...and how can OpenSolar and SunWiz increase your chances of WINNING?
Part 1 of this series was introduced as:
Wouldn’t it be amazing if every proposal you sent out to a prospect won you the job?
Now, we’re not saying OpenSolar will do that for you automatically. (But we reckon just using OpenSolar will improve your odds).
But maybe with a little guidance, your solar business can start hitting home runs more often.
A reminder: some OpenSolar have permitted us to analyse their OS accounts to guide them where they should focus their efforts to maximise their chances of success. They’ve agreed we can publish aggregated anonymous analysis of their results for the purpose of sustainable industry growth.
In Part 1 we saw:
- The 90-day success rate (conversion from prospect into sale in the first 90 days) for a sample of companies ranged from over 40% success down to below 10%.
- The success rate wasn’t determined by the size of the company
- The success rate wasn’t determined by the size of the system
- The success rate was strongly influenced by the system price
But the key observation from Part 1 was that many companies are still selling high-priced systems and remaining in business.
In Part 2 we’ll show you why this is possible and what to do to emulate it.
Price isn’t the primary determinant of successful sales… payback is!
The chart below plots the success rate against the payback period for the system, for the most recent 90-day period. You can see that a business has a 30% chance of winning a job where the proposed system pays for itself in 2.5 years… but systems with paybacks shorter than 2.5 years have a lower success rate. Contrast this with systems with paybacks in the 4.5-5.9 year range, which have a 18% success rate. Paybacks beyond this have lower success rates, but interestingly the success rate actually increases as your payback grows longer than 6.5 years.
What does this imply:
- For a household with fixed electricity prices and consumption, system price is the dominant factor in payback.
- Reducing your system price to rock-bottom levels may mean you make more sales, but it doesn’t mean you’ll make much profit.
- If your typical system price price produces a 4.5 year payback, you could increase your price by as much as 30% without materially harming your chance of making a sale
- There’s an argument for a high-price, high-profit business model, albeit at low volumes.
So, are you charging too little? Are you charging less than you could?
Maximising your Expected Profit per customer
To truly scale your solar business, you need to make the most out of every opportunity. For every customer that comes through the door, you could charge a low price with a decent chance of converting the sale, or a high price and have a modest chance of success (or somewhere in between).
How can you maximise the profit you make from every opportunity? That’s answered by a metric called the Expected Profit – the profit you make on a sale multiplied by the likelihood of making the sale (at that price). We cover it in more detail here. It’s enabled by inputting one of OpenSolar’s most powerful features: Costs of Goods Sold, which has the power to enhance your profitabilty when combined with Margin-Based Pricing .
The chart below shows the expected profit per residential customer, across a number of businesses that are keen to maximise their bottom line with SunWiz’s analytical assistance. Amongst our sample dataset, the maximum expected profit is actually when you sell in the $1.75/W-$1.99/W range, in which case you can expect $500 per prospect (which may be 10% conversion rate on $5000 profit), compared to a $350 expected profit per prospect when you sell at $0.75-$0.99/W (which may be a 35% conversion rate on a $1000 profit).
This suggests you don’t have to race to the bottom to run a profitable company.
Maximising your bottom line occurs when you identifying your sweet spots:
- Selling the most profitable products
- at the most profitable margin
- to the most profitable people
- with the best-performing salespeople training everyone else to sell just as well.
SunWiz, an OpenSolar Expert Partner, has an insightful service called SunBizAdvisor that provides that guidance. It’s a service that shows your business where you best should focus your efforts to maximise your chances of success. Click Here to learn more about SunBiz Advisor.