On this episode of Energy Ahead, we get a crash course in photo voltaic installer monetary well being. What are “wholesome” installers doing that struggling installers are usually not doing? And in the event you’re not struggling now, how are you going to finest defend towards the market’s volatility? Rachel Shapira, residential finance director at BayWa r.e. offers us some in-depth perception.
You should definitely watch the complete 20 min episode for your self. Right here’s a part of the transcript.
Let’s dig into among the issues that photo voltaic installers can management. What are the main indicators of installer monetary well being? And what defines wholesome on this means?
Shapira: Main indicators are:
- Is the installer present process a interval of managed progress somewhat than unfettered progress the place their gross sales are far outstripping their skill to finish the installations?
- Is high quality the main focus of the work each when it comes to craftsmanship on the roof but additionally when it comes to programs internally?
- Are they utilizing information to tell the choices they make?
- Have they got good challenge durations and
- Are they adjusting their redlines as costs are shifting?
A wholesome installer additionally has programs and processes developed as they’re rising. They’re not simply rising after which realizing uh oh we grew previous our programs. They’re frequently investing of their programs and processes in order that the programs can scale as they develop as a result of what occurs to a whole lot of installers is that they’re so centered on doing high quality craftsmanship, which is all the time price doing, and so they’re centered on gross sales, that they’re not investing within the programs that permit them to trace the KPIs to ensure that they’re hiring for the abilities that they’re going to wish in three years to handle their liquidity.
So what are wholesome photo voltaic installers doing otherwise than these which can be struggling? You touched on it a bit of bit there, however are there some extra examples you’ll be able to throw out?
The very first thing is that they’re saying no to some alternatives. They’re being selective about how they develop in order that they are often intentional and strategic in how they develop as a result of not all progress is worthwhile. It’s not price investing in progress that’s not going to be worthwhile.
You could do a correct evaluation and make strategic selections primarily based on precise information projections forecasts that show you how to inform:
- Do I need to enter a brand new vertical?
- Do I need to begin increasing into non-solar providers?
- Do I need to shut down a gross sales staff when my variety of closed gross sales is way outstripping my set up capability?
The opposite factor that they do is that they’re actually specializing in operational excellence. They’re in investing in programs to ensure that they’ve information to drive their resolution making. They’re ensuring that they find the money for within the financial institution to do extra than simply cowl subsequent week’s payroll. They’re their money move to ensure that they find the money for coming in to cowl all the prices which can be due on all of the tasks that they’ve closed as a result of once you don’t have information, and also you’re solely can I make subsequent week’s payroll, you find yourself mispricing your providers. We all know it is a very worth delicate market; we all know a whole lot of installers are working in very aggressive environments which can be a bit over saturated. That may drive the mispricing of providers, which may result in a whole lot of high quality points, which then can lead installers to actually get themselves into hassle.
Quite a lot of the perfect installers really spend money on programs to the purpose the place they rent an individual to handle it and assist them with information analytics as a result of, once more, they’re centered on the lengthy sport. They’re centered on scalability, and so they’re centered on progress.
The subsequent factor that wholesome installers try this unhealthy installers are inclined to spend money on much less is organizational resilience. Everyone knows we’re in a difficult time for a photo voltaic installer proper now … however we want to consider how are we going to come back out the opposite aspect of this. Are your individuals focusing their instances in your progress objectives or are they getting caught in non-productive work? Do you may have programs that will let you plan your money necessities as a way to have the cash you must hit your progress targets and your objectives.
And do you may have some money reserves available to just be sure you can survive a downturn? Quite a lot of wholesome companies usually wish to see you recognize three months of OPEX available always in order that if there’s a downturn or a slowdown like we’re in now the place there’s simply not sufficient provide to fulfill most installers’ set up timelines, which is resulting in a slowdown in income. The installers which have money reserves are ready to make use of that to maintain their workers right here, maintain them paid, and maintain themselves rising and get via this this difficult time.
The perfect installers actually excel at setting buyer expectations and speaking about house owner expectations. Their gross sales groups are effectively educated and centered on consultative gross sales and educating the house owner so they arrive in understanding what to anticipate.
The very last thing, and that is actually essential, is that they’re adjusting the redlines as costs enhance. The previous few months, as tools costs have been rising, labor prices have been rising, and a whole lot of installers have been very hesitant to regulate their redlines as a result of they didn’t need to be priced out of the market by their competitors.
What that meant was they have been dropping the margin that they wanted to have the ability to take up prices like change orders after they couldn’t get precisely the product they wanted as we bought into the provision constraints. You could just be sure you’re ready the place you’ll be able to modify your redlines in a well timed method to just be sure you proceed to have you recognize some wiggle room to cowl change orders if vital or to simply ensure that all of your gross sales and installs are worthwhile.
Installers do have the chance to promote their worth and their high quality with a purpose to justify a slight worth distinction in the event that they’re competing towards somebody who hasn’t adjusted their redlines. In addition they can promote themselves as, ‘we’re going to be financially wholesome; we’re right here for the lengthy haul. I do know that we’re a pair cents larger and we’re going to be right here to honor our guarantee to you consequently.’
Subsequent we get into:
- accrual accounting vs. money accounting,
- renegotiating third-party gross sales agreements
- ^ and why it is very important renegotiate them
- And what financially wholesome installers have to be doing proper now — like testing BayWa r.e.’s Split Pay option, which Shapira says is “particularly designed to just be sure you can get the tools you want once you want it. We accomplice with some photo voltaic financiers to have the ability to safe the tools we ship you towards loans that you’ve from the financiers. That means we are able to ship you extra supplies than our credit score line usually permits, and also you get the supplies once you want with out having to prepay different payments in case your credit score line doesn’t provide you with sufficient room to get all of the tools you want in a given month.”
Choose up the episode proper the place the transcript left off: