Podcast Summary: Next Level Pros #146 – "This is Why The Solar Industry is Dying"
Episode Information:
- Title: Next Level Pros
- Host: Chris Lee
- Episode Number: #146
- Episode Title: This is Why The Solar Industry is Dying
- Release Date: April 25, 2025
Introduction
In episode #146 of Next Level Pros, host Chris Lee delves into the critical challenges plaguing the solar industry. Drawing from his extensive experience in building multi-billion dollar companies, Lee offers a candid analysis of why the solar sector is struggling and provides actionable strategies for business owners to recover and thrive. The episode is structured around Lee’s key insights, supported by real-world examples and his proprietary methodologies.
The State of the Solar Industry
Chris Lee opens the discussion by painting a grim picture of the current solar industry landscape:
“The last two years, the solar industry has been an absolute bloodbath.” (00:00)
He cites multiple companies, including Titan, Lumios, Solsius, ADT Solar, SunPower, and Sunova, which are either threatening bankruptcy or shutting down. The primary culprit, according to Lee, is the pervasive use of the "redline model" in running solar businesses.
Key Issues Identified:
- Redline Model Mismanagement: Solar companies are operating like sales-driven entities, where the pressures of sales targets overshadow sustainable business practices.
- Lack of Profitability: Persistent redline practices lead to minimal or no profits, pushing companies towards financial ruin.
- Declining Commitment: Many solar business owners lack the commitment needed to navigate these turbulent times, resulting in a high turnover of industry players.
Chris Lee’s Background and Authority
To establish credibility, Lee shares his personal journey:
“I’m one of a handful of companies that was actually able to exit in this space. And it was because of the way that we built, it wasn’t the status quo.” (01:56)
He highlights his achievements, including founding multiple nine-figure companies, executing two nine-figure exits, and participating in Harvard’s prestigious Owner’s Presence and Management Program.
Notable Accomplishments:
- Built an 1,100-person organization from his garage.
- Generated $233 million in annual revenue within five years.
- Invested over $1.3 million of personal income into business growth and development.
Understanding the Redline Model
Lee criticizes the redline model, emphasizing its detrimental impact on the solar industry:
“There’s no such thing as competition. Competition is, is only the pain that you are solving.” (14:00)
Problems with the Redline Model:
- Profit Margins: Traditionally, companies under the redline model struggle to achieve sustainable profit margins, often operating in the red.
- Employee Motivation: The model’s focus on high commissions leads to low sales volumes and decreased employee satisfaction.
- Customer Experience: Price-driven models fail to deliver consistent value to customers, leading to dissatisfaction and loss of trust.
Introducing the Eight Pillars for Growth
To counteract these issues, Lee introduces his "Eight Pillars for Growth," part of his proprietary "God Mode" strategy designed to build resilient and profitable organizations.
Pillar Highlights:
- Design:
- Five-Year Roadmap: Lee stresses the importance of having a comprehensive five-year plan.
- Execution Chart: Outlines the organizational structure from top to bottom, detailing roles and responsibilities across sales, management, operations, and finance.
“There’s no such thing as lazy people. Absolutely. There’s no such thing as lazy people. Only unclear people.” (08:22)
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Culture:
- Human Development: Focuses on recruiting, recognition, competition, and building a trustworthy environment.
- Vision and Mission: A clear vision attracts top talent and fosters a cohesive organizational culture.
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Offer:
- Value Proposition: Beyond pricing, it's about the value delivered to both customers and employees.
- Customer Experience Mapping: Differentiates a company from its competitors by enhancing the overall customer journey.
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Pricing:
- Company-Set Pricing: Advocates for companies to dictate pricing rather than letting sales reps determine it, ensuring better profitability and service quality.
Strategic Financial Structuring for Profitability
Lee outlines a financial model aimed at achieving a 25% net margin, a rarity in the solar industry.
Financial Breakdown:
- Direct Costs: 40% of total revenue should be allocated to direct costs, including cost of goods sold (COGS).
- Sales and Marketing: 20% of total revenue, split evenly between sales (10%) and marketing (10%).
- Net Margin Target: Aiming for 25% net margins by maintaining strict financial discipline and avoiding the pitfalls of the redline model.
“If you are not the sales and the installer, 10% of the total revenue stack should be what the installer is making from a net profit standpoint.” (22:31)
Employee Motivation and Compensation Models
Lee critiques traditional commission-based compensation, advocating for a holistic approach that aligns employee incentives with company goals.
Key Strategies:
- Transparent Compensation Structure: Moving away from high commissions to a model that supports team leads and setters within the 10% allocation for sales.
- Training and Development: Investing in employee growth to enhance performance and job satisfaction.
- Recruitment Philosophy: Prefers hiring C-level players with potential over A-level players who may demand more.
“Everybody has a number where it’s like I need to make that number. Okay, if a sales rep’s number is 20k a month and I use your model, they make 2,000 versus a redline model where they make 10,000, how many deals do you think that they will sell?” (31:36)
Leveraging Technology and AI Integration
Emphasizing the importance of modern tools, Lee introduces the use of AI to streamline operations and improve sales interactions.
Innovative Tools:
- AI-Driven Feedback: Utilizes devices like the Plout Note to record sales interactions, feeding data into AI models for real-time feedback and SOP development.
- Software Integration: Encourages the adoption of comprehensive software stacks and AI to enhance productivity and decision-making.
“This little guy that I’m wearing, the plot note, it’s absolutely game changing... 30 bucks a month, you’re going to be able to do that.” (33:06)
Building a Robust Community and Continuous Learning
Lee underscores the importance of being part of the right communities and continuous learning for sustained business growth.
Recommendations:
- Networking: Engage with high-performing individuals and mentors to accelerate personal and professional development.
- Investment in Education: Prioritize spending on workshops, masterminds, and training programs to stay ahead in the industry.
“The number one cost on your P and L is opportunity cost. And the way you fix this opportunity cost is to get in the right rooms with people that have run that map.” (37:57)
Conclusion and Call to Action
Chris Lee wraps up the episode by reiterating the necessity of abandoning outdated models and embracing his Eight Pillars for Growth. He encourages listeners to take actionable steps towards restructuring their businesses for profitability and sustainability.
“There is a whole lot more to why people are with you than pay... It's about culture.” (22:56)
Action Items for Listeners:
- Assess Current Models: Evaluate whether your business is operating under the redline model.
- Implement the Eight Pillars: Start integrating the Eight Pillars for Growth into your business strategy.
- Engage with Next Level Pros: Join the community or book a call with Lee for personalized guidance.
“If you find value from what you’re hearing, book a call. No high-pressure sales, it's about fit.” (33:39)
Key Takeaways:
- The solar industry is in crisis due to unsustainable business models.
- Adopting a strategic, profit-focused approach can reverse current trends.
- Building a strong company culture and leveraging technology are essential for growth.
- Continuous learning and community engagement significantly impact business success.
Chris Lee’s episode serves as a comprehensive guide for solar business owners seeking to navigate challenges and achieve long-term profitability through strategic planning and innovative practices.