This is part of a series of articles about “lessons learned” as a CFO/COO of a national solar developer.
The “lessons learned” are built into the Industry Specific Solar ERP software my company recently launched. www.devholderp.com.
Not going all in on Land Acquisition? – The most valuable asset a Solar developer has is LAND! Most solar developers believe their primary role is to develop the land…it’s not, nothing happens without the land.
When I first started in the Large-Scale Solar business, as a CFO, I was confused as to where the business triggers were and what we should be focused on and measuring.
The first two solar companies I worked at were primarily in the Residential and C&I Solar business. It was pretty easy to figure out that to prosper, all we had to do was get more customers.
So we set up a team and a process that would make that happen! A simple straightforward Business Model.
My next venture was at a Large-Scale Solar company using the Develop and Sell Business Model. The company was small and the model was to find land with the largest potential development fees, and Sell the Developed Land in portfolios to the highest bidder.
Cash flow was always a problem so we did everything we could to minimize cost or push expenses to the last second.
It was less a Business Model to flourish on and more an exercise in survival tactics!
Of course this was not an environment where we could invest a lot in marketing or land acquisition expenses. We ended up focusing on geographic areas we knew and were comfortable with. Again, not exactly a high growth business model.
Fortunately, we ended up selling the company to a large Private Equity fund. Their intent was to use us as a “platform” and move to the Develop & Hold model where they could deploy long term capital…unfortunately, we were caught “flat footed”!
We now had all the capital we needed, but we did not have the Land or the Land Acquisition processes to really scale up.
As we all know, true “Greenfield” sites are a lot more profitable than “Acquiring” a fully developed site ready for construction.
We spent the next couple of years focused on Acquisitions of already developed projects to speed up the process of deploying capital.
Acquisitions can be profitable, but they are usually at the low end of the hurdle rates, expensive and have a lot of “Strings attached”.
We were making a lot of Develop and Sell companies very rich!
As I continue on my journey of promoting my software with the intent of supporting the Large-Scale Solar industry, I have the opportunity to learn from the best of the best.
Every one of the successful companies spends their time and money on securing land…nothing happens without the Land.
Secure the Land and then call us, the best practices designed into our Develop & Hold Enterprise System will support you the rest of the way.
And one last thought: The Cornerstone of the Large-Scale Solar business is LAND.
Sincerely
Jeff