Business Featured

Solar Business Profit Margin | Guide for Startups

By Shreya Durgan

The average solar business profit margin is 20%-25%.

Solar power plants have low operating costs, and their profit margin is high, making them a lucrative business venture.

Not to mention that they are gaining popularity in the market and becoming a cheaper option for energy production.

They were not profitable enough to be commercially viable earlier.

However, with the growing demand for clean energy and decreasing costs, the solar power plant business is becoming more and more competitive.

In fact, the solar power plant business can be profitable for companies because they have low start-up costs.

Moreover, they can generate electricity at a lower rate than other forms of energy production like coal and natural gas.

Overview of Solar Business in India

Investment: Rs. 10 Lacs - Rs. 15 Lacs (Minimum)
Investment (In case of Manufacturing) - 1 - 5 Crores (minimum)
Area Required: 200 sq ft for Office and 1000-1500 sq ft for Storage and Production.
Human Resource: 5- 15 People
Solar Business Profit Margin: 20% - 25%
Expected Earnings: 3 Lacs - 4 Lacs Monthly

Types of Solar Business in India

In India, solar power is still a relatively new concept.

In fact, the government has been pushing for the use of solar energy for the last few years.

Some of the different types of solar power business are:

Solar installation companies that install solar panels on rooftops and provide services related to maintenance and repair.
Solar service providers that provide services such as design, construction, and installation of solar panels on the rooftop.
Solar manufacturers that make and sell solar panels to other companies.
Solar developers who create projects in areas with high potential for generating electricity through the use of renewable sources like wind or sun.

Expected Gross Profit in Solar Business

It is difficult to give an exact answer to what a solar business can expect its gross profit to be as many factors contribute to it.

Such as initial investment, cost of power produced per month, interest rates on capital, etc.

However, the expected gross profit in the solar business can be around 15% - 20%.

To clarify, the actual profit will depend on several factors, such as:

Investment
Expenses
Operational Cost
Manufacturing Capacity
Market Size
Selling Price
Salaries and Wages
Logistics Cost
Sales
Unforeseen Factors

There is no doubt that the solar business industry is booming at a very high rate.

The global solar power market is predicted to grow from USD 184 billion in 2021 to USD 293 billion in 2028 at a CAGR of 6.9% in the forecast period 2021-2028.

The demand for this renewable resource is increasing along with population growth and global warming concerns.

As a result, it is opening up new opportunities for the solar power industry to be profitable.

Investment

The basic investment required to start a solar business is Rs. 10 Lacs to 15 Lacs minimum.

Here is a list of expenses in a solar business that you will have to invest in:

Company Registration Online
GST Registration
Shop and Establishment Act License
ISO Certification
DISCOM Certificate
Direct costs: advertisement and marketing costs, equipment acquisition and installation.
Indirect costs: utility bills for the company's core business
Rent or lease payments
Taxes

There are various ways in which solar power can get investment:

Government grants
Selling shares to investors
Raising debt capital from banks or private lenders
Use of crowdfunding for marketing purposes only

Successful solar businesses can get a great return on investment.

With the increasing demand for solar power, investors are more likely to invest in businesses they can see the potential.

Here are some steps that you need to take to obtain investment funds:

Understand your business and be able to describe it easily and accurately
Develop a detailed financial plan that explains how you will make money with your business and how you will pay back investors.
Market your business as well as possible through social media, advertising, or podcasts
Find investors through friends or connections.

Solar power is now a key sector for investors everywhere.

It is due to its low carbon footprint and the prospect of low-risk returns in the future as solar energy becomes more popular.

Area

The land area required to start a solar power business is approximately 1,000 - 2000 sq ft.

However, if you are planning to get into just installation or providing after-sale services, you will need only 200 - 400 sq ft to set up your office.

Choosing a location for a solar power business can be very difficult. The location is one of the most important things for businesses.

You need to consider factors such as:

Cost of Energy
Regulations and incentives
Availability of workforce and community amenities
Shipping prices to your location
Business climate and infrastructure
Sunlight Hours

Most importantly, do not forget to consider:- "Are there enough people with disposable income to buy solar panels?".

A solar power business should ideally be located in an area that has high sunlight hours, a low cost of living, and a low unemployment rate.

Human Resource

To run a solar power business, the people required are solar panel installers, electricians, accountants and management.

People required for solar power are usually called "Solar Power Engineers" or "Solar Power Technicians".

A specific type of solar power engineer is called an "Energy Distributor", who may have less working experience but more knowledge about renewable energy systems than other engineers conducting the same job.

Solar power requires a great deal of education, so you will need someone who knows both how they work and how they can make them work better.

Apart from that, you will also require the following people to run a solar business: