Start a solar panel business by following these 10 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your solar panel business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Check out our How to Start a Business page.
STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a solar panel business?
There will be a significant investment required in order to obtain your first shipments of panels to be installed in a home or business. If you are looking at franchise opportunities, they require a minimum payment of between $100,000 to $350,000 just to gain access to their assigned region. Without a franchise, expecting to invest up to $500,000 will enable you to initially market, hire a crew, and perform the first round of installations over the course of one year.
Read our solar panel business purchasing guide to learn about the materials and equipment you'll need to start a solar panel business, how much to budget, and where to make purchases.
What are the ongoing expenses for a solar panel business?
You will be responsible for payroll, ordering panels from a distributor for each job, marketing, and paying the energy company on behalf of leased customer accounts. You will likely have an office space, delivery vehicles, and ongoing training to maintain licenses. You will need significant business insurance coverage as well.
Who is the target market?
With ever evolving solar technologies, solar energy is now available to most homeowners with a clear roof line. Homeowner Associations sometimes collaborate for entire neighborhood solar installations. Businesses small and large are adding solar to their energy programs and may be ready to invest in sizable rooftop or field farms.
How does a solar panel business make money?
Whether you work with a franchise or wholesaler, your installation business makes money through the successful installation of solar units. Some leasing programs generate regular income by charging their customers a monthly bill, which includes the cost of the panel installation and any extra power the customers are using from the grid. Otherwise, the customer pays a retail rate upfront for their panels and appropriate labor costs for connecting their panels to their home and the power grid.
How much can you charge customers?
A residential installation can be priced anywhere from $15,000 to $50,000, depending on the size and type of panels installed. Leases with a zero dollar down payment can run anywhere between $25 - $200 monthly depending on the type of client and the size of the installation.
How much profit can a solar panel business make?
When you operate a leased solar panel business, your profit will depend entirely on the number of panels that you have installed. A typical return is about 6% per year, but this requires a long-term investment strategy as the company owner. For companies that only install panels for customers who pay all at once, you can see profits of $5,000 to $10,000 per job. However, this requires a steady stream of new contracts. If you’re working with a large industrial contract, you can see a profit in the hundreds of thousands for a year-long job.
How can you make your business more profitable?
Your largest costs will be purchasing the panels from the distributor and your payroll. You can control supply costs by purchasing large lots of panels and using them for multiple jobs, lowering your per unit cost.
Another way to increase profits is to reach out to other solar panel contractors to offer assistance as a sub-contractor. This way you can form strong professional relationships in your area, and also take on larger projects than your team might otherwise come across.
What will you name your business?
Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Solar Panel Business Name Generator
When registering a business name, we recommend researching your business name by checking:
- Your state's business records
- Federal and state trademark records
- Social media platforms
- Web domain availability.
It's very important to secure your domain name before someone else does.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your solar panel business is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.
Open net-30 accounts
When it comes to establishing your business credit, net-30 vendors are considered the way to go. The term "net-30," which is popular among vendors, refers to a business credit arrangement where the company pays the vendor within 30 days of receiving goods or services.
Net-30 credit terms are often used for businesses that need to obtain inventory quickly but do not have the cash on hand.
Besides establishing business relationships with vendors, net-30 credit accounts get reported to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our guide on the best net-30 vendors so you can start building business credit now, so you never have to worry about cash flow in the future. Keep in mind that poor cash flow is the #1 reason businesses fail!
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a solar panel business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
There may be relevant regulations regarding solar power in local areas. Certain areas may prohibit the installation of solar panels for one reason or another so be sure to check with the relevant agencies before doing any work.
For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
A solar panel installation business would need to create a services agreement, which should outline the parameters of installation, the price, and the expectations of the client. This is especially important with regards to ensuring the panels will provide enough energy for the home or business. Here is an example service agreement.
Recommended: Rocket Lawyer makes it easy to create a professional service agreement for your solar panel installation business when you sign up for their premium membership. For $39.95 per month, members receive access to hundreds of legal agreements and on call attorneys to get complimentary legal advice.
Certificate of Occupancy
A solar panel business is often run out of an office. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease office space:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a solar panel business.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build office space:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for you business’ location to ensure your solar panel business will be in compliance and able to obtain a CO.
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
How to promote & market a solar panel business
Attend home shows as a vendor, purchase on-air and print ads, and join your local chamber of commerce to get your name out in the community. Ask at the city hall what requirements they have in order to consider your company for municipal projects.
How to keep customers coming back
Solar panels are a highly visible product. Consider installing panels on a home or business in a high-traffic area for free or at a promotional rate. Your reputation will grow with each job completed on-budget and on-time. You could also consider donating a panel to local park or school as a goodwill gesture.
Make sure you or someone on your team knows the ins and outs of government incentives and tax cuts for people who choose to install residential solar panels. This will help potential customers place greater faith in your company’s expertise in the industry, and it will also help them feel better about investing in your products.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use.
Recommended: Find the best phone system for your business; check out our review of the Best Business Phone Systems 2021.
Start A Solar Panel Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
A motivated individual with excellent business skills, knowledge of electrical contract work, a background in construction, and an eager marketing plan can make a success out of this rapidly expanding industry.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at a solar panel business?
As owner, your day’s activities will vary depending on what jobs you have lined up. Typical duties might include:
- Installing solar panels, back-up battery systems, and connections to main power grid
- Contacting potential customers for initial survey
- Working with customers to find grants, rebates, and special financing available to those entering the solar program
- Calculating the amount of potential solar energy a particular location could generate with a variety of products
- Scheduling installation crews and delivery of panels to site
- Conducting a final survey and checklist of a completed installation
- Maintaining proper accounting and payroll procedures
- Hiring staff for a multitude of responsibilities
- Developing potential commercial and municipal customers for large installations and projects
- Providing maintenance and repair for existing solar panels, possibly including previous customers
What are some skills and experiences that will help you build a successful solar panel business?
The successful solar panel business owner will have solid understanding of marketing and use it to the greatest effect, generating new contracts for their new company and brand. They will have shrewd personnel skills, taking the time to hire reputable technicians with all the proper licensing and training. Good managerial skills will keep the crews busy, completing jobs on time as promised, while keeping payroll expenses under control. They must also work to stay current with changing technologies, as solar is still a developing industry.
What is the growth potential for a solar panel business?
As more people, cities, and states turn to renewable energy sources, the solar panel industry is seeing a healthy growth of 15% annually, according to IBISWorld.com. With ongoing technological improvements and reducing costs of materials, solar power is becoming more affordable and appealing to both residential and commercial clients.
TRUiC's YouTube Channel
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a solar panel business?
You must hit the ground running as soon as you find your first customer. Before that, take the time to develop your knowledge of the entire solar industry, emerging technologies, and installation options. Research the various government rebates and work with a financing institution to provide payment options for your clients. You will need to be able to offer something unique to your clients that other companies cannot provide. Make sure your company is properly insured, as accidents will happen that can pose hazards to your crews and your customer's property.
How and when to build a team
As soon as your business loan is in place, you must start building your sales, survey, installation, and maintenance team. Unless you are an experienced installer, it is wise to include an industry expert as one of your first team members who can help guide you in building the best staff. You may require an executive assistant as your schedule gets crowded with meetings, marketing, and social events.
Read our solar panel business hiring guide to learn about the different roles a solar panel business typically fills, how much to budget for employee salaries, and how to build your team exactly how you want it.