Discussing a successful Solar Company
Mark Ambrose: Today, we have a special guest on the show. Randy Zeckman, founder, owner, and “Mischief Executive Officer” at Clean Solar in San Jose, California. Randy’s a serial entrepreneur and started Clean Solar from scratch in 2007.
Today, it’s the most highly rated solar installation company in the Bay Area of California. And one of just a few thousand certified B Corporations in the entire USA. They’re also the most highly rated solar installer in the world on Yelp and named one of the fastest-growing solar installers in the US by Inc 5,000 and one of the top three residential installers in the country by Solar Power World.
Randy is going to talk about what it takes to succeed in the solar business and create a team fully committed to serving both the customer and the community the best that it can. Listen to how Randy and his company connect and share their success with their local community. He also discusses his outlook on solar energy in California and its struggle with the public utility companies.
Randy Zechman: Thanks for having me.
Mark Ambrose: Yeah, we appreciate you coming on the show today. So, let’s dive right in. Tell us what you do now, who you do it for, where you do it and how your company helps them.
Randy Zechman: I’m the founder and CEO of Clean Solar. We’re mostly a residential solar installation company. We do some commercials, but 95% of our work is residential. We focused on kind of the higher-end market. We’re a highly rated company. We let some of the other big marketers in the space like Tesla and Sondra and those folks drive customers to solar, and then when they dig in and realize those companies struggle with customer service a little bit, they typically end up in our laps. I’m also the founder of a company called Clean Roofing as a sister company since roofing and solar kind of go together.
Mark Ambrose: Yeah. Because there’s roofing done on many solar jobs. Do you also get into the Tesla roofs, the actual PV roof tiles?
Randy Zechman: So, we were one of the first authorized dealers to do that. We’ve done more tear-offs in weatherproofing of those types of roofs than maybe any other roofer. And we’ve done the back end, the electrical work. But are we doing all the job ourselves? We’re just starting to get into that. So, we’ve done kind of both ends with that product. And I’ve worked with Tesla for a couple of years in that process.
Mark Ambrose: Were you working with others? Not just with Tesla, but other solar installers where you would do the electrical?
Randy Zechman: Yeah, exactly. So, with Tesla, they sell some of them themselves, and others they hire out to third parties. They mainly allow roofers to go and sell the product and install it too. And because roofers aren’t in the electrical trade, they reach out to an electrician to do the electrical part.
And we’ve been a good partner in that sense because we’re a solar company that understands both the roofing and the solar side of it. So, we’ve been a good partner for roofers, as opposed to just hiring an electrician without understanding the connection between them.
Mark Ambrose: Right, and AC versus DC, right. The different electric world as well. So that’s nice. That gets to referral business from a bunch of roofers, perhaps from those other than Tesla, right?
Randy Zechman: Yeah. It’s opened up other relationships. And anytime you’re out there doing business with folks, if you do a good job, the more folks you know with varied skills, the better.
Mark Ambrose: Yeah. That’s awesome. Let’s talk solar leases, power purchase agreements, and purchasing. Do you offer all three? Do you recommend one over the other for most of your clients? How does that work?
Randy Zechman: The short answer is 90% of our business is on a cash basis and about 10% is financed.
Solar leases and PPAs are essentially the same things. PPAs are just reverse-engineered leases. That’s all they really are. We hardly do any of those anymore because the math for just doing loans is better now than with PPAs. That wasn’t the case five or six years ago, however. And so, the interesting part though, is when I started the business 15 years ago, I started it under the auspices of maybe five or six years, you would get the new adopters to an industry. And those folks typically have money. And those folks are typically going to pay for things in cash, but then eventually, on that bell curve of customers, you get to the point where you start to get average consumers.
And that’s where businesses really take off is when you get to that level. Right? And so those customers typically don’t have a bunch of money. Then financing was going to be important. The whole reason to start the business was to do the financing piece because I thought that was going to be the driving force long-term. I was so sure that I contacted probably 20 different entities to start our own financing entity. From VC investors to angel investors, to community banks, to regular banks, I tried them all. We looked at system third-party financiers. I even looked at some folks that do high-interest dollar loans, short-term financing stuff. I talked to all these folks out there and was unsuccessful in getting our own platform to do it. I probably talked to every financing entity in the space over the past 15 years because I’ve been so interested.
And the odd thing about all of that is that I pride myself on being a pretty good business guy and entrepreneur in many industries. And the financing I believed to be the core of the business. I thought that would be where we would go, but I’ve never been able to figure it out. And we’ve never even been average at it. We’ve always been under the industry. When they were doing 50% financing, we were still at 10%. So, it’s been interesting for us. And the conclusion to that long story is that because we sit in the space we do as a brand, we’ve become so highly rated that the customers who just come to us aren’t the Average-Joe-customers. The customer does a little more research. Those customers seem to have a little more money typically and they end up paying cash for things.
