c). Becoming a seller of solar equipment – This is more of a distributor but only differs in a sense that this can be done to the und user and can be a retail outlet shop doing this. No much technical expertise because you can outsource technicians for installation requirements.
You can also concentrate on fully integrated solar solutions which do not need installation of many components and is plug and play.
This solar company type also works well for pico solar systems and solar home systems.
(d). Combine both distributor and integrator – For this you will be both a distributor and an integrator or installer at the same time. You need to understand distribution and its requirements while at the same time understanding installation and after sales service.
3. Sort out any Certifications and Licensing Requirements
Like any other business, solar business requires certifications and licensing according to the country you would want to operate in. So make sure you understand this.
The best way is to start by registering the rightful type of company for your solar startup. This might need to be backed by registering to organizations that regulate the solar industry in that particular country.
Don’t forget to insure your business as this is a necessity. You will put some money into this business and risk is like rain – it can come while you are not prepared or covered. So get it right and be covered for any unforeseeable risk. Also insure your employees as they will be part of you in this journey.
And don’t forget to become a registered member of associations in the country you want to operate in. In many cases renewable energy or solar associations would have collectively solved some of the problems that you might be facing and joining them will make your life and business easier. So do it.
After registering the rightful company type and becoming a member of associations, then you will need to do a research on the required certifications for you to sell solar products in your target country. For this you have to reach out to regulatory authorities or easier done by reaching out to the associations for more information and advice.
Also remember the certifications for products might mean your supplier has to comply with such local certifications. This means that in some countries they require only products with certain certifications to be sold and installed to the market.
Therefore research on this one upfront. Otherwise you might later identify a very good product but only to later realize that you can’t sell it in your region or country because of certifications. This also goes to product selection checklists especially if you are going to import your products.
Also make sure to understand the mandatory skillset required for your company if any.
4. Select your Preferred Product Brands
When you want to start a solar company, representing or pushing good and reputable brands can be half your battle. However bear in mind that some upcoming brands have proven to be innovative, cost effective and at the same time reliable, therefore don’t hesitate to try them.
If you are to try a new product then do a pilot order and test the product first before getting a big order. Or at least be recommended to the product but it is just wise to do a proof of concept and test the product extensively before you jump for a container shipment. Unless it is one of those well known and tried brands that every customer believes in.
Pay attention to product warranty as this gives you a guide on product reliability from the manufacturer’s perspective. Go for products with longer warranty especially if you are to import the products since some time is going to elapse during product importation procedure.
There is always a reason why a manufacturer gives a certain duration as warranty. And this is definitely based on the product performance tests conducted by the manufacturer.
If a manufacturer himself does not have confidence in his product and cannot be sure that his product will function for at least a certain number of years then who are you to believe in the very same product more than its manufacturer?SolarEyes International, 2023
If you are to become a distributor and you want to import your products then a few days visit to the supplier’s factory would be a good move. This will help you understand the product functionality and have an enriched face to face conversation with your supplier partner.
Furthermore, this shows your seriousness to represent the brand and might work to your advantage especially when it comes to negotiating better payment terms. People trust someone they have met in person more than someone they have never met in person.
Therefore, this step will be a pillar to your business for years especially if you are planning for long term partnership with the supplier.
It is important to create good relationships with your suppliers as this will enable you to perpetually get good wholesale prices and eventually enable you to make good profits.SolarEyes International, 2023
5. Understand Available Tax Incentives
Various tax incentives exist depending on your target country and where your business will be based. Reach out to the responsible tax regulatory authority to understand tax incentives for solar companies and solar products.
In some countries solar products do not pay customs duty. Understand this and take advantage of the available tax incentives in your country or region. In some countries the government offer some incentives or subsidies for either solar companies or solar end users – use this to your advantage.
If the government is offering incentives to end users who go solar then use this as your marketing statement. You might realize that end users will not be knowing that such incentives do exist – and you give them knowledge and good reason to go solar. Obviously they will do business with you since you revealed a good secret to them.
6. Assemble your Team and Start
It can’t be a solar company if you do not start. Therefore, after all has been said you need to assemble your excellent team and start, of course watching every step for learning and improvement.
Get the best team at an affordable cost. Pay well, especially those that are highly skilled and loyal to your business. Strive to keep your team for longer times with the company.
Make sure you have a skilled personnel for each of the important departments of your solar company – finance, technical, human capital, sales and marketing. If budget is a constraint then one person can handle two departments as you start and scale.
The best way to start a solar company is to have the experience required and understand the business and its surroundings – or at least work with those that have been there before starting your own company.
Having the rightful skills mix coupled together with business and startup skills will make you a good candidate for a successful solar business. And this will bring money along the way.
Frequently Asked Questions (FAQs) on How to Start a Solar Company (Questions and Answers)
Question 1: How can I start a solar business without money?
Answer 1: Like any other business when you want to start a solar company you need some money to do initial requirements such as stocking products, labor costs and logistics costs.
What you can do when you have a limited budget is to start in a lean way where you do not need to stock a huge quantity of stock. You can start as a smaller installer and scale upwards to become an integrator and even include distribution.
Question 2: Do I require solar skills for me to start a solar company?
Answer 2: Having solar skills is a plus in this business as this will enable you to understand how your products work and have a good decision making on product selection and customer explanations.
However, if you do not have solar skills then you probably need to learn them and this can be done while you are starting and you learn as you go. Be eager to learn new things quickly and in some cases this could mean taking a solar related course to bridge the gap.
The other way is to employ key people who have these skills and they will advise as the business progress and as you learn your way to these skills. Or better have business consultations along the way for direction and strategy.
Question 3: Should I start as a distributor or integrator? Which one is profitable?
Answer 3: It really depends on your skills, strengths and budget. Being a distributor might mean a stronger need for a bigger budget to be able to stock large quantities. But remember when you put more money then you are likely to get more money. More so, you can start being one of the two and then bring in the other part as you scale.
Question 4: I want to focus on solar home systems. How do I effectively excel on last mile distribution?
Answer 4: There are many solutions to last mile distribution. The best way is to have community agents who are people who stay in the target community. Recruit these agents to become ambassadors of your brand and train them effectively for them to be able to sell and install your products.
People trust their own people and it will be easier for these people to navigate the communities they live in or closer to.
The other effective way is to have community leaders endorse or participate in your solar home system distribution one way or the other. Maybe installing a demo solar home system kit at the village head’s or Chief’s compound can work as a par excellence marketing piece.
Question 5: What is a solar EPC company?
Answer 5: A solar EPC company is a solar company that offers engineering, procurement, and construction of complete solar systems. It offers a full-service solar installation package along with ongoing system maintenance assistance.
Some common solar business models which are usually provided by a solar EPC company include Power-as-a-Service (PaaS) and acting as an Independent Power Producer. We will focus on these ones in a separate article to follow soon.
Question 6: What are the key factors to consider when comparing two countries on solar business potential?
Answer 6: Key factors include population, number of households, GDP, electrification rates and political terrain.
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*** ALSO CHECK: 12 CHALLENGES FACED BY SOLAR COMPANIES IN DEVELOPING COUNTRIES