Do you Want to Start Solar Farm Business?

Are you planning on how to start a solar farm? This is a great business venture considering the increasing demand for solar energy in the recent times. Solar farms pool together resources to generate a large scale source of solar power energy which is then sold to both residential and commercial customers. Solar energy is now considered the most reliable energy source that is utilized for various uses. The business still has a lot of opportunities that are yet to be exploited and therefore, you can be assured of reaping good profits. However, the initial startup capital is high because of the technical infrastructure required. With a good business plan, you can be assured to quickly recoup your entire investment.

Executive Summary

2.1 The Business

The solar farm will be registered under the name SolarStar Technologies and will be located in Forney, Texas approximately 25 miles from Dallas, Texas. The solar farm will be owned by Smith White who is a Renewable Energy Specialist with vast experience on how to start a solar power business. The business will be strategically located in a vast piece of land located on the outskirts of Forney.

2.2 Management Team

Smith White who’s the owner of SolarStar Technologies is an experienced Renewable Energy Specialist with extensive experience spanning two decades in solar energy technologies. Before starting the solar farm, Smith worked for numerous high profile renewable energy companies across the United States. On completion of the business set-up, Smith White intends to employ a team of staff to assist in day-to- day running of the solar farm.

2.3 Customer Focus

SolarStar Technologies has plans to set up the solar farm in a strategic location that ensures the farm is able to effectively meet the needs of its customers. The aim is to ensure customers access sufficient solar energy for various needs. When you build your own solar farm, you should think about how to improve the lives and businesses of your customers.

2.4 Business Target

SolarStar Technologies plans to offer various types of services for both domestic and commercial clients in need of a quality, reliable and affordable solar energy provider in Fortney and the surrounding areas.

Solar Farm Business Plan - 3 Years Profit Forecast

Company Summary

3.1 Company Owner

Smith White is an experienced renewable energy specialist who has enjoyed a successful career life. He is a well-respected and known expert who has played a major role in improving the lives of various communities by utilizing renewable energy sources.

3.2 Aim of Starting the Business

With the increasing demand for solar energy, the available solar farms are unable to fully cater for the rising demand from both domestic and commercial customers. For this reason, Smith White thought it would be good to use his expertise and professional experience to set up his own solar farm and make a positive impact in the society.

3.3 How the Business will be Started

With industry experience spanning over twenty years, Mr. Smith has hands-on experience in solar energy infrastructure and technology. He is well versed with the technical aspect but on the other hand, has sought the advice of business setup experts to help him draw up a comprehensive solar power plant start up cost.

Solar Farm Business Plan - Startup cost

Start-up Expenses 
Legal$3,000
Consultants$6,000
Insurance$22,000
Rent$9,000
Research and Development$14,000
Expensed Equipment$12,000
Signs$4,000
TOTAL START-UP EXPENSES$70,000
Start-up Assets$0
Cash Required$140,000
Start-up Inventory$50,000
Other Current Assets$24,000
Long-term Assets$7,000
TOTAL ASSETS$22,000
Total Requirements$25,000
START-UP FUNDING$0
START-UP FUNDING$100,000
Start-up Expenses to Fund$30,000
Start-up Assets to Fund$27,000
TOTAL FUNDING REQUIRED$0
Assets$18,000
Non-cash Assets from Start-up$12,000
Cash Requirements from Start-up$0
Additional Cash Raised$50,000
Cash Balance on Starting Date$25,000
TOTAL ASSETS$0
Liabilities and Capital$0
Liabilities$0
Current Borrowing$0
Long-term Liabilities$0
Accounts Payable (Outstanding Bills)$0
Other Current Liabilities (interest-free)$0
TOTAL LIABILITIES$0
Capital$0
Planned Investment$0
Investor 1$40,000
Investor 2$60,000
Other$0
Additional Investment Requirement$0
TOTAL PLANNED INVESTMENT$160,000
Loss at Start-up (Start-up Expenses)$50,000
TOTAL CAPITAL$45,000
TOTAL CAPITAL AND LIABILITIES$40,000
Total Funding$230,000

Services for Customers

SolarStar Technologies offers various types of services that cater for both commercial and domestic needs. When planning how to start a solar energy business, entrepreneurs need to think of a diversified service approach to boost customer satisfaction and increase revenue. In line with offering the best services to its clients, SolarStar Technologies intends to offer the following key services when all procedures of starting a solar power company have been completed and the solar farm has opened for business.

