How to Sell a Solar Installation Company

The backlog and the pipeline

A buyer starts with the list of signed contracts that have not yet been installed. For each job they want to know the contract date, the system size, the price, the stage the job has reached, and what is holding it up. A job stuck waiting for a permit, an inspection, or the utility's permission to switch on is worth less than a job on the schedule for next week, and a buyer will ask how long jobs have been sitting at each stage.

Cancellations come next. Homeowners can often walk away from a signed agreement for a period after signing, and a pipeline that looks large may include many that never reach a roof. Buyers ask for cancellation history by sales rep and by lead source, because a handful of reps or one marketing channel can account for most of the churn.

Revenue timing is its own conversation. Some companies book revenue when the contract is signed, others when the panels go up, and others when the utility approves the system. A buyer's accountant will rework the books onto one method, and customer deposits or financing payments received ahead of the work are treated as a liability and not as profit. Our post on financial statements for a sale describes what clean books look like.

What the company earns on each job

Buyers want margin by job type, and they want it computed honestly. Residential rooftop, commercial rooftop, ground mount, battery storage, and service calls all earn different amounts, and the cost lines should include crew labor, panels, inverters, racking, permit fees, sales commissions, and the lender fee that is often built into a financed sale. Many solar companies lose money on a job after they pay for a financing partner, so a buyer will look at that cost closely.

Equipment pricing matters too. The company that buys panels and inverters from a reliable distributor at a steady price is easier to forecast than one that buys whatever is cheapest each month. Buyers ask about supply agreements, how the company handled shortages, and whether any warehouse stock on the shelf is current or aging.

The policy question

Solar demand rises and falls with government incentives and with how the local utility pays customers for the power they send back to the grid. Buyers will ask what share of your customers bought mainly because of a tax credit or a rebate program, and what happens to your sales if that program changes. They also want to see that you have already lived through a policy change, with a plan for adjusting the sales pitch and the product mix.

A buyer will be satisfied by a business that has survived some shifts, does not depend on one program, and can sell storage, service, or commercial work if home installs slow down. Rules on incentives and utility compensation vary by state and your attorney or tax advisor confirms what applies to your customers.

Crews, licenses, and certifications

The people who install the systems are the company. A buyer wants a roster of installers and electricians, how long each has been with you, what they are paid, and who leads each crew. Crew leads who can run a job without the owner on the roof are the thing a buyer will pay for, and a company where the owner is the only person who can design a system will be priced lower.

Licensing deserves care. Most solar companies operate under a contractor or electrical license held by a named qualifying individual, and in many places that person must be an owner or full-time employee. If that person is you and you plan to leave, the buyer needs a plan for who holds the license afterward, and the timing needs to be worked out before an offer is accepted. Certifications from manufacturers, battery vendors, and industry training bodies are worth listing, since some lenders and some suppliers only work with certified installers.

Safety records are checked as well. Falls from roofs are the main risk in the trade, and buyers will ask for incident logs, insurance claims history, workers' compensation experience, and training records. A company with a clean safety history gets better insurance terms, which a buyer can see in the books.

Warranties, monitoring, and service

Every system sold leaves a set of promises behind. The company usually gives a workmanship warranty on the installation and a roof penetration warranty, and the manufacturers back the panels and inverters. A buyer wants to know the age of the systems in the field, the claims history, and how many service calls are open. Systems installed years ago and now out of warranty may need work, and a buyer will price in a reserve if the history is unclear.

Companies that offer monitoring, maintenance contracts, or production guarantees have a steadier income than those that only install. A buyer treats this as recurring revenue, as we explain in our post on recurring revenue and contracts, and may pay more for it than for the same dollars from new installs. Some companies also own systems that sell power to the customer under a lease or a purchase agreement, and those need their own review of contracts, financing, and the entity that holds them.

What has to transfer

Contracts with customers, with lenders and leasing partners, with distributors, and with the utilities for interconnection applications all need to be read for consent clauses. Financing partners in particular approve their installers, and a change of ownership can pause your ability to originate new loans until the partner reviews the new owner. Open permits and utility applications are filed in your company's name, and a buyer needs to know which can be assigned and which must be refiled.

The contractor license, bonds, insurance, vehicle titles, equipment, and any warehouse or office lease are on the list too. A buyer who intends to buy only the assets of the company, and not the company itself, will need new licenses and registrations in many cases. Your attorney confirms which approach fits your company and which approvals are needed.

What tends to sink a solar sale

Most failed deals come from a few repeated problems. The backlog was smaller or older than the seller said. Sales commissions and financing fees were not in the margin figures. A single lender or a single lead source accounted for most of the sales and cut the company off after the announcement. The license holder left. Warranty claims were higher than the reserve. Customers had complaints on file with a state office that nobody had resolved.

Getting ready

Build a clean report of the backlog by stage, a margin report by job type, and a list of warranties and open service calls. Move the lead sources, financing relationships, and distributor accounts onto a footing the company can show in writing. Train a crew lead and a sales manager to run without you, and settle who will hold the license. Resolve any open complaints. When you want to understand how buyers look at companies like yours, see our page on selling a solar or renewable energy company, and Business Advisors of America can start with a valuation from your own numbers.

This article shares our opinion and general information. It is not legal or tax advice. Always speak with a licensed attorney for legal advice, and a qualified tax professional for tax questions, before you act.