As the world races toward cleaner, more sustainable energy solutions, the solar industry stands at the forefront. Driven by growing environmental concerns, government incentives, and advancements in technology, both residential and commercial customers are increasingly turning to solar power.
With demand on the rise and opportunities expanding, now is an excellent time to consider starting a solar business or adding solar as an offering within your existing business. Whether you're an entrepreneur looking to enter the clean energy market or a contractor looking to grow your construction business, the solar industry offers strong potential for long-term growth and profitability.
In this article, we’ll explore how to start a solar business, evaluate whether it's a profitable venture, highlight what you should consider before launching, and outline strategies to grow an existing solar installation business.
Types of solar businesses
Solar businesses specialize in providing solar energy solutions to residential and commercial customers primarily by installing solar panels and related hardware. Solar businesses revolve around helping clients use solar power to reduce energy costs and environmental impact.
There are several business models within the solar industry, each with its own focus and revenue streams:
- Installation-only model: This type of model concentrates strictly on the physical installation of solar panels and the necessary electrical permits.
- Full-service solar business model: Offers a comprehensive solution that includes consultation, system design, securing permits, installation, and even post-installation support.
- Sales and leasing model: A solar business that sells systems outright or leases them to customers in exchange for a monthly fee. This helps to make solar more financially accessible to a wider customer base.
Unique opportunities for solar businesses
Beyond the primary business models listed above, the solar sector offers a few niche opportunities.
- Off-grid systems: Offering installation for extremely remote or rural areas is a good way to establish a niche for your business.
- Battery storage add-ons: Providing customers the opportunity to enhance energy independence is a good way to upsell to current customers.
- System monitoring and maintenance plans: For less technology-inclined customers, offering system monitoring and maintenance plans can provide them peace of mind if something goes wrong with their solar system.
How to start a solar business
Starting a solar business requires strategic planning, proper licensing, and smart business development — especially if you plan to scale your business in the future. To set yourself up for long-term success, it’s important to follow some foundational steps.
Step 1: Research and planning
Before even starting your business, the first place to start is research. Conduct in-depth market research of your area. Is there demand for solar right now? Who are the other local competitors? Consider the legal side of it as well: what are the regional policies, permitting rules, and available incentives in your area for switching to solar?
Here are the crucial planning tasks you should tackle:
Market assessment
- Analyze local solar adoption rates. Study current market penetration to identify opportunity areas.
- Map the competitor landscape. Identify existing companies' focus areas to find underserved niches.
- Evaluate electricity costs: Higher rates typically offer better customer ROI, making these markets particularly attractive.
Regulatory environment
- Research incentives. Document available tax credits, rebates, SRECs (Solar Renewable Energy Credits), exemptions, and financing programs that apply to your market.
- Investigate net metering policies. Understand utility-specific rules that impact customer ROI, including credit rates and rollover policies.
- Understand permitting requirements. Research jurisdiction-specific processes, timelines, and costs that will affect your operations and project timelines.
Pro tip: Permitting software can handle the research for you. PermitFlow will pinpoint permitting requirements in any jurisdiction you plan to serve.
Business model
- Define your service offerings. Determine whether you'll offer installation only or provide more comprehensive solutions like consultation, design, and maintenance.
- Develop a competitive pricing strategy. Research local cost-per-watt benchmarks to best position your business.
- Create realistic financial projections. Model startup costs, operational expenses, and revenue based on typical project types and volume.
Legal structure and requirements
- Choose a business entity. LLC? S-Corp? Consider liability protection, tax implications, and growth plans when selecting your legal structure.
- Secure necessary licenses and insurance: Create a checklist of contractor/electrical licenses, insurance, and bonding requirements specific to your state.
Step 2: Licensing and certification
Most municipalities require solar service providers to be licensed in some capacity. Many states require you to have an electrical license, and some require specific solar contractor licenses. If you plan to serve multiple states, be sure to get appropriate licensing for each state.
Learn about local permitting requirements with PermitFlow’s Municipal Guides.
Beyond mandatory licenses, obtaining certification from the North American Board of Certified Energy Practitioners (NABCEP) is a great way to boost your earning potential. NABCEP-certified professionals earn, on average, over $11,000 more per year than uncertified peers. In addition, the certification helps make your business appear more credible to customers and other industry professionals.
Step 3: Equipment and supplier selection
Reliable equipment, tools, and suppliers are the backbone of any solar business. Partner with trustworthy suppliers for solar panels, inverters, and mounting systems. Some solar businesses prefer working directly with hardware manufacturers because it offers better pricing and support. Others opt to source materials from a variety of different sources to maintain flexibility with a client’s budget.