Mark Ambrose: Gotcha. That’s interesting. Do you think part of it is in your location? You’re in the bay area, so it’s a higher-income area. Does that play a role?
Randy Zechman: Yeah, for sure. Statistically, financing solar is lower in the bay area than it is in other parts of California, even in Southern California. But we’ve still been under those averages for 15 years.
Mark Ambrose: Oh, that’s great. Well, you came at an issue targeting that type of client, you did great work, you got highly rated, and then your word-of-mouth referral business spread.
Randy Zechman: Yes, that’s it. Here’s the thing about entrepreneurism at the end of the day: we can lay the greatest plans, yet we’re still hostage to just what happens in the industry and have to adapt to it.
Mark Ambrose: Yeah, absolutely. It is survival of he or she who adapts, right? Not the fittest, really. He or she who adapts to the environment. So that’s interesting. A little side notes there; of all those finance companies, no one was interested in solar finance, which blows me away a little bit. There’s an asset that’s semi-retrievable. It’s a little difficult because it’s attached to the house, I guess. What was their great hesitancy? Was there a common denominator amongst a reluctance to get into that field?
Randy Zechman: It is low-risk profiles for the unknown, and financing entities don’t look at the logic. The logic was if you’re not going to pay a bill, you prioritize what you need to pay. The first bill you’re always going to pay is your mortgage, and the second is going to be your utility. Those are the two that you’re always going to pay. And so, the default rates on those are just going to be less than with cars, for instance.
And so, the dollar conversation always went to the car space because the dollar amounts are similar. They would always use numbers in that space and start looking at default rates and then look at the product’s retrievability, and with cars, it’s easier. I think what ended up happening was you saw companies like Tesla and Sunrun who ended up starting their own financing and they kind of proved to the market that the default rates are really low. Then other finances got in there because now it was a known entity and they had numbers they could put in. They could calculate knowing they’re at like 3.2% or whatever the default rate was.
Mark Ambrose: Right. I see, nobody wanted to be the pioneer. I think I heard it on Shark Tank when Damon says, “Pioneers get shot, and settlers come in later.” They want to be the settler, not the pioneer. They don’t want that risk. So, you’re in California, and up there in Northern California, they have more power outages than we have here in the South and more fires. So, has power outages made battery storage systems very popular in your area?
Randy Zechman: So, the seasonal business of batteries is certainly higher as you approach the fire season. After the first power outage or the first fire that happens somewhere near the area where you’re doing business, the phone’s ringing off the hook.
The day after we had all those fires so close to the Bay Area, we got eight times the number of calls we would normally. So, yes, for sure, and the downside to all that is there are lots of logistical issues with batteries with their availability, and because it’s a new industry. Because it’s a new industry, there’s lots of city and county jurisdictional naivete that causes delays and causes bad decisions to be made during that process. And it delays, delays, delays.
So, if the first fire breaks out and you want to solve that problem now, you’re six months away from solving that problem at the end of the day. Right? So now you’re into the next fire season. And in America, we don’t have a whole lot of tolerance for waiting six months for something we want.
Mark Ambrose: Right. So, the local jurisdictions and the permitting process are naive to battery storage, therefore delaying the approval process, the engineering process, and coming back to you asking you about drawings and all that.
Randy Zechman: Yes. And fairness, it’s new to everyone. So, we’re more likely to make a mistake on batteries than solar because we’ve been doing solar for 15 years. And the jurisdiction’s job is to safeguard. So that process is good overall, but the downside of the process is slower movement and conservatism that often leads to a kind of silly concern.
Mark Ambrose: Gotcha. And there are a lot of different kinds of products out there. You have a dry cell, you have a gel cell, and you have lithium. You mentioned manufacturing difficulties. Is that due to COVID, we have shut-downs and it’s difficult to get a product or other causes?
Randy Zechman: Yeah. That’s the main issue today. But if you look at it historically over the past couple of years, we went from wanting two batteries a month to needing a hundred batteries a month, and you multiply that by thousands of contractors. And so, you’ve got manufacturers that traditionally in the solar space have not done a very good job of understanding demand and based demand off the previous and not the projected future.
There are obvious reasons that that occurs. When you’ve got hockey stick growth in an industry—and batteries are certainly that—manufacturing, no matter the occasion, is going to struggle to keep up with it. You’re going to have delays. Then you pour gas on that fire being now there’s COVID. And now there are actual fires that are causing more demand than normal. Then you get more problems. And so, the realism for us is that tomorrow, I would buy 400 batteries and I can get 400 batteries total, and I can get about 20 a quarter. That’s the Delta we’re talking about right now.
Mark Ambrose: That’s very significant. And each year, the fires seem to be getting worse. So, each year that demand, like you say, has a hockey stick growth. It’s probably exponentially growing from one year over the next, just that demand.