  • Supply solar energy to domestic, commercial and industrial enterprises in need of clean, efficient and reliable solar energy
  • Installation of solar panels, repair and maintenance services thanks to a qualified and reputable installation and quality assurance team
  • Construction of CSP power plants, CSP tower power plants and CSP trough power plants using the latest environmentally friendly technologies
  • Construction of Crystalline silicon solar and Thin-film solar power plants
  • Consultation, energy analysis studies and designing of integrated solar system plans. This involves holding discussions with potential customers to determine their solar needs and recommend an appropriate solution.

Marketing Analysis of Solar Farm Business

The demand for solar energy is at an all-time high. SolarStar Technologies intends to fully benefit from the hype for solar energy to generate higher revenue streams. In this solar farm business plan, a detailed market analysis was carried out to better position the business to have a competitive advantage. The purpose of the market analysis is to find out the best approach to market the solar farm so as to reach out to potential customers. With more people becoming keen on enjoying the benefits of using solar technologies, there are plenty of opportunities for investors to tap.

5.1 Market Segmentation

In order to ensure business goals are met, SolarStar Technologies intends to offer a wide range of services in order to cater for different types of customers. Focus will be placed on offering quality services and deployment of the latest infrastructure and technologies to ensure this solar energy farm business plan realizes its intended purpose. With rapid technology development and favorable government policies on the use of solar energy, SolarStar Technologies knows the market is ready for new investors looking to offer diversified services that will be beneficial to local communities. Considering the favorable business environment, the business expects good profits. This small solar farm business plan has identified the following potential customers that need to be approached.

Solar Farm Business Plan - Market Segmentation

5.1.1 Individuals and Households

Statistics have indicated that the biggest consumers of solar energy are domestic consumers who account for a larger percentage of the total consumption. With the high cost of electricity, many households and individual users are opting for solar energy which is considered to be more affordable and highly reliable. The increased frequency of power outages has also contributed to many homes considering using solar as an alternative. In addition, the price of solar panels has drastically reduced thus attracting domestic consumers who don’t need to spend much investing in solar energy. In this solar farm business plan sample, a lot of emphasis is placed on reaching out to domestic consumers as they’re a lucrative customer segment for the SolarStar Technologies.

5.1.2 Corporate Organizations and Manufacturers

In a bid to reduce electricity costs, many companies are opting to embrace solar energy to lower business expenses with a view of increasing profits. Numerous government incentives including tax reliefs on solar energy have encouraged the uptake of commercial use of solar energy. In addition, most corporates are adopting a green approach which emphasizes on environmental conservation. As part of renewable energy efforts, many stakeholders have begun to focus on adopting policies that will allow companies to utilize solar energy to manage various business activities. With the kind of infrastructure SolarStar Technologies plans to roll out, the business has an excellent opportunity to increase its revenue channels.

5.1.3 Real Estate Developers

A lot of real estate developments are increasingly opting for solar energy since it’s a cost effective and environmental friendly option. To avoid depending on traditional electricity, many developers are investing heavily in solar infrastructure with the intention of using solar as a selling point for their properties. In a bid to cut down on electricity costs, the real estate property is now amongst the biggest consumers of solar energy. As the property industry continues to witness more developments, the biggest beneficiary will be SolarStar Technologies.

5.1.4 Schools

This solar farm business model incorporates educational institutions as one of key customer segments that SolarStar Technologies needs to reach out to. There are numerous educational institutions in Forney, and the solar farm has a good opportunity to market to the neighboring schools with an aim of supplying solar power. Because of the diverse nature of activities, schools are always in need of enough energy supply to be able to satisfy their needs.

Market Analysis
Potential CustomersGrowthYEAR 1YEAR 2YEAR 3YEAR 4YEAR 5CAGR
Individual and households35%30,00032,00034,00036,00038,00010.00%
Corporate organizations and manufacturers30%25,00027,00029,00031,00033,00014.00%
Real estate developers20%20,00022,00024,00026,00028,00012.00%
Schools15%15,00017,00019,00021,00023,0009.00%
Total100%90,00098,000              106,000114,000122,00018.00%

5.2 Business Target

SolarStar Technologies has acquired a huge farm that will hold the infrastructure for the solar farm. Given the huge initial investment, this solar energy business plan is focused on coming up with a framework that will support business activities. The solar farm plans to leverage on the latest technologies and exemplary business practices to achieve its goals. The population in the city of Forney and its surroundings is the main target for the solar farm. With a good business plan for solar energy company in place, SolarStar Technologies hopes to achieve an annual sales growth of between 15-20%.

5.3 Product Pricing

SolarStar Technologies intends to come up with a comprehensive pricing structure that will guide how various services will be priced. Starting a solar energy business demands a lot of research especially how to effectively price different types of services.

