Solar Farm Business Plan
A solar farm is an excellent business to start; it has a few unique aspects that you’ll need to consider. Like other businesses requiring investors or lenders, it’s essential to show you’ve done your research to produce a viable business. Before moving forward, if you need outside funding to make your dream a reality, you need a solid solar farm business plan.
The idea of harnessing solar energy may be anywhere from a clear concept to a foreign thing to you. Most people understand that solar panels attract the sun’s energy and convert it to a usable power source. Furthermore, it’s common to find solar panels on rooftops generating power for use in homes. There is also a great deal more in which we can use solar power.
A solar farm is a bigger version of home solar panels, intended to power broader energy needs. That is to say, a solar farm is designed to provide electricity to thousands of homes and businesses.
Solar farms are composed of hundreds of silicon panels embedded with photovoltaic cells. The average solar farm can spread across 2.5 acres of land. In this space, the farm can receive enough high-intensity sun to generate up to one megawatt of electricity. That is one million watts — enough to power 650 residential homes for a day.
This post will review what you need to include and explore when writing a solar farm business plan.
Overview of a Solar Farm Business Plan
Why You Need a Plan
It may surprise you to know that the solar farm industry in the U.S. is a $10 billion dollar market. Additionally, the industry also has an estimated growth rate of 46.5 percent. Currently, in the U.S., there are only around 80 registered and licensed solar farm developer businesses. Because of these statistics, this industry has become most lucrative for those desirous of setting up a solar farm.
While the solar farm business is hugely attractive, it also has nuances that non-energy business types don’t have to consider. The alternative energy sector has unique financing opportunities and hurdles. It also comes with unique regulations with which to comply and access to the right experts. This is all to ensure equipment and infrastructure are set up correctly.
Putting together a solar farm business plan helps in figuring out these components. It also helps in attracting investment funding for it. By making a business plan, you reduce everything to writing. This way it’s unlikely your plan will miss out on any important aspect.
What to Include
A solar farm business plan should address the key information an investor or lender would want to know before making a decision.
I recommend including the following features:
#1 Executive Summary
In this section, provide a brief overview of each section of the business plan. Highlight the information sought by the intended readers of the plan — namely your bankers, investors, and even potential customers. Moreover, you might tweak this summary to cater to different audiences if you plan to present to multiple people.
#2 Company and Financing Summary
Provide an outline of your firm, along with your mission statement and a summary of your operations. This also includes the financials.
Registered Name and Corporate Structure
Provide the name of your company and the address and why that location would be a good choice for this industry. Likewise, describe your company’s organizational structure and spell out what needs your company will fulfill. Also, discuss industry trends that back up the feasibility of setting up a solar farm.
Mention how much investment is required for your solar farm. In addition, provide the breakdown of these funds. For example, initial lease payments and deposits, working capital, leasehold improvements, security deposits, marketing budget, opening supplies, etc.
Investor and Management Equities
Disclose what percentage of interest you are willing to sell to the investor in exchange for the funds invested. Also, mention your offer to include the investor as one of the board of directors. Declare what percentage of majority ownership you will retain once you raise the required capital.
#3 Products and Services Overview
This section provides an overview of products and services and includes the following parts:
Describe the geopolitical environment that will help in increasing the rates of your alternative energy. In addition, mention the likely competition you will face in your business operations.
Compare the price of oil and other fossil fuels to that of alternative energy sources. Stress the fact that alternative energy sources, such as solar energy, are cheaper and expected to grow significantly. Mention the statistics of companies providing non-nuclear and non-fossil fuel power generation to the general public.
Describe the two main customers for solar power — mainly government agencies and electricity wholesalers. Mention the eagerness of counties, state governments, and the U.S. federal government in obtaining large scale electricity delivery contracts from you for its large-scale applications.
In the present scenario, solar energy providers are few and far between. They do not provide much competition for each other. As popularity of solar energy increases, you need a competitive edge by maintaining a low-cost operating infrastructure. You can compare the price, reliability, and scalability of the electricity generated by your solar farm with other alternative energy providers.
#4 Marketing Plan
If you plan to sell the solar energy from your farm directly to the electrical grid, it will require minimal marketing. However, for selling it to established utility companies and large businesses, you will need to become visible online. Develop your own website and establish strong relationships with the businesses you’re hoping to partner with.
Your marketing strategy should highlight the benefits of solar energy through public relations campaigns. Make the public aware of the unique benefits of solar produced electricity — beyond the benefits of zero emissions. Your business will directly benefit from advantages in terms of rebates, tax credits, and other incentives.
Since the price is an overriding factor, also describe the pricing of your services and products.
Make mention of market analysis where you review your competitors, like other solar farms, tidal power plants, and others. Highlight the benefits of solar energy over conventional energy providers, like coal.
#5 Financial Plan
The solar farm business plan financial analysis includes projected financial statements and ratio analysis. Solar farms have high initial capital costs for equipment and setup. Discuss the potential funding sources you are considering, like government grants, bank loans, and even future stock offerings.
#6 Personnel Plan
In this section, provide an organizational chart that shows the management hierarchy. Also, present your brief professional biography and that of your managerial team. Give details about the manpower that will be engaged in the solar farm. Keep your workforce small by using third-parties for installation, maintenance, and upkeep of the solar farm. This will be in your interest as it will project a positive picture to your investors.
#7 Sales Forecast and Expansion Plan
Mention your sales forecast for the next three to five years. It should show a strong initial rate of growth leading to the rapid expansion of your business during this period. Your sales forecast should project metrics, such as sales, operating costs, EBITDA, taxes, interest and depreciation, and net profit. Also, describe your efforts to aggressively seek additional capital to reinvest in new photovoltaic cell structures.
#8 SWOT Analysis
It is important to mention the results of SWOT analysis in your solar farm business plan. This is to prove the viability of your solar farm business in the intended geographic location. It will highlight the strengths, weaknesses, opportunities, and threats of your business plan. Depending on the ground realities, describe these features individually:
- Strengths: Discuss the internal strengths and experience of your team and any assets you currently possess. If you already have land secured, mention the size and location of the solar farm. Mention the competence and dedication of your core team and workforce for installation, maintenance, and repair of solar panels.
- Weaknesses: Here you need to highlight the unique internal hurdles you may encounter in establishing the solar farms, such as the lack of adequate finances to promote your business or lack of team members with previous entrepreneur experience.
- Opportunities: Explain how the market opportunities are going to bring an advantage to your new solar farm. Any positive impacts from government regulations, new tax incentives, and financing programs would be great environmental opportunities that will help your business thrive.
- Threats: One major external threat is that of an economic downturn that will affect your purchasing and spending power. Another is the establishment of another solar farm in your vicinity that threatens to take your business away.
Overall, a solar farm brings great benefits to the business owner and to users of its energy. It is a sustainable business to launch and many investors and financing institutions specialize in supporting alternative energy. The timing is perfect for new entrants looking for a profitable, ethical business to launch in the solar farm space. In conclusion, having a well-executed solar farm business plan is the first step toward running your very own solar farm.
If you need support creating your solar farm business plan for strategy or funding, Written Success is here to help. Request a free consult with Ashley to learn more about the services that will help you reach your goals.