Could this tool double your profitability?
We recently posted an article on the . We established the importance of cutting soft costs to ensure a profitable business operation, and introduced PVsell as a tool that helps you cut soft costs and improve profitability. In this article, we’re going to share some survey results that illustrate the plight of the average PV retailer when it comes to commercial PV. Along the way, we’re going to demonstrate how PVsell can increase business profitability by as much as 50%.
In mid April, SunWiz surveyed its readers on their Commercial PV retailing experience. The results were very interesting:
- The success rate of the typical solar retailer when it comes to commercial PV sales is 20%. This means 4 out of 5 pitches for commercial PV sales are unsuccessful. If you’re doing better than this, pat yourself on the back – 25% of companies reported a success rate of 33% or higher, and 25% reported a success rate of 10% or lower.
- The typical solar retailer spends 6 hours on each proposal they put together for commercial PV. (PVsell can cut this to 5 minutes). Interestingly, 25% of respondents spent 3 hours or less, and 25% spent 10 hours or more. The typical solar business is therefore spending a lot of time preparing proposals that are mostly unsuccessful.
- Now, when they are successful, the typical business has a 22% Gross Profit Margin – and 50% of businesses have a GP in the range of 20%-25%.
- The typical business pays its commercial salespeople $70,000, through some combination of salary and commission, though again there is a large variation in the amount paid.
How does this translate into total business revenue? The average solar retailer installed 12 commercial PV systems totalling 310kW in 2015. At an average of $2.20/W before STC discount, the business turnover in commercial PV would be $680k, and the gross profit at 22% margin would be $150,000. After paying the salesperson $70,000, this leaves $80,000 per year to cover the rest of business overheads and to pay a dividend/distribution/salary to the company directors.
You can see at these levels, it’s hard to make money selling only commercial PV. That’s why the mainstay of most solar retailers is still residential PV, which covers most of the business operating costs. Considering how barely-profitable the typical commercial solar sale is, it’s not surprising that survey respondents were excited about a tool that could:
- Halve the amount of time spent on solar proposals
- Increase by one-third the success rate of commercial jobs
- Present a professional proposal including highly accurate ROI calculation
- Provide a personalised proposal less than 15 minutes after speaking with a potential customer.
Now, let’s see how such a tool could double their profitability.
- Base Case: Let’s use our earlier example as a base point (20% success rate, 22% Gross Profit margin, $150k/year total gross profit, $80,000 profit net of sales person). Now, at 6 hours per customer and a 20% success rate, the typical salesperson spends 20% of their time on customer proposals.
- Halve the time spent on customer proposals: Simply by using a tool that halves the amount of time it takes to create a proposal, all of a sudden they have an extra 10% of their week available to see potential customers. Accordingly, your business volume increases by 10%, bumping your gross profit up to $165k. Your profit net of salesperson salary increases to $94k, an improvement of $14k or 18% over the base case.
- Increase your success rate by 33%: Now if this tool produces professional-grade proposals that clearly calculate the ROI and enable you to put your best-foot-forward, then it would be a marked improvement over a typical solar proposal that is lacklustre and one of the key reasons solar businesses are losing work to their competitors. Increasing the success rate by 33% lifts your 165k Gross Profit to $220k, for the same amount of effort. Even after paying your salesperson extra commission, your profit net of salesperson salary leaps to $145k, an improvement of $66k or 83% over the base case.
- The success multiplier: Now as you start doing more volume, you’re going to increasingly both win referral work and win work by reputation of your testimonials and customer portfolio. This means your success rate would naturally go up – but let’s investigate an approach that enables you to have more profit for less effort, an approach where you raise your prices instead, because your reputation means you no longer have to compete on price and price alone. The exciting thing is by increasing by 5% the price you charge while your costs stay the same, your gross profit leaps by 22% to $269k, and your net profit skyrockets to $192k, a $113k or 143% improvement over the base case.
(These calculations are illustrated at the end of this article.)
So, you’ve gone from a business with a profit after salesperson salary of $79k to one with $192k – an almost 150% improvement. That sales tool that cuts soft costs and enhances sales outcomes has delivered your business an extra $113k/year. What investment is required in that sales tool? PVsell starts from less than $1000/year, depending on the size of your business. With a 28-day money back guarantee, you’ve got nothing to lose and immense profits to gain – indeed PVsell can transform your business profitability.