Selling commercial and industrial (C&I) scale solar is complicated, and there are many factors that distinguish it from residential solar sales. Your commercial client's reasons for choosing solar vary from those of your residential client, as do the ways they analyze your plan and make decisions.
We spoke with experts with extensive C&I solar sales experience, including Conrad Chase, CEO of Point Load Power, a manufacturer of PV Booster rooftop solar trackers for commercial and industrial rooftops, to learn about some of the most critical factors in an effective C&I sales operation. With over a decade of experience in the solar industry, Nico Johnson, host of SunCast, a podcast that shares the experiences of renewable energy entrepreneurs, was also interviewed.
Some key elements of an effective commercial solar sales process emerged from our discussions with Chase and Johnson: asking the right questions during the sales process, identifying the environment of other energy and building improvements the commercial client might be considering, and choosing the right tools and technologies (including the right proposal and design tools to close the sale).
Part 3 of our Unlocking Commercial Solar series, we'll go over each of these topics and how to approach them intelligently to increase your chances of closing the commercial deal.
In our interviews with Chase and Johnson, one of the most common mistakes in commercial solar sales was failing to ask the right questions. “In this category, asking the right questions is important. And what we discovered after talking to hundreds of installers is that they're completely off the mark,” Chase said.
As Chase clarified, asking the right questions allows you to make the best proposal for your customer's requirements. This will allow you to make a more convincing pitch and improve your chances of closing the deal. Johnson also stressed the importance of asking the right questions in order to communicate with the right decision-maker in the company that would actually approve the project.
Let's look at some of the most important questions you should be asking.
Understanding the relationship between the building owner and tenants is one of Chase's most important categories of questions (if any).
One of the factors that makes commercial solar projects more complex, as mentioned in our previous articles in this series (Key Players in a Commercial Solar Project and Making Sense of Commercial Solar), is that the owner of the building with the authority to authorize a solar purchase is often not the occupant of the building who would benefit from lower utility bills.
Questions regarding the lease arrangement and the relationship between the building owner and the tenant (if any) will help you grasp these nuances right away. This will help you figure out if the opportunity is worth pursuing and, if so, how to adapt your solar design and proposal to fit the situation.
Although there are several different types of commercial ventures and lease structures, Chase outlined three of the most common lease / building-tenant arrangements that Point Load Power encounters. These are the least to most complicated:
Multi-tenant buildings, owner-occupied buildings, and buildings with a single tenant in a triple net lease (a form of lease in which the building owner offers the building as-is and the tenant is responsible for all building maintenance, renovations, utilities costs, and property taxes, among other things) (which may have different lease types including triple net or gross leases).
Since the building occupant who profits from energy conservation and the owner who can make solar buying decisions are one and the same, owner-occupied buildings make for the most straightforward commercial solar projects. It may make sense to concentrate your attention on projects that are less complicated in terms of the lease and tenant situation, particularly if you're just getting started.
If the building has a mortgage, you can ask the following lease-related questions:
Understanding the financial goals of the parties concerned, especially the building owner and the company that will own the solar installation, is also critical (in many cases these will be the same, though not if a third-party-owned financing option is selected). You'll also want to learn about the tenant(s)' motivations, if any exist.
Chase emphasized the importance of comprehending the building owner's goal in relation to the building's ownership. “Will this land, for example, be flipped and sold to a larger company? Is the property held by someone who intends to purchase and keep it for a long time?”
In single-tenant buildings with triple net leases, he noted that one of the most important financial considerations for building owners is how likely and at what expense their tenant would extend their contract. “The landlord prefers longer leases with higher lease rents. And they want it to be as stable as possible, since the more secure their building income is, the easier it will be to obtain bank financing.”
Reduced energy bills from a commercial solar installation will encourage tenants to extend their leases while also allowing the building owner to charge higher rents. Additionally, the revenue generated by a solar installation can allow the building owner to provide incentives to entice new or renewing tenants to sign a lease.
This scenario is illustrated by a large commercial project built by Point Load Power for building owner Harry Ross Industries, whose prospective tenant, Chiquita Brands International, was enticed by the utility bill savings solar would offer on their refrigerated warehouse.
