Guest post by Max Kazakov, Coperniq
As the famous adage goes: “fool me once, shame on you, fool me twice, shame on me.” In business, making the same mistake twice can be a matter of life and death (especially at a rapidly growing but early-stage solar company). The first time around, you’re learning and getting flooded with unknown unknowns. However the second time around, you are supposed to have gathered crucial insight to war-game your next move.
How do you gather these crucial insights? There’s a saying often attributed to Peter Drucker — the father of business management, “You can’t improve what you can’t measure.” Solar isn’t any different from other industries when it comes to quantitative approaches to growth. In fact, since sales and operations are the two basic pillars of the solar value chain (both extremely data-driven functions), “knowing your numbers” is paramount to your business thriving in today’s data-first landscape.
After “seeing the matrix”, Neo was able to dodge bullets, fly, and fight Agents with one hand. The effects of a KPI strategy on your business can be as profound and game-changing, as you gain insight into what makes your operation tick and discover hidden leverage points.
“But how do I know which KPIs to track?”
“How many KPIs should I be keeping an eye on and how often?”
“How do I know that KPIs are not being cheated at my company?”
Let’s start with the anatomy of Key Performance Indicators (KPIs). If a KPI is not carefully defined, it risks becoming a raw, unactionable number, tracked for its own sake only. Setting KPIs is not meant to be an end all be all exercise, but rather a conversation-starter and a “step one” in terms of aligning departments (or even the entire organization) around concrete goals. An excellent framework for going about KPIs is SMART. Well-crafted KPIs should be all of the following…
In addition to being SMART, KPIs have to have clear ownership status. In other words, every KPI should have a person who has the experience, skill, and knowledge to collect, measure, interpret and respond to the indicator in question.
Alright, we now have a solid understanding of how KPIs work in the abstract, but should a business owner start their journey with KPIs? An excellent place to start is a so-called North Star metric. This is a special kind of high-level KPI that sits at the center of your company’s business strategy. It’s a single number that serves as an instant health check for your entire operation. It also serves the role of uniting and aligning your entire team around a single quantitative mission and goal.
Most theories agree that a company’s North Star metric should ultimately correlate with the value that you’re bringing to your market. Before you ask, no, revenue is not a good North Star metric. This can cause your company to start optimizing for extracting as much money out of your customer base as possible, rather than looking for ways to deliver the most value (which in the long term will pay far greater dividends). Instead, here are some examples of customer-oriented metrics to give you ideas…
Now that you have your entire organization aligned around a single quantifiable goal, it is time to think about more department-specific KPIs that will be part of your cross-functional KPI strategy. Here are a couple of scenarios from some of our partners that might sound all too familiar to you. For each one, we propose a toolkit of useful metrics that should serve as inspiration for your own KPI strategy.
Please note that while most of these metrics have stood the test of time, your mileage may vary. Depending on your management style, organizational chart, and a myriad of other factors, you may have to tweak or augment these metrics. Use them as a rule of thumb, but ultimately every company should have its own set of KPIs.
Your company is in a groove doing one kind of project like net-metered residential on pitched-roof homes. You see the other opportunities that are out there like ground-mounts, commercial work, or even floatovoltaics. You have to decide if your team has the capacity to do that work and whether the rest of your projects (and teammates if their work is quota-based) will suffer by adding this kind of project. It’s here where having reviewable data can create an informed decision. Try a few small projects and see what the numbers look like.
Study the difference of Profit and Loss (P&L) between those types of projects. If a large city is in your service territory and there are endless numbers of row and townhomes, you may have installed solar using materials like U-Anchors or Schletter. These projects are challenging because there’s more risk, the arrays are often smaller, and they typically cost more. If you study what the variations are between the projects, you can determine what costs need to be adjusted to make it more worthwhile.
You’ve established yourself and are ready to grow. Expansion means overhead. You now need new field staff, more support staff, more vehicles, and more equipment. Find out how much revenue you need to support a new site. Knowing the average revenue per salesperson will tell you how many salespeople you will need. How efficient are your operations at the first site? Cost per Acquisition, Cost of Material per Project, and Cost of Labor per Project should be included in your calculations to establish that baseline for solvency. Knowing how many projects are in each stage and the typical time in each stage can tell you about your bottlenecks.
Here are some proven KPIs for the most common work centers in a modern (residential) renewable energy installation company.
Note that these are geared towards companies in the residential installation industry. Large-scale commercial projects have their own set of operational challenges and hence require a separate science of KPIs.
Accounting & Inventory
Operations & Maintenance
In the beginning, it seems that metrics are not a high priority. Remember that you build on lessons learned with each project. Metrics can help you set baselines to improve upon. Systemic inefficiencies become much harder to eradicate the longer they exist (see status quo trap). Look back at all of those metrics above and imagine the value you could discover. Data removes bias, helps make better decisions or persuade decision-makers.
Practically every solar company in 2022 is sitting on gold — the hidden data flows pouring in and out of the operation. Ones that are only now discovering the enormous value of KPIs are having to shoehorn analytics tools into their legacy systems (with variable success). If you’re just starting out, future-proof your business by thinking about your metrics from day 1.
Once you determine the highest-leverage KPIs to track based on your business needs, you should look for a robust business intelligence solution. Here are some boxes to check off and questions to ask as you shop for an analytics software platform….
By setting the appropriate, actionable KPIs you can not only foster a culture of data-driven decision making in your organization but also gain a clear view (in some cases for the first time) into the inner workings of its vital organs. This will not only generate ideas for low-hanging fruit gains but also set your solar company on a path of continuous improvement, innovation, and business growth so you can stay ahead of the competition. Happy measuring!
Max Kazakov, CTO & co-founder @ Coperniq.io. Loves building tools that make the renewable energy industry more productive and happy.
Coperniq is a CRM platform that helps solar & net-zero companies grow by connecting their people, data, and systems.