Strategy

In order for SolarStar Technologies to realize its objectives, Smith White has worked closely with experts to come up with a marketing strategy that will steer the path for business growth. When planning to start a solar farm business, it is important to have a strategy that will outline plans a solar farm will use to approach customers. The sales strategy for SolarStar Technologies is explained below.

6.1 Competitive Analysis

SolarStar Technologies intends to focus on a well-structured approach that will ensure provision of key services. Even though there are other solar farms in the region, SolarStar Technologies has crafted a unique business approach to identify potential customers and reach out to them effectively to boost revenue.

6.2 Sales Strategy

For SolarStar Technologies to achieve its goals, the following strategies have been identified to help the solar farm reach out to its customers. If you plan to start solar farm business, the following strategies will be of great help.

  • Introduce the solar farm to the neighboring community by sending letters of introduction together with a brochure to all targeted customers such as households and individuals, corporate organization, schools and real estate developers.
  • Be at the forefront of bidding for tenders and contracts from government and corporate organizations
  • Advertise the solar farm in local media channels such as TV stations, newspapers, magazines and radio stations
  • Advertise the SolarStar Technologies on local directories such as yellow pages
  • Participate in both local and international expos, workshops and business exhibitions to market the solar farm
  • Come up with different service packages and find a creative approach of customizing budgets to allow clients enjoy services depending on their budget.
  • Ensure the quality of service delivery and consistency in professionalism is upheld at all times
  • Use digital platforms such as Facebook, Twitter, Instagram to advertise the business
  • Use direct marketing approaches to reach out to potential customers
  • Encourage word of mouth marketing and referrals especially for loyal and happy clients
  • Put signage at strategic locations in close proximity to the targeted customer areas
  • Hire an external professional marketing company to help SolarStar Technologies reach out to as many potential customers as possible
  • Organize road shows around the neighborhood to create awareness about the solar farm as well as the benefits of using solar energy

6.3 Sales Forecast

In order to successfully manage how to start solar business, SolarStar Technologies has come up with a sales forecast which will show how the solar farm will perform when it begins operations.

Solar Farm Business Plan - Unit Sales

Sales Forecast   
Unit SalesYear 1Year 2Year 3
Supply solar power to domestic, commercial & industrial entreprises500,000520,000540,000
Installation of solar power, repair and installation400,000420,000440,000
Construction of CSP power plants300,000320,000340,000
Consultation and energy analysis200,000220,000240,000
TOTAL UNIT SALES1,400,0001,480,0001,560,000
Unit PricesYear 1Year 2Year 3
Supply solar power to domestic, commercial & industrial entreprises$400.00$420.00$440.00
Installation of solar power, repair and installation$300.00$320.00$340.00
Construction of CSP power plants$250.00$270.00$290.00
Consultation and energy analysis$200.00$220.00$240.00
Sales
Supply solar power to domestic, commercial & industrial entreprises$310,000$340,000$370,000
Installation of solar power, repair and installation$200,000$240,000$280,000
Construction of CSP power plants$150,000$180,000$210,000
Consultation and energy analysis$100,000$140,000$180,000
TOTAL SALES
Direct Unit CostsYear 1Year 2Year 3
Supply solar power to domestic, commercial & industrial entreprises$5.00$4.00$3.00
Installation of solar power, repair and installation$4.00$3.00$2.00
Construction of CSP power plants$3.00$2.00$1.00
Consultation and energy analysis$2.00$3.00$4.00
Direct Cost of Sales
Supply solar power to domestic, commercial & industrial entreprises$300,000$320,000$340,000
Installation of solar power, repair and installation$250,000$270,000$290,000
Construction of CSP power plants$200,000$220,000$240,000
Consultation and energy analysis$150,000$170,000$190,000
Subtotal Direct Cost of Sales$900,000$980,000$1,060,000

Personnel Plan

SolarStar Technologies is keen on leveraging on the latest technologies and providing an efficient and reliable source of energy to both domestic and commercial consumers. Before starting a solar farm business, it is wise to put in place a personnel plan to manage solar farm operations.

7.1 Personnel Plan

SolarStar Technologies is owned by Smith White who will also be the Chief Executive Officer of the solar farm. Starting a solar business requires the following staff to be employed in the facility.

Chief Executive Officer (CEO)
Manager, Technical and Operations
2 Sales and Marketing Executives
1 Accountant
2 Client Service Executive
10 Installation, Repair and Maintenance Engineers
2 Security Guards

Successful applicants will be trained in different areas of solar farm operations in order to prepare them to serve customers.

