Wrenches
Its ironic this topic came up for me yesterday as well. As we have approached
the day where everything is online- pricing of our widgets from various
sources, its challenging for wrenches to not be transparent or to explain you
want to make X% margin on widgets.
But if someone buys things elsewhere, what are our options?
For the on-grid market, pricing has dropped precipitously for the cost per watt
of installed products and the urban solar business could be more crowded than
the off-grid market, as the specialized skills for understanding batteries is
usually absent from the on-grid market, ratio and proportion to the installer
base.
How about a novel approach:
1. Charge what your time is worth. Determine how many hours in a year you can
"sell" your services. My rule of thumb is 75% efficient- 6 out of 8 hours you
can be doing productive work. This varies depending upon if you're a 1 person
company or have a staff. The 1 person shops can probably sell their time- 1000
hours a year. Add in all of your overhead costs in a year and come up with this
number and spread it across the amount of time you can sell in a year.
2. You can then come up with a daily rate for doing work or a half day rate.
3. Have language in your contract to address installing other peoples equipment
and if their are issues with it, then there will be a cost to them for parts
that don't work or are DOA out of the box etc.
At its core- it might seem counter-intuitive but sell your time and focus less
on making a margin on widgets. Many industries, like legal, accounting or your
dentist- make money selling their time vs widgets. Perhaps we are close to that
time in our industry.
In doing PPA's and other structured finance projects lately, we get squeezed as
well. Investors want to know how the costs can be more transparent to making
funding a project a dream to a reality. They want EPC's to make money but want
to know how to make the economics work. Today, this could also be similar for
the smaller projects. Some people just want to do their own shopping. Yes, it
can be frustrating, as you find yourself being the engineer for them and invest
alot of time and often it is free consulting. My suggestion would be to
cultivate the relationship, see if there is a fit and have a contract for a
labor only aspect of the opportunity. I recognize its not something we've been
usually associated to, but thinking about this further, is one solution to this
change on the playing field.
So, I'd suggest line itemization of everything. The key is for us to know how
long things take, in general to install things and know those times associated
to those activities.
Layer on top your overhead % and profit % and any local tax to come up with
your selling price.
If you'd like any help with this, contact me off list.
Aloha,
Keith
________________________________
From: Jason Szumlanski <ja...@fafcosolar.com>
To: RE-wrenches <re-wrenches@lists.re-wrenches.org>
Sent: Saturday, August 18, 2012 6:18 AM
Subject: [RE-wrenches] Combating requests for itemized PV pricing
We are getting more and more people calling that want to provide their own
equipment and have us install it. It's frustrating, because usually they are
looking at prices for materials that either I would not consider selling, or
would not meet the mounting requirements of the Florida Building Code. Of
course, they do not understand and consider all of the other costs.
In addition, lots of people are looking for a breakdown of prices (down to the
line item - nuts and bolts). I generally refuse to provide it because it
inevitably leads to the response "I can get that module/inverter online
cheaper." The "I need to make money" response leads to "yeah, but you must be
getting better prices than I see online" argument. And so on, and so on... I'm
sure you've heard it...
I've resorted recently to just providing a percentage breakdown, stating that
the price is roughly 25% each:
* PV Modules
* Inverters and Electrical
* Mounting System
* Design/Engineering, Permitting, Labor, Overhead, and ProfitAny other
tips out there to answer the request for line item details?
Jason Szumlanski
Fafco Solar
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