Here's how to build a strong supply chain:
Hardware selection
- Develop tiered product offerings. Create good-better-best options using different panel and inverter combinations to serve various customer budgets while maintaining quality standards.
- Evaluate warranty terms. Compare manufacturer warranty periods, coverage details, and claims processes — especially for panels (typically 25+ years) and inverters (10-25 years).
- Assess manufacturer stability. Protect your investment by partnering with established companies that are likely to remain in business long-term. Review their financial stability, market longevity, and reputation in the industry.
Supplier partnerships
- Diversify your supply chain. Build relationships with multiple distributors to protect against inventory shortages and price fluctuations.
- Negotiate preferential terms. As your volume increases, leverage it for better pricing, extended payment terms, and priority fulfillment during supply shortages.
- Consider manufacturer-direct programs. Larger installers can sometimes secure better pricing and support by buying directly from manufacturers.
- Explore solar co-op membership. Join regional solar cooperatives that will allow your company to combine purchasing power, secure better pricing from suppliers, and meet minimum order quantities (MOQs) with distributors. These co-ops operate throughout the country and can provide significant cost advantages for smaller solar businesses.
Equipment and tools
- Invest in quality installation tools: Professional-grade tools improve installation efficiency, reduce callbacks, and ensure safety. Budget for essential equipment like:
- Specialized mounting hardware
- Wire management systems
- Electrical testing equipment
- Safety gear
Software
Equipment and tools also extend to the software that you use to manage your business and other aspects of your process. You’lll want to invest in tools that help streamline your workflow.
Adopt specialized software for:
- Permit management
- System design and production modeling
- Customer relationship management
- Proposal generation and digital signature collection
- Project management and crew scheduling
Step 4: Build a strong team
As your operations grow, building the right team is essential.
- Start with essential technical roles. If you won’t be doing the installs yourself or need additional sets of hands, be sure to hire NABCEP-certified installers and licensed electricians.
- Add operational support strategically. As you grow beyond 3-5 concurrent projects, invest in dedicated role for:
- Project management (handling permits, scheduling, and customer communication)
- Site assessment (conducting detailed pre-installation evaluations)
- Design specialists (optimizing system output and aesthetics)
Once you have team members onboard, invest in ongoing training and professional development. This helps your staff stay up to date on safety, technology, and industry best practices.
Tips for implementing training and development:
- Create a structured onboarding program. Develop standardized training processes that cover guidelines for installation methods, safety protocols, and customer interaction.
- Support certification pursuits: Offer financial assistance or time allowances for team members pursuing NABCEP certification or electrical licensing.
- Schedule regular technical updates: Hold monthly sessions to review new products, installation methods, and code requirements to keep your team up to speed.
Step 5: Marketing and customer acquisition
Once you’re ready to start looking for new customers, it’s time to establish a clear marketing plan. Start by creating a streamlined and professional website optimized for SEO. Additionally, list your business on local directories such as Google Business, Yelp, and Thumbtack.
Referrals are also a big part of the solar and construction industry as a whole. This makes networking a very important marketing strategy for new solar businesses. Start by building relationships with related industry partners, like real estate agents, HOAs, general contractors, and electricians. All of these people can help to source and refer clients your way.
Is a solar business profitable?
If managed correctly, a solar business can be highly profitable — especially for those who enter the market with a solid business plan, a clear niche, and an understanding of local market dynamics.
On average, small to mid-sized solar installation companies can expect profit margins ranging from 10-20%, with revenue potential varying based on the scale and the focus of the business.
Revenue from the corporate solar installation company Sunrun generated approximately 2.26 billion US dollars in revenue in 2023. If you consider that on a much smaller scale, a residential solar installation can bring in anywhere from $10,000 to $30,000 per project, depending on the scale and complexity. Large, commercial jobs can easily exceed $100,000 depending on the scope of work.
Factors that influence solar business profitability:
- Location. States with high solar adoption like California, Arizona, Texas, and Florida offer established markets with greater customer awareness and acceptance of solar technology. Of course, these kinds of markets may also bring steeper competition.
- Local electricity rates. Areas with higher electricity costs create more compelling savings for customers, allowing you to maintain healthy margins while delivering substantial long-term value. Utilities charging $0.20/kWh or more typically yield the most profitable opportunities.
- Permitting costs and efficiency. Jurisdictions with streamlined permitting processes compress project timelines, allowing you to complete more installations within the same timeframe and maintain healthier cash flow.
- Incentives. Strong state and local incentive programs not only make solar more affordable for your customers but also enable you to maintain higher margins while still offering competitive pricing. Some premium markets with robust incentives can support profit margins approaching 25-30%.
What to consider before starting a solar business
Before jumping into the solar industry, it’s important to understand some key considerations that can make or break your business.
Upfront investment
Starting a solar company requires a lot of capital for tools, equipment, business software, licensing fees, and more. Explore financing options from individual investors, institutional investors, or solar-serving firms.
Upfront expenses can add up quickly, so ensuring you have a clear financial plan is essential to your success.
Local solar incentives and regulations
Incentives like tax credits, rebates, and performance-based incentives will dramatically influence customers’ buying decisions and your pricing strategy.
Variable permitting processes
Every municipality has its own permitting process, safety codes, and utility guidelines. If you’re looking to work across multiple municipalities, knowing exactly what you need for all of them is important for streamlining permit submissions. Using tools like PermitFlow can help manage those differing needs efficiently.
Utility interconnection rules
Similar to variable permitting processes, it’s important to know what rules and metering policies are in place for your customers who receive credits for the excess energy their systems produce. These factors directly impact the value of solar for your clients.
Common industry challenges
Long sales cycles, supply chain issues, and permit delays are all common issues that can impact project timelines and customer satisfaction. All of these things can lead to cash flow stress, especially early on in your business.
How to expand an existing solar business
Once your solar business is maintaining stability, the next step is growth. There are several ways to scale operations and expand your market reach.
Scale your operations
- Hire additional crew members or subcontractors.
- Expanding your workforce allows you to take on more projects and reduce customer wait times. Consider implementing a "crew leader" structure where experienced installers can manage 2-3 new hires, enabling faster team growth without sacrificing quality.
- Systematize your processes.
- Document standard operating procedures for every aspect of your business, from initial customer contact to post-installation support. Create detailed checklists, training materials, and quality assurance protocols that ensure consistent results regardless of which team members handle a project.
- Optimize inventory management.
- As you grow, implement an inventory tracking system that prevents stockouts (which delay installations) and excess inventory (which ties up capital). Consider vendor-managed inventory arrangements with key suppliers or just-in-time delivery schedules for high-value components.
Leverage technology
- Implement permitting software
- Permitting is often one of the biggest roadblocks to keeping projects progressing quickly. By investing in permit software, you’ll free up time to focus on revenue-generating activities
- Adopt virtual site assessment tools
- Remote assessment technologies can eliminate preliminary site visits, allowing your sales team to qualify leads faster. Tools combining satellite imagery, LIDAR data, and 3D modeling enable accurate preliminary designs without sending staff to every prospective customer's location.
Expand service offerings
- Diversify your service offerings
- Adding complementary services increases your revenue per customer while leveraging your existing customer base. For example, battery storage installations can typically add $10,000-25,000 to project values, while EV charger installations might add $1,500-3,000.
- Develop maintenance service contracts
- Create recurring revenue streams by offering annual maintenance plans, system monitoring services, and performance guarantees. These services not only generate predictable income but also maintain customer relationships that can lead to referrals and upgrade opportunities.
- Explore commercial and specialty markets
- If you've focused primarily on residential installations, consider expanding into light commercial, agricultural, or specialized markets like carports or ground-mounted systems. These segments often have higher project values and may be less competitive than the residential market.
Expand into new markets
- Expand into adjacent markets
- Target neighboring communities where you can leverage your existing reputation and operational infrastructure. Research each new area's building codes, permitting processes, and utility interconnection requirements before entry. Start with a focused zip-code-by-zip-code expansion strategy rather than attempting to cover too wide an area initially.
- Navigate multi-jurisdiction requirements
- Use software like PermitFlow to understand the specific permitting and licensing requirements of each new jurisdiction. Create a systematic approach to maintaining compliance with varying building codes, contractor licensing, and utility interconnection procedures across your expanded service territory.
Simplify permitting for your solar business with PermitFlow
Navigating complex permitting processes is one of the biggest challenges for solar businesses today. Permit delays and complications significantly impact project timelines, cash flow, and ultimately, your ability to scale effectively.
PermitFlow eliminates these bottlenecks by automating the permitting process, providing jurisdiction-specific guidance, preparing and submitting applications, and tracking all your permits in one dashboard. With PermitFlow working for you, you’ll be able to complete more projects and expand into new markets with confidence.
Ready to transform your permitting process? Talk to an expert at PermitFlow today.
