Episode 14
· 25:47
I will say that our business is stronger than it has ever been.
Micah:The success of growth and where I see companies growing consistently really is your people.
Intro:I mean, the story is not does it make power? Because they all make power. The story is what does it power?
Micah:This is what solar installers need to know with your host Herve Billie and Joe Marhamati.
Hervé:Hi there. It's Herve and Joe Lourdes, Solar Installers Need to Know, where we interview solar CEOs and experts on how they run their business on the solar cluster. We ask their private revenue numbers. We give actionable advice and learn about trade secrets so you can run and grow your solar business. Joe and I built a solar company from 0 to 12,000,000 sales and got successfully acquired.
Hervé:If you'd like to do the same or do better, go to sungo.com/blog to get actionable behind the scenes lessons on running and growing your solar business. And now without further ado, let's jump right into the next episode. Hello. This is what solar installers need to know. Welcome, Micah.
Micah:Hey, everybody. How are you, man?
Hervé:I'm doing alright. Michael, we've known each other for many, many years. You run Solar States out of Philly. How are doing?
Micah:Solar States. Solar States. You know, These are crazy, crazy times in the solar industry, my friend.
Hervé:Wow. Well, let's speak about that. But first, for audience to understand solar states, you it's 12,000,000 revenue. You have 60 employees that you care about daily. You do about 22 installs.
Hervé:That's both raising commercial. You have an attachment rate of values of around 20%. You have four crews, two commercial, two resi, and then one O and M crew. So, actually, five crews total. You do all work in house, and you operate in Philly and recently in New Jersey.
Micah:Yes. I just got my Jersey license, man. Pass the test. That was a tough one.
Hervé:Congrats. Well, was it harder than the other one? Isn't that kind of the same?
Micah:Well, here's the crazy thing. In New Jersey, first off, they don't let you bring in your own book, which they allow you to do in Pennsylvania. So I have, you know, tabs in my book and highlights and just makes it you don't realize it, but it makes it so much easier to navigate the book. And then in Jersey, they make you take a business law exam plus fire alarms plus the NEC code. So in all, you're sitting for about eight and a half hours.
Hervé:Oh, it's an endurance test.
Micah:It's an endurance. It's like it's like running long distance, man. You're out there. I'm just like, oh, man. I'm running out of juice.
Micah:I'm running out of juice. Can't finish the test. Oh, no.
Hervé:So that is the real test. Can you run a solar company? So it's actually perfect test to see if you qualify.
Micah:That's right. Test of endurance, man.
Hervé:Well, you also said it was crazy, crazy times. So this is being recorded on July 31. So tell us about crazy times, and now we know you can run an endurance test. So can you do both?
Micah:You know, we like to run together, so running is my thing. I mean, you know, the BBB, man. And those beasts can stand for anything you want. Bullshit, better, whatever you think, but it didn't do good things for the solar industry. It really cut hard and fast the residential tax credit.
Micah:And, you know, it's had a pretty crazy effect. Right now, there's a huge rush to get your solar installed before the end of the year because that's when the 30% goes away.
Hervé:And then what?
Micah:Then what? Right. So, you know, we're like, I like in this moment in solar history to being on the Titanic. You're on this, like, the most luxurious trip. There's an orchestra playing.
Micah:The food is great. Like but we're headed right for an iceberg. Nobody knows what's gonna happen when we hit that iceberg.
Hervé:Well, if you were on the Titanic except the few people that actually saw from far that you were hitting it, like, you we we you know what's gonna come. We know what would be so
Micah:As a Titanic, and I know the iceberg's gonna hit. So, yes, that is a big difference.
Hervé:So well, let let's speak about how you adapt. Like, you've been in business for quite some time. Like, this is not your first rodeo. You've proven time and time again that that endurance test that you can handle it. So so let's speak about what you've done in the past.
Hervé:How did you pivot it? Like, you were running an electrical company at some point. That's right.
Micah:That's right. We had an electrical division for many years. Ran it very poorly. Never never made any money on it. But the thing that I've learned, I come from the rooftop.
Micah:You know? I installed. I didn't come from a business background where I was like, oh, I'm gonna invest in a solar business and, do that. And so in some ways, scaling a business might be easier if you have that business background a little bit and you're not a worker bee background. Also, I think there's a lot to be learned when you have to switch from hands on to management.
Micah:Mhmm. I really to some extent, I poo poo management, you know, but one of the things that I've learned is having a solid management team in place allows you to grow and to be nimble too sometimes. One of the reasons I think we really failed with the electrical division is we just didn't have the right management in place. We didn't have people with a keen eye for profitability in the electrical space. We had an electrician, great guy, did quality work, but just was constantly over budget.