Randy Zechman: And just regionally here, our best marketers are PG&E. PG&E runs ads on television that says, “We’re going to shut off your power.” They run public service advertisements. It’s so crazy that in the world we live in now, the one source that provides power, the monopoly, can say, “sorry, we’re going to turn off your power.” And so, from my perspective, I feel like I owe PG&E Christmas presents every year for all the business they send our way.
Mark Ambrose: Exactly. What do most energy storage customers have or want solar and conjunction with it, or do some simply charge with utility power and off-peak periods and then have that backup as an emergency?
Randy Zechman: Well, we always tie batteries to solar, so we’re not feeding the battery from the grid. We always have an alternative source of power for that battery or generator or whatever it might be.
Since we’re a solar company, it’s always solar with us. Generally, our sales mix is a third battery only, a third solar only, and the third combo together. And those splits of a third in a third are those battery customers, and those are the early adopters from solar that are now adding on batteries.
Mark Ambrose: Are there any systems you recommend over others, or should we leave that out of the conversation to allow growth and change?
Randy Zechman: Yeah, the battery market’s just complex. It’s way more complex than solar is. And so, there are lots of ways to do it from a simple perspective. You’ve got AC and DC and how you want to couple it. If you go with an AC-coupled system, as a Tesla system would be, then you can plug that into any existing solar system. The downside is you might be doing two inversions, so they’re a little less efficient. So, we’re talking a couple of percentage points, which typically doesn’t matter as much in a complex sale. DC is more efficient, but now you can only plug them into certain situations. If you’ve got a hundred customers calling you a day, you have to mine through their needs. This customer has something you can plug this battery into, and this customer is complaint with that battery—and it just becomes complex when you have so many other things you’re trying to do.
Mark Ambrose: Yeah. Plus, you have load calculations, right? It’s not like you’re just replacing their electric bill. Batteries are expensive, so what’s your essential mode? What can you not do without? And that differs for everybody. One might have medical equipment; another might run of business out of the house. Maybe, another has a shop out of the house. So you guys have to do both counts before you do the battery part. Is your battery size correct?
Randy Zechman: Yes, we do it as a battery sizing on the front end. That’s done by sales, which are generally non-technical people, right? So, they do a good job at it, not a great job. And then, after they sell it, they send out the more detailed folks to do the more detailed components of it.
Customers don’t realize what really is happening here. If I said, “Hey, Mark, go look in your service panel right now and look at a particular breaker and tell me every single thing that it powers,” you probably couldn’t tell me what the blender is attached to or even where it is.
Consumers just don’t know that. And I own a solar company and can barely tell you in my home. It would require a lot of effort. You would have to turn everything on, including your blender, and then start flipping switches and write down everything that goes off.
That’s a laborious process. Coupled on top of that, you must think about where the service panels are. What if your service panel with the breakers isn’t outside? If it’s in your pantry, kitchen, or closet, are you really going to break into there, pull out three or four breakers, move those through the house, tear out drywall? It can get really complicated. You might only want to back up the refrigerator and the internet, but you’re going to back up half the house because of where the panel is.
Mark Ambrose: Right, I see, so you’re creating sub-panels.
Randy Zechman: Yeah, and in all situations, you create a load center. You’re going to have a controlled load center that you’re going to have to connect to.
Mark Ambrose: Is there not a device that you can hook up to your service panel? I’m not an electrician, but I remember a device where you could put leads on your service panel, which would then measure where your loads were going.
Randy Zechman: Yes, they’re called CTs. The ring you put around wires, but it’s a more complicated way of doing it, really. It only tells you that there’s a load coming through, but is that load coming through because you’re running the microwave or because you’re watching the TV?
Mark Ambrose: Oh, it doesn’t yet know what appliances are being used.
Randy Zechman: It tells you the amount of load coming through that particular breaker.
Mark Ambrose: I see. That wouldn’t be the best source of information. Our audience is comprised of home service companies, with many solar companies among them. So, let’s ask how do you create recurring revenue in the solar business? Is that attainable at all? Do you do like monitoring service agreements or panel washing service agreements? Is there any way to create recurring revenue in the solar industry?
Randy Zechman: Yeah. The short answer is yes, and it’s through some of the things you mentioned; service agreements and panel washing are two common ones. The longer answer is that it’s difficult and it’s difficult for multiple reasons. Philosophically, what solar does is it comes in, and it says, “get this thing that only has value to you by lowering a monthly bill.”
So, since many customers pay for that upfront, they go, “okay, well, I’ve got a seven-year payback or a five-year payback” or whatever the payback is. Even if they finance it, they’re saving 10, 20, maybe a hundred dollars a month for someone who’s got a big bill. And then if you say, “oh, and we can do this service agreement on top of it,” that’s now a hundred bucks a month or 50 bucks a month that’s now taking away those savings. That makes that a process.
Mark Ambrose: