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Creating a Successful Solar Business

Bill Guiney
Program Manager
Renewable Energy Solutions
Johnson Controls, Inc.

Have a Plan

ƒ Licensing and Qualifications

ƒ Capital

ƒ Vendor/Supplier

ƒ Go to Market Strategy

ƒ Office and Employees

ƒ Insurance & Financing

Creating a Successful Solar Business

©2010 Johnson Controls, Inc. 1


What Do You Want To Be ?

• Focus on Technology
• Solar Thermal
• Solar Photovoltaic
• Both/ Plumbing/ HVAC/ Electrical
• Focus on Market
• Residential
• Commercial
• Industrial

Creating a Successful Solar Business

Licensing and Qualifications


ƒ Corporation - Sub-S - Limited Liability Corporation (LLC)
– Partnership - Sole Proprietorship (DBA)
ƒ Federal and State Registrations

ƒ Contractors License

ƒ Training and Certifications


– MREA
ƒ Site Assessor
– NABCEP
ƒ Thermal
Th l and/or
d/ PV IInstaller
t ll
– Focus On Energy (Approved Contractor)
– Technical Training
ƒ Manufacturer, Technical College, Industry Association Porgrams

Creating a Successful Solar Business

©2010 Johnson Controls, Inc. 2


Capital
ƒ Self Funded
– Need sufficient capital to fund the total operation
– Partial cash and bank financing (Don’t use Credit Cards)
ƒ Partners
– Existing Business, Minority or Women Owned Enterprise
ƒ Venture Capital
– Know what they expect as rate of return and when they want out
ƒ Angel Investors
– They must realize the investment may be long term They also
want to know what the up-side to the investment is.
ƒ Friends and Family (can by tough in tight market)

Creating a Successful Solar Business

What Will You Need?


ƒ Business Plan
– Complete description of business organization, marketing plan, competitors,
risks and rewards

ƒ Cash Flow Analysis and Performa


– 3 to 5-years of operation to include operating costs, income, debt service,
taxes and retained earnings
– Growth forecasts

ƒ Investment Prospectus
– What does the investor or partner get out of the deal? What is your share?
What are the long range and short range goals? Complete a Commitment
Letter ----------Use of funds

ƒ Board of Directors or Business Advisors


– Not Mom and Dad – Successful and Knowledgeable individuals

Creating a Successful Solar Business

©2010 Johnson Controls, Inc. 3


Business Plan
ƒ Business Opportunity
ƒ Company Summary
ƒ Company Ownership
ƒ Market Size/Potential
ƒ Technology
ƒ Product Lines
ƒ Market Strategy
ƒ Company
C Location
L i &FFacilities
ili i
ƒ Engineering Services

Creating a Successful Solar Business

Business Plan
ƒ Market Strategy
ƒ Market Needs
ƒ Market Trends
ƒ Industry Analysis
ƒ Industry Participants
– Distribution Patterns
– Competitive Analysis
ƒ Management Summary
ƒ Personnel Plan
ƒ Organizational And Personnel Profiles
ƒ APPENDIX Financial Statements

Creating a Successful Solar Business

©2010 Johnson Controls, Inc. 4


Income Summary
Proposed Solar Technologies Limited
Income Summary 17-Nov-04
Year 1 Year 2 Year 3
Total Sales $ 812,754 $ 1,893,501 $ 3,241,653

Cost of Goods Sold


Collectors $ 82,769 $ 211,698 $ 362,075
Flush mounting hardware $ 3,990 $ 8,914 $ 15,245
Tilt roof mounting $ 9,660 $ 28,651 $ 49,003
50-gal Tank $ 31,980 $ 53,800 $ 93,578
80-gal. Tank $ 23,115 $ 53,322 $ 91,199
Installation $ 51 600
51,600 $ 119 378
119,378 $ 204 178
204,178
Complete 50-gal System $ 58,523 $ 121,766 $ 208,261
Complete 80-gal System $ 152,675 $ 370,073 $ 632,951
Freight $ 72,000 $ 72,000
Total Cost of Goods Sold $ 414,311 $ 967,602 $ 1,656,490
Gross Profit $ 398,442 $ 925,899 $ 1,585,164
Gross Margin 49% 49% 49%
Operating Expenses
Sales & Marketing
Advertising $ 30,000 $ 30,000 $ 42,000
Commissions $ 16,255 $ 37,870 $ 64,833
Entertainment $ 12,000 $ 12,000 $ 24,000
Literature $ 21,000 $ 21,000 $ 21,000
Promotions $ 16,200 $ 16,200 $ 30,000
Trade Association Dues $ 21,000 $ 21,000 $ 21,000
Trade Shows $ 41,250 $ 41,250 $ 41,250
Travel $ 72,000 $ 72,000 $ 84,000
Total Sales & Marketing Costs $ 229,705 $ 251,320 $ 328,083
General & Administrative
Salaries $ 270,018 $ 430,020 $ 433,604
Social Security Tax $ 6,756 $ 10,752 $ 10,840
H lth IInsurance
Health $ 21 240
21,240 $ 30 960
30,960 $ 36 000
36,000
Engineering $ 32,000 $ 12,000 $ 24,000
Testing & certification $ 10,000 $ -
Accounting $ 6,000 $ 6,000 $ 7,200
Insurance $ 6,000 $ 6,000 $ 7,200
Legal Fees $ 600 $ 600 $ 1,200
Office Expenses $ 12,000 $ 12,000 $ 24,000
Telephone /Long dist. /DLS $ 4,800 $ 4,800 $ 9,600
Utilities $ 6,000 $ 6,000 $ 9,000
Total G & A Costs $ 375,414 $ 519,132 $ 562,644
% of Total Sales 46% 27% 17%
Total Operating Expenses $ 605,119 $ 770,452 $ 890,727
Income From Operations $ (206,677) $ 155,447 $ 694,437

Creating a Successful Solar Business

Cash Flow
3-Year Cash Flow Projections
1-12 months 13-24 months 26-36 Months
Total Sales $ 812,754 $ 1,893,501 $ 3,241,653
Total Cost of Goods Sold $ 414,311 $ 967,602 $ 1,656,490
Gross Profit $ 398,442 $ 925,899 $ 1,585,164
Total Sales & Marketing Costs $ 229,705 $ 251,320 $ 328,083
Total G & A Costs $ 375,414 $ 519,132 $ 562,644
Total Operating Expenses $ 605,119 $ 770,452 $ 890,727
Income From Operations $ (206 677)
(206,677) $ 155 447
155,447 $ 694 437
694,437

Capital Investment $ 1,500,000

Plant & Equipment 2005 $ (1,030,649)


Income/Loss 2005 $ (206,677)
Total Cash Expensed 2005 $ (1,237,326)
Cash Balance Dec. 2005 $ 262,674
Income/Loss 2006 $ 155,447
Cash Balance Dec. 2006 $ 418,121
Income/Loss 2007 $ 694,437
Cash Balance Dec 2007 $ 1,112,558

Stockholder Equity
Assets Plant/ Equipment & Inventory $ 1,030,649 2005
Cash $ 469,351
Income/Loss 1st y
year $ ((206,677))
Equity Balance 1st year $ 1,293,323
Income/Loss 2nd year $ 155,447 2006
Equity Balance 2nd year $ 1,448,770
Income /Loss 3rd year $ 694,437
Equity Balance 3rd year $ 2,143,207 2007

Estimated Net Gain after 3-years $ 643,207


Forecasted Per Share Earning $ 0.4288
Expected 3-year R.O.I. 43%

Creating a Successful Solar Business

©2010 Johnson Controls, Inc. 5


Investment Prospectus
ƒ Summary
ƒ Mission Statement
ƒ E
Executive
ti SSummary
ƒ Summary Of The Offer
ƒ History And Nature Of The Business
ƒ Use Of Proceeds
ƒ Planned Capital
p Expansion
p
ƒ Secondary Market For The Shares
ƒ Key Investment Information
Creating a Successful Solar Business

Investment Prospectus

ƒ Directors
ƒ National Market Overview
ƒ Regional Market Overview
ƒ International Market Overview
ƒ Forecasted Financial Statement
ƒ Client Verification Requirements
ƒ Compan Information
Company
ƒ Subscription Form (Commitment Letter)

Creating a Successful Solar Business

©2010 Johnson Controls, Inc. 6


Vendor and Suppliers

ƒ Technology Supplier (Solar Systems and Equipment)


– Distributor
ƒ Local and low cost of inventory
ƒ Minimum shipping costs
ƒ Quick and reliable service
– Manufacturer
ƒ Market differentiator
ƒ Higher Shipping and Inventory costs

ƒ Financing and Delivery Program


– COD, Where is it received? Is a check available?
– Negotiated or Standard Terms
ƒ Floor Plan or Lines of Credit

Creating a Successful Solar Business

Vendor and Suppliers

ƒ Technology Supplier (equipment)


– Country of Origin
– Time in the marketplace
– Warranty and Terms of returns and repairs
– Engineering Support
ƒ System Design
ƒ Structural details
ƒ Wind Load testing and information
ƒ Project Management Support Services
– Certifications
C tifi ti
ƒ SRCC (Solar Rating and Certification Corporation)

Creating a Successful Solar Business

©2010 Johnson Controls, Inc. 7


Go to Market Strategy
ƒ What are you going to offer?
– Sales
– Installation
– Systems Service
– O&M
– Engineering

ƒ How will you generate leads?


– Advertising
– Trade or Consumer Shows/Exhibits
– Canvassing
– Seminars
– Referrals (Paid and/or Self-Generated)

Creating a Successful Solar Business

Office and Employees


Employees
ƒ Will Make or Break a Company

ƒ Identifying
y g – Advertising
g – Filling
g Openings
p g
– Technical College Graduates
– Internships
– Union Trade Apprentice Programs

ƒ Qualifications – Journeyman or Entry Level

ƒ Driving Records/ Background Check

Most important asset


asset, value is typically not recognized by many new contractors.
contractors
Consider the cost of retraining new workers

Creating a Successful Solar Business

©2010 Johnson Controls, Inc. 8


Office and Employees
Employees
ƒ Qualifications – Journeyman or Entry Level
– Well paid workers perform better
– Pay grade tied to continuing education –NABCEP
NABCEP Certification –
Technical College Degree Program – Engineering Degree

ƒ Training – Technical & Safety


– Basic Systems, installation and O&M Training
– Safety programs must be established and documented

ƒ Benefits
– What will be offered?
– Retention Programs (Continuing Education & Advanced Training)
– Recognition Benefits the Company more than the Employee

Creating a Successful Solar Business

Office and Employees


ƒ Installation Tools
– What will employer provide and what is employee responsible
for?
– Personal Safety Equipment (Know the OSHA Codes)
ƒ Hard Hats
ƒ Safety Glasses
ƒ Fall Protection
ƒ Shoes/Vests

ƒ Wage scales – Open Shop or Union


– Prevailing Wages (Davis Bacon)
– Competitive market will put pressure on pay scales
– Hours
ƒ Daily, Weekly and Holiday Schedules
ƒ Premium Pay or Bonus Plan

Creating a Successful Solar Business

©2010 Johnson Controls, Inc. 9


Office and Employees
Office
ƒ Many options available, depends on levels of funding and
investment.
– Industrial Office and Warehouse
ƒ Indoor materials storage - trucks in secured area
– Office Park (individual address and entrance
ƒ One or multiple offices for administrative and sales force
ƒ Will need installation subcontractor or storage/warehouse
– Show Room
ƒ Displays of Product and Company information. Seminar room, may
have warehouse and service door.
– Sales and Administrative Staff
– Shared
Sh d Space
S - Business
B i Incubator
I b t -
– Home Office
ƒ Small Business – (one or two trucks) – Phone – Answering Service
–Paging – Call Forwarding

Creating a Successful Solar Business

Office and Employees


Office
ƒ Furnishing the office
– Fixtures
ƒ Desks/Workstations/Exhibits - Literature
ƒ Phone system
ƒ Internet Services
ƒ Safety Equipment
– Computers
– Printers
– Software
ƒ Legal and Accounting Support
– Early in the development process
– In-house Bookkeeping / Contracted Services
– Accounting and Tax Services
– Banking & Attorney relationships are a must have for any business

Creating a Successful Solar Business

©2010 Johnson Controls, Inc. 10


Insurance & Financing
Insurance
ƒ Business and Contractor Liability
– Mi
Minimums
i
– Commercial sub-contracting opportunities
ƒ Workers Compensation
ƒ Inventory and Property
ƒ Vehicles
ƒ Health Insurance
– Management and Employees

Creating a Successful Solar Business

Insurance & Financing


Finance
ƒ Product and Inventory
– Line of Credit
– Vendor or Supplier Financing
– Work in Progress (project)
ƒ Project and Sales
– Bonding
– Commercial and Retail Sales Financing
ƒ Installment loans
ƒ Utility or State Finance Programs
ƒ Incentive Programs
g and Grants
– Who does the paperwork and application?
– How does it impact the sale?
– Timing and funding cycles – Who holds the paper?

Creating a Successful Solar Business

©2010 Johnson Controls, Inc. 11


Conclusion
ƒ We used to have a saying in the solar business:

“Do you know how to make a little bundle of money in the solar business?”
Start out with a big bundle
We need new companies to create the jobs and handle the anticipated
growth of the solar industry.
But more importantly, we need to create sustainable companies who
will become the success stories of the new century.

Creating a Successful Solar Business

Questions?

Creating a Successful Solar Business

©2010 Johnson Controls, Inc. 12

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