Micah:And, like, nobody was there to give him the guardrails to even tell him he was over budget. So we would just lose money and be like, alright. Next project. Lose money. Next project.
Micah:You know? And it's like, that's not a recipe for success. You gotta look over projects. You gotta review them and make sure, you know, you're doing things well. Otherwise, you gotta make changes.
Micah:So but it's hard, man. And and we were just talking about this a little bit. When you're in the gears, it's hard to have that, like, macro perspective. Sometimes you're so micro. You're like, I gotta get done what's in front of me.
Micah:I gotta, you know, get this solar project done. And whatever the electrical division is doing, they're just they're doing they're they're off doing it. And so, you know, if I had it to do over again, yeah, we probably will do more electrical work. We'll we'll we'll start by having a good electrical manager and then build the division around that person rather than just saying, well, we have a great electrician. Let's build around him.
Hervé:But the thing I I think the business is a team sport. Right? You need the electrician, but you also need the business people and people that cannot just just look at profit is not enough. Right? If you're just on an Excel
Micah:sheet That's right.
Hervé:You see some numbers, and you don't know that there are people behind
Micah:you. Big mistake, and that's that's the flip side of what I just said. If you come in and you're all management focused and business focused, you don't know what quality looks like. You have no idea when somebody does a good job. People can fool you left and right on how they do things, and I would not recommend that either.
Micah:I think, actually, the way that I did it worked out pretty well because, yeah, I took some knots learning management and understanding the business side of things, but we always had a reputation for quality and for doing good work. And once you stain your reputation So get it. It's hard it's hard to get that back. And one of the things I'm most proud of is there's a lot of really positive brand recognition in the marketplace for Solar States. And I know that was true, you know, for your former company as well.
Micah:You know, you gotta be relentlessly focused on quality and then build backwards profitability from quality. I think a lot of people think profitability first and we'll get we'll solve everything else. Like, nah, dude. If that's the way you think you're gonna build a business, you're you're in for a a real rough ride. Quality first, great products first, and then how do you get profitable for it?
Hervé:Well, since I sold my business, I also saw firsthand where people see value and are ready to pay for. So brand recognition is definitely one. You have a good brand people trust and have a good reputation there, happy clients, happy customers, happy vendors, all of that. But the other piece is what you mentioned, like having that management team in place, having processes in place. I remember we I tried several times to set up a management team, not just me and my co founder just making decision, but have a a team that makes decisions.
Hervé:I tried it several times and failed. And then a little plug from Maria Kingery, she came in and, like, set up that magic team and somehow with some magical furry dust or something like it took shape. And then suddenly,
Micah:had my management team that was going Yeah. So I had the same sort of epiphany moment, but with this guy Andrew Kleeman rather than Maria Kingery. Andrew just came in and was like, you know, you Micah, you're like, you're this cool dude and you have like this really cool flat company, but like, at the scale you're at, man, not cool. It's like not cool. Nobody nobody is responsible for anything.
Micah:Everybody's responsible for everything, and that means nobody's responsible for everything. Like, we need to silo a little bit. We need to say this person, this is your domain. You're gonna be held responsible for this. And once we started doing that, we could see who was achieving at management and who wasn't, and where we needed to plug holes, and then we did it.
Micah:We have a wonderful team. I gotta say, I mean, one of the things that is so dismaying about this new budget is, like, we have a team in place. Like, we could really scale. We're at 60 people, which is unbelievable to say. I can't believe somebody allows me to be in charge of a 60 person company.
Micah:Like It must be crazy.
Hervé:No. You deserve it. You've also grown into it. So, no, deserve it.
Micah:It's been many years. That's true. But at the same time, like, we have this management team where I feel like we could go to a 120, 200 people. When we were scaling before sort of Andrew really introduced this idea of divisions and heads of divisions and, like, there's gotta be very clear lines of responsibility, we would go up to 50 people and just crash and burn. We were constantly, like, up to 50 people, back down to 30, up to 40, back down to 35.
Micah:It was like, we couldn't hold on to growth because we just didn't have the levers in place to stay at the size we were at. And we we needed structure and good people in order to grow, and we have that now at Spadesman. So it's hard to tell. We're working on on a, quote, ethical lease. It's a little bit of an oxymoron perhaps, but we have been very against leasing up to this point in the industry.
Hervé:Tell me why. Maybe not everybody understands the the or maybe because of surprise to some people. Like, tell me why.
Micah:Well, first off, I mean, the solar industry has has been significantly harmed by this phenomenon known as the solar bros. And the solar bros are these dudes who go around, they door knock, and they offer people a deal that's too good to be true. Go solar. It's free usually. So the moment you hear free solar, run the other damn way because,
Hervé:like It's supposed to be free.
Micah:Yeah. There's there ain't nothing that's free here. Alright? And so what they're doing is they're signing people up for leases or sometimes loans where the fees they're they're either hidden fees or they're escalators in the in the lease that while it looks like a good deal upfront, they're showing you a rate that's lower than the current rate you're paying. There's like a 5%, 7% escalator, and you can't get out of it.
Micah:And so you start the the rate starts escalating way above what your electrical rate is. And then the way you get out of it is you have to pay the the the the brand new value of a solar array. So maybe you're, like, ten years into your lease. It's a terrible value, and you've gotta pay an amount that's equal to, like, buying a brand new system just to get out of the lease and to not own solar anymore.
Hervé:Yep. And so you said you're gonna work with, a more ethical lease for the the financial mechanism or financial sum, makes sense for that homeowner.
Micah:That's right. We're gonna guarantee a 20% savings. You know, we're part of a national cooperative called Amicus, and I gotta give a big shout out to our dear friend, Steven, Kevin, all the folks working very hard at Amicus to come up with an ethical lease at a really, really fast pace because it's required now. Essentially, what's happening is the residential tax credit's going away at the end of this year. However, leases or leased systems are considered commercial because a commercial entity owns the system.
Micah:So you can put it onto a residential property, but if it's leased by a commercial entity, it still qualifies for the tax credit. And and transferability stuck around as well, so you can transfer those tax credits and get monetary value as well. So there's tremendous advantages now to having leases, and we think that our customers can be really at a tremendous advantage if we can offer our own lease where we dictate the terms, where it's ethical, where you can get out of the lease if you want to without paying some astronomical amount, and people can get value for the long term because they get a lower price for their solar upfront.
Hervé:So let's speak long term about the solar company. You put management team in place. You already tried an electrical division, pure electrical company before you did a merger acquisition in the past. Whatever legislation is gonna be, it may change in a few years again anyway, so you always adapt. So so what other pieces do you put in place to grow as a company?
Micah:Well, let me first say, like, I'm solar all the way to my bones, as you know. I did this from the rooftop to, you know, interconnecting from one panel battery to, you know, 2,000 solar panels on a roof. I always see solar as a as a part of what we do and probably one of the bigger parts of what we do. That said, I also love batteries. I think the idea of storing renewable energy is is gonna be key.
Micah:With rates going up, I think that we're gonna see a higher attachment rate. I think you said our attachment rate beginning somewhere 20%. I think that's gonna go up to maybe as high as 50%, maybe higher depending on how rate structures are going. So understanding the value proposition of batteries is gonna be key going forward. I also think that's quote unquote smart home technologies.
Micah:I'm a big fan of energy management systems in the home, things like Stan or Eaton smart breakers where you can dynamically control loads to be used at different times. That makes the battery value proposition much better because you can get a smaller battery or you cannot upgrade a service in order to service a lot of loads in the home. So with with the electrify everything movement, homes are drawing more and more power, but it's not happening all at once. So, like, traditionally, if you had an EV charger and electric oven and electric, you know, dryer, and all maybe electric heat, and you had a 100 amp service panel, you got hit over the head because you gotta upgrade your service panel, you know, 200 amp service, whatever thousands of dollars that is. But now you can put in something like Eaton smart breakers or a fan and do energy management at the home and not have to do that upgrade.
Micah:And you get tremendous advantages from these things. They can interact with your batteries. So you can have less equipment, say, if you need to go off grid with a Tesla Powerwall. I know Span is coming out with this technology that allows it to isolate your house from the grid, and then boom, you're running off your batteries. That's cool.
Micah:But Span also knows all the loads that are running. So it can tell you how long you can hold out on your batteries with the current loads that are running, which batteries couldn't tell you because they didn't know your individual loads. And so Span can say, hey. Turn this load off and you'll last an hour two more on your batteries. Or your solar is charging the batteries, so, like, you don't need to worry.
Micah:You can hold out for the next hour. Like, this these are the sort of smart decisions that the software is making for you or helping you to make that I think is the future, hopefully, that's where we'll invest and see growth going into the future.
Hervé:So you can look in a year few years from now at solar states, you'd be able to buy energy management systems and things like that. Just like in the past, only a few hippies bought solar panels, and now it becomes mainstream. What you just mentioned there, you think it's gonna be mainstream?
Micah:Yeah. I think every house is gonna be built with a smart panel in the future. You know? It just it it makes too much sense. You can see the energy draw of all your loads.
Micah:I mean, I think that's the biggest problem today is we all look at our electric bill. Right? Or some of us don't even look at
Hervé:our electric bill. I'm I'm not.
Micah:A lot of people actually don't. I do. I'm a nerd. I look at my electric bill. Most people don't.
Micah:That's the first problem we need to solve. And I think that with electric rates going up, people are gonna start looking at the bill a lot more. So I think that's gonna sort of solve itself. But I think once they start looking at the bill, there's another mystery to be solved. Right?
Micah:Because you look at your bill and you say, wait. This is hot. Okay. What's causing it to be hot? I have no idea.
Micah:I have no insight into what the electrical loads of my house actually look like. I can tell you what my whole house is drawing. I cannot tell you a single reason why it's drawing any of that. So that's where the energy management systems come in is they can give you this thing really draws a lot of power, and then you can choose to replace it, or you can choose to manage it and have it run off peak, like EV car charging, for example. So if you have a time of use rate, that's the other thing that I think is gonna be very different about energy use for the future.
Micah:I think time of use rates are gonna be more standard, and so there are gonna be these big peak rates that are really gonna advantage people who can shed loads to off peak times. Again, energy management system, you can just sort of set it and forget it in there and play that energy arbitrage, for lack of a better word, where you're buying energy when it's cheapest and you're pumping it back. You're running your house off of batteries at peak time, and you're pumping all of your solar back onto the grid so you're getting that highest rate through net metering for your solar. It's a great way to be smart with your energy use.
Hervé:And also touches to virtual power plants, which is a different
Micah:Virtual VPPs. Think that's I think that's gonna be huge. Yeah. And in fact, I'm already doing that. I did a little experiment at my parents' house in in Massachusetts, set up two Tesla Powerwalls, and we're participating in VPP in the Eversource territory.
Micah:We got a $2,000 check last year for our virtual power plant VPT contributions. That's like that's pretty good money, man.
Hervé:That's not bad. Some pocket money there. Yeah.
Micah:Yeah. That's more than, like, you know, a couple quarters found in your pocket. I was like, wow. Didn't expect that.
Hervé:Alright. You also had a past career in software. So if you had a magic wand, what other software do you want for your business that would just magically solve one of your business problems?
Micah:Yeah. We really need ERP, I think it's called, enterprise research planning or something. Or we just we need a piece of software that is elegant to use that ties together our accounting inventory and Calculates your cash flow. Management. Yeah.
Micah:Calculate cash flow, you know, all this stuff. It gets me the credit line I need automatically. So, no. I mean, yeah. I mean, it's just just a piece of software that that is there's a real sort of donut hole in the marketplace, I think.
Micah:If you're smaller, you can find really good customer CMSs, customer management systems that do really well for you. They don't necessarily integrate into your accounting or, you know, into your inventory or whatever it is. But and if you're really big, if you're, like, 25,000,000 plus, there's the NetSuite, the SAPs, the, you know, the Oracles. But if you're in this space between, like, 10 and 25,000,000, there's a real gap in, like, I need powerful software, but it can't I don't have a huge IT team to administer it. So it it would be nice if someone found that spot.
Micah:And I think what you're doing with SunBoy, I mean, it's great. We have a branded portal that our customers download, submit trouble tickets through, allows us to really have dynamic interactions with the client. And it always was like, you know, one of those things when when somebody invents something new and then it seems so obvious? That's how I feel about Sunboy. It's like, why were we sending them to Enphase's website?
Micah:Why were we sending them to SolarEdge's website? Like, that's crazy. That's not my brand. That's not gonna help me grow. People are calling SolarEdge for support because they couldn't remember that we installed it or that there was no branding for us there, really.
Hervé:Yeah. I'm just back to the beginning. Right? Branding is everything.
Micah:Branding is everything. Now it's I'm in the Solar States app. There's a problem. We get this support ticket. Boom.
Micah:Boom. Boom. You know? And O and M is becoming a real profit center for us. So No.
Micah:Let's speak about that.
Hervé:That's a trend I'm seeing. O and M was kinda like kind of a cost center before. You kind of have to do it to keep, again, your your your brand in good shape. But I think more installers now are considering, like, o and m as, like, a real division, not just something you kind of have to do. So are you now running one crew?
Hervé:Like, speak about, like, the logistics and maybe some of the the the how is the revenue generated?
Micah:Yeah. So it's like you said. We we had to have some people available to service our own warranty issues. Right? We can't leave our customers high and dry on warranty.
Micah:So part of what they're doing is actually, you know what? Bob Kingery, Maria's husband, had the best line about this I ever had. I said, Bob and this was like a year or two ago. My O and M, man, it's killing me, man. I just don't have, you know, I didn't budget for it, and, like, we're spending all this money.
Micah:Bob goes, oh, come on, Micah. Every year, we we had a thousand dollar budget for sins of the past. I was like, that's it. Sins of the past. Of course.
Micah:You gotta have something in the budget for sins of the past. So we budget a little bit for sins of the past, you know, where where you just made a mistake and we have to go back and and fix it. It's gonna happen. We're all human. We try not to.
Micah:We we do everything we can to do high quality stuff.
Hervé:Just human. It's also an accounting. So at some point, we need we had too much profit, and we needed to reduce the profit. So if right now your your sales is through the roof, you're gonna have a very, very good year. Now you need to think about how to manage our profit.
Hervé:And so we put all our our warranties for the last years that we never really did until one day is like, oh, shoot. It's really we really should put our warranties all in the books. And it also coincidentally happened when you had a fantastic strong year, so you bring your profit down. That's another Right.
Micah:Right. You put up your warranty reserve when you have really good
Hervé:And you need to start it at some point. You've never done it. Might as well start this year.
Micah:Yeah. Yes. That's a great point. Helps there. But then beyond that, and this is the unfortunate truth of the solar industry, like, so many solar businesses, so many people come into solar for the gold rush, but they see an incentive.
Micah:They see, like, I can get panels cheap. Like, I can do this. And, you know, I see this on the solar subreddit all the time. It's like, the equipment's so cheap. Should do it yourself, and, like, you'll save these these solar companies.
Micah:They're, like, charging so much, and it's like, good luck, man. There's a lot you learn from doing it. Like, a lot. Like, yes. It's true.
Micah:We're there one day, and you're paying $25,000, and you're like, wow. That's a lot. You're paying for the fact that we learned for over many, many years how to do this the right way and get it done in a day. You do it yourself, you don't there ain't no way you're getting it done right in a day. Not even close.
Micah:So you're paying somewhat for the efficiency gains that that we've had over the years. And sure, we're profiting from that, but that's that's called business. Like, that's what you do. You get really good at something, and you're able to profit from it.
Hervé:So let's end with what one mistake that you see auto solar installers make.
Micah:You know, just rushing job to job, man, and and not taking care of the client and and worrying too much about hitting the grand slam project in terms of finances. You know, I know so many people who went in and were like, I made, like, all this money on this one solar install, and then the going gets rough or whatever. And they're like, I gotta get out of this business. I'm done. I'm out.
Micah:Like, this is it because I'm losing money on this. Listen. Business is about if you win all the time, you're Bernie Madoff, scamming something. Right? Like, business is wins and losses and, like, just improve every day.
Micah:Don't don't think there's quick money in this industry. It is not. But if you're willing to grind, if you're willing to get better, if you're willing to learn, you'll be great.
Hervé:Yeah. Before I click the record button here, I asked you the same question. What's one mistake you see other installer installer are making. You made me laugh because you said, what do I thinking it is easy. Thinking you could do it easily.
Micah:Thinking it's easy is the biggest mistake anybody can make. But you know what's funny, Herve? In some ways, I was thinking about this the other day. You never would try something this risky or doing any construction for that matter, which is risky without sort of willfully lying to yourself. So in some ways, lying to yourself is a good way is a good thing because like, otherwise, if I'd known how hard it was, I would have never gotten into it.
Micah:I'd never done it. You know what I mean? Like so you have to have that like balance of like, I'm willing to lie to myself to be like, I can do this. I'm gonna get into this. It's gonna be good and all that.
Micah:But then you can't lie to yourself when it's hard, and you gotta be like, I just gotta work through this, and it's just gonna be really hard and and get through it.
Hervé:Are we still talking about solo, is it just live in general?
Micah:I think I just went to my relationship all of a sudden. Oh my god.
Hervé:There's no no shortcut, like no pain, no gain.
Micah:There's no shortcuts in life, man. I wish there was, but I haven't found them yet.
Hervé:Along those wise words, Micah, it's been a pleasure. Thank you.
Micah:Perfect. Thanks so much.
Hervé:If you'd like to do the same or do better, go to sunvoy.com/blog and get actionable behind the scenes lessons on running and growing your solo business.
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