Meanwhile, you'll want to be aware of the concerns of the tenant(s) involved. “It really depends on the tenant,” Chase says, “but in general, whether they're either in or signing a contract, they don't want their power bill to go up.” And some may have specifications regarding, you know, flexibility up on the roof, you know, if they want to install anything up there, like an HVAC unit or some other piece of equipment, there may be some structural considerations that they need to be aware of.”
Finally, you'll need to ask questions in order to fully comprehend the financial goals of the company that will own the solar installation. Understanding the organization's tax situation, in particular, may be beneficial because it can affect whether they are eligible for solar tax credits.
According to Chase, "Knowing these nuances can affect how the installer makes their pitch and what types of stuff they pitch."
Another important aspect of asking the right questions is to recognize the person or people who have the authority to sign off on a solar purchase. Commercial solar ventures, unlike residential sales, require a large number of parties, and it is up to the salesperson to determine who has the authority to drive the project forward.
According to Johnson, this is a typical C&I sales blunder. “[Contractors] get their foot in the door, they do a fantastic job prospecting, they have the resources, maybe they have a good layout and energy analysis—but they're just plain talking to their own person,” says one contractor.
“The only person they've been able to get open the door is the facilities manager in certain cases,” he says. The facilities manager, in most situations, is the one who makes the call. However, if you consider the facilities manager as your champion, grasp massive account management, and have your sales staff well qualified, you'll be able to reach the decision-makers—the board of directors or whatever will ultimately stroke the check—in a timely manner. Determine whether the buyer is an economic or a technological one.”
Make certain you ask all of the pertinent questions in order to identify the true decision-maker.
According to Chase, another critical aspect of an effective C&I sales process is understanding the many other choices that are vying for the same portion of your commercial client's budget. Solar contractors often believe that other solar projects are their key competitors, according to him.
In reality, there are a slew of other energy and building upgrade solutions and innovations vying for the same dollars that would go toward a solar purchase. Energy-efficient windows, roof replacements, new HVAC systems, and a variety of other possible investments are among them.
These investments can have a shorter payback period than solar in some situations. However, combining solar with these other improvements may result in a more appealing proposal for the client, particularly if the other technologies are eligible for rebates or other incentives.
It's also important to keep in mind that some of these investments might be required by the client in order to keep their building in good working order. Chase cited a university in which Point Load Power collaborated. The structure in question needed a new roof, as well as the replacement of very old HVAC units that were on the verge of breaking, as well as a number of other improvements.
The team was able to learn that after the other building initiatives the client was undertaking were completed by asking questions to understand the other building initiatives the client was undertaking by asking questions to understand the other building initiatives the client was undertaking by asking questions to understand the other building initiatives the client was undertaking by asking questions
With this experience, the team proposed a smaller, 400kW PV device that, when compared to megawatt-scale projects proposed by rivals, better suited the real future needs of their prospect. “Understanding the environment of solutions is important because it helps installers to make the correct proposal,” Chase concludes.
The use of the appropriate equipment and technologies is a final critical component of an effective commercial solar sales strategy. This applies to both the technologies you propose in your commercial solar project and the design and proposal tools you employ, especially software.
Chase and Johnson both stressed the value of having reliable solar tech resources when it comes to closing a C&I contract. “Having the right proposal and design software is crucial,” Chase says. “Software that allows an installer to look at a variety of scenarios, taking into account the other technologies in use and potentially resulting in a new load profile—and to run those scenarios quickly—is critical.”
“I see a lot of folks trying to scale in the C&I not investing in the program upfront,” Johnson said. So they try to do the hard math in the hopes of closing a transaction that will justify the software cost, rather than justifying the software cost because it will help them close a difficult deal.”
Choosing the right technologies to incorporate into your solar design is also critical to providing the most convincing plan to the client. “In the university's case, they didn't want to put carport solar because it was too expensive,” Chase explains. They were also involved in installing rooftop solar at the same time because they were repairing the roof. The client's desire to reduce the amount of equipment on their new roof was satisfied by Point Load Power's proposal of an efficient solution that provided higher output with fewer modules.
Solar sales in the commercial sector are complicated. This is especially true if you're new to the industry, such as if you're switching from residential to commercial solar. Asking the right questions, knowing the world of competing technology and building improvements, and using the right tools and technologies—all of these best practices will help you close the deal.
What else have you discovered to be relevant in a commercial solar sales process? Please let us know in the comments section below!