- What Are Soft Costs?
- How Do Soft Costs Impact Me?
- How Do I Take Action on Soft Costs?
1. What Are Soft Costs?
Simply put, soft costs are made up of all the customer acquisition, personnel, administrative and operational expenses outside of the solar panels, inverters and other balance of system hardware components required to sell and install a PV system.
For solar contractors, this is a warning sign that they cannot continue to rely solely on decreasing component prices as a viable means to grow and maintain profits. In order to build a sustainable solar company, both solar and non-solar research shows that targeting soft cost reductions is now the fastest and most effective way to get there.
The Solar Energy Industries Association highlights permitting and inspection costs as primary drivers of solar project soft costs, and has called for government action to reduce them. But in the meantime, this makes it all the more critical that solar managers tackle the soft cost drivers that are within their immediate control.
2. How Do Soft Costs Impact Me?
One of the key responsibilities of solar business managers is to steer company operations so as to maximize profit margins. In rapidly growing sectors, managers typically have focused on increasing top-line revenue through growth and market penetration. However, as the solar market matures, it’s crucial to keep an eye on the bottom line in order to be a truly efficient and growth-ready company.
As was mentioned in part 1 of this post, soft costs can make up to two-thirds of the total solar installation cost. In order to minimize your overhead, your focus will need to be on streamlining the processes behind activities like customer acquisition, labor management, and supply chain.
In your mind, select an operational process that you are familiar with (installation, inspection, maintenance, etc.) and ask yourself:
- Is this being done in the most efficient way possible?
- Where are the bottlenecks?
- How much time is the team wasting because of ineffective communication channels?
- What proportion of their time is spent doing administrative tasks versus work that directly contributes to growing my company?
- How much of my team’s time is spent reporting to someone or waiting for a response?
- How different is the current process compared to my ideal version of how it should be run?
What you’ll likely find is that there is a compounding effect taking place: small delays, missed steps or communication inefficiencies conspire to become large, costly time-wasters for you and your team. What can you do about them?
3. How Do I Take Action on Soft Costs?
No two solar providers have the same processes, but a common consensus is that teams—unfortunately—spend more time on repetitive, manual and administrative tasks than on growing the business itself. To give you and your team back some of that time, the easiest way to automate those small, annoying steps is through the adoption of mobile workforce management & automation software (mWMA).
mWMA is a platform focused on addressing the operational challenges of solar installation, maintenance, sales and management teams everywhere. Over the past few years, the American PV market has begun to embrace the idea of implementing innovative technology to spur growth. Greentech Media now hosts the Solar Software Summit (S3) annually, and
There is software (whether in progress or already launched) that supports various steps of the solar process, from digitizing the proposal design process to empowering better data collection and retrieval in the field. If your company does not have a CTO or CIO with a process for exploring new technologies in place, we recommend starting by:
- Researching the different technology solutions available.
To get a lay of the land, ask for referrals from your network, read case studies put out by different software platforms and look up companies who attend or are affiliated with major solar events. If you’re looking for a solar-specific platform, software review and directory sites may not be the best place to start your search, although they are helpful for validation.
- Requesting consultations.
Free demos are great, but if the software company is not willing to work with you to ensure that the solution fits your problems, then that could be a red flag. Solar software should have some flexibility, especially as the market for it is quite new.
- Focusing on getting buy-in from one side of operations.
If you have a focus area and have discussed pain points with the key people involved, it gives you a much clearer set of criteria when sourcing a new solar software. Especially if your company has multiple services, select one team (ex. residential O&M only) to try the tool before rolling it out to other departments (this is where it is important to look for a flexible platform).
Though it does take an open-minded and results-oriented leader to step outside of traditional methods and embrace innovation, the results are well worth it. You can then further stabilize solar operations by reinvesting the money that is saved into increasing innovation, quality and customer experience to form a solid foundation for future growth. What’s important to note is that the pursuit of soft cost reduction has long-lasting and far-reaching effects on your organization that go beyond increasing profits; it results in cultivating a solar company that is more resilient, more disciplined and possesses a solid foundation for growth.
Interested in improving workflow automation and communication via solar software? Take a look at what other solar companies have done. SunSystem Technology, one of the nation’s leading O&M providers, use mobile forms, data integration and process automation to work smarter, and have captured annualized savings of over $17,000 per employee.