7.2 Average Salaries

SolarStar Technologies intends to pay members of staff the following salaries in the first three years of operation.

 Personnel Plan   
Year 1Year 2Year 3
Chief Executive Officer (CEO)$65,000$70,000$75,000
Manager of operations$38,000$40,000$42,000
Accountant$30,000$35,000$40,000
2 Sales and Marketing Executive$50,000$54,000$58,000
2 Client Service Executive$56,000$60,000$64,000
10 installation, repair and maintanence engieneers$250,000$270,000$290,000
2 security guards$45,000$50,000$55,000
Total Salaries$534,000$579,000$624,000

Financial Plan

SolarStar Technologies has come up with a detailed financial plan that reflects the financial status of the solar farm. Successfully starting a solar farm depends on how well experts determine the financial aspects of the business. How to start your own solar company also depends on the source of capital. In this case, Smith White shall fund the business using his personal savings, and will be assisted by two investors. Additionally, extra funding will be secured from a loan to provide additional capital.

Below is the key financial data for SolarStar Technologies.

8.1 Important Assumptions

Financial forecast for SolarStar Technologies shall be based on the below assumptions.

 General Assumptions   
Year 1Year 2Year 3
Plan Month123
Current Interest Rate14.00%16.00%18.00%
Long-term Interest Rate5.00%5.00%5.00%
Tax Rate12.00%15.00%19.00%
Other000

8.2 Brake-even Analysis

The Brake-even Analysis for SolarStar Technologies is illustrated in the graph below.

Solar Farm Business Plan - Brake-even Analysis

 Brake-Even Analysis 
Monthly Units Break-even8000
Monthly Revenue Break-even$250,000
Assumptions:
Average Per-Unit Revenue$210.00
Average Per-Unit Variable Cost$3.00
Estimated Monthly Fixed Cost$400,000

8.3 Projected Profit and Loss

Profit and Loss information for the solar farm calculated on a monthly and annual basis is shown below.

 Pro Forma Profit And Loss   
Year 1Year 2Year 3
Sales$820,000$840,000$860,000
Direct Cost of Sales$100,000$120,000$140,000
Other$0$0$0
TOTAL COST OF SALES$920,000 $960,000 $1,000,000
Gross Margin$420,000$450,000$480,000
Gross Margin %65.00%70.00%75.00%
Expenses
Payroll$230,000$260,000$290,000
Sales and Marketing and Other Expenses$6,000$8,000$10,000
Depreciation$4,000$6,000$8,000
Leased Equipment$0$0$0
Utilities$6,000$8,000$10,000
Insurance$2,000$2,500$3,000
Rent$8,000$10,000$12,000
Payroll Taxes$25,000$28,000$31,000
Other$0$0$0
Total Operating Expenses$320,000$350,000$380,000
Profit Before Interest and Taxes$100,000$130,000$160,000
EBITDA$40,000$60,000$80,000
Interest Expense$0$0$0
Taxes Incurred$30,000$35,000$40,000
Net Profit$120,000$140,000$160,000
Net Profit/Sales40.00%50.00%60.00%

8.3.1 Monthly Profit

Solar Farm Business Plan - PROFIT MONTHLY

8.3.2 Yearly Profit

Solar Farm Business Plan - PROFIT YEARLY

8.3.3 Monthly Gross Margin

Solar Farm Business Plan - GROSS MARGIN MONTHLY

8.3.4 Yearly Gross Margin

Profit and Loss Analysis for SolarStar Technologies is shown below.

Solar Farm Business Plan - GROSS MARGIN YEARLY

8.4 Projected Cash Flow

Below is a summary of subtotal cash spent, subtotal cash spent on operations, subtotal cash from operations, subtotal cash received and pro forma cash flow.

Solar Farm Business Plan - Projected Cash Flow

 Pro Forma Cash Flow   
Cash ReceivedYear 1Year 2Year 3
Cash from Operations
Cash Sales$100,000$120,000$140,000
Cash from Receivables$10,000$14,000$18,000
SUBTOTAL CASH FROM OPERATIONS$110,000 $134,000 $158,000
Additional Cash Received
Sales Tax, VAT, HST/GST Received$0$0$0
New Current Borrowing$0$0$0
New Other Liabilities (interest-free)$0$0$0
New Long-term Liabilities$0$0$0
Sales of Other Current Assets$0$0$0
Sales of Long-term Assets$0$0$0
New Investment Received$0$0$0
SUBTOTAL CASH RECEIVED$80,000 $85,000 $90,000
ExpendituresYear 1Year 2Year 3
Expenditures from Operations
Cash Spending$15,000$20,000$25,000
Bill Payments$18,000$21,000$24,000
SUBTOTAL SPENT ON OPERATIONS$33,000 $41,000 $49,000
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out$0$0$0
Principal Repayment of Current Borrowing$0$0$0
Other Liabilities Principal Repayment$0$0$0
Long-term Liabilities Principal Repayment$0$0$0
Purchase Other Current Assets$0$0$0
Purchase Long-term Assets$0$0$0
Dividends$0$0$0
SUBTOTAL CASH SPENT$33,000 $41,000 $490,000
Net Cash Flow$15,000$18,000$21,000
Cash Balance$20,000$24,000$30,000

8.5 Projected Balance Sheet

Below is a Projected Balance Sheet for SolarStar Technologies that shows assets, liabilities, capital, long term assets and current liabilities.

 Pro Forma Balance Sheet   
AssetsYear 1Year 2Year 3
Current Assets
Cash$280,000$320,000$360,000
Accounts Receivable$12,000$16,000$20,000
Inventory$5,000$7,000$6,000
Other Current Assets$5,000$5,000$5,000
TOTAL CURRENT ASSETS$302,000 $348,000 $391,000
Long-term Assets
Long-term Assets$12,000$15,000$18,000
Accumulated Depreciation$14,000$16,000$18,000
TOTAL LONG-TERM ASSETS$4,000 $3,000 $2,000
TOTAL ASSETS$332,000 $382,000 $429,000
Liabilities and CapitalYear 1Year 2Year 3
Current Liabilities
Accounts Payable$20,000$24,000$28,000
Current Borrowing$0$0$0
Other Current Liabilities$0$0$0
SUBTOTAL CURRENT LIABILITIES$20,000 $24,000 $28,000
Long-term Liabilities$0$0$0
TOTAL LIABILITIES$22,000 $26,000 $30,000
Paid-in Capital$27,000$27,000$27,000
Retained Earnings$20,000$30,000$40,000
Earnings$80,000$100,000$120,000
TOTAL CAPITAL$220,000 $240,000 $260,000
TOTAL LIABILITIES AND CAPITAL$210,000 $230,000 $270,000
Net Worth$400,000$420,000$440,000

8.6 Business Ratios

The following is the Ratio Analysis, Business Ratios and Business Net Worth.

 Ratio Analysis    
Year 1Year 2Year 3INDUSTRY PROFILE
Sales Growth12.00%40.00%60.00%6.00%
Percent of Total Assets
Accounts Receivable7.00%4.00%3.00%11.00%
Inventory5.00%3.00%2.00%10.00%
Other Current Assets4.00%3.50%2.20%28.00%
Total Current Assets100.00%120.00%130.00%56.00%
Long-term Assets-6.00%-18.00%-20.00%43.50%
TOTAL ASSETS100.00%100.00%100.00%100.00%
Current Liabilities7.00%5.00%3.00%20.50%
Long-term Liabilities0.00%0.00%0.00%18.20%
Total Liabilities6.00%3.00%1.60%37.50%
NET WORTH95.00%82.00%105.00%35.00%
Percent of Sales
Sales100.00%100.00%100.00%100.00%
Gross Margin74.00%78.00%82.00%0.00%
Selling, General & Administrative Expenses65.00%80.00%65.00%55.00%
Advertising Expenses4.00%3.00%2.50%4.20%
Profit Before Interest and Taxes25.00%28.00%31.00%2.50%
Main Ratios
Current1316191.8
Quick2629322.5
Total Debt to Total Assets5.05%3.00%1.80%65.00%
Pre-tax Return on Net Worth70.00%80.00%90.00%3.00%
Pre-tax Return on Assets65.00%60.00%70.00%10.00%
Additional RatiosYear 1Year 2Year 3
Net Profit Margin18.00%22.00%24.00%N.A.
Return on Equity55.00%60.00%65.00%N.A.
Activity Ratios
Accounts Receivable Turnover6810N.A.
Collection Days95105110N.A.
Inventory Turnover172125N.A.
Accounts Payable Turnover1215.218N.A.
Payment Days252525N.A.
Total Asset Turnover2.82.62.4N.A.
Debt Ratios
Debt to Net Worth0-0.07-0.04N.A.
Current Liab. to Liab.000N.A.
Liquidity Ratios
Net Working Capital$300,000$330,000$360,000N.A.
Interest Coverage000N.A.
Additional Ratios
Assets to Sales1.451.480.35N.A.
Current Debt/Total Assets8%5%3%N.A.
Acid Test262933N.A.
Sales/Net Worth3.42.21.2N.A.
Dividend Payout000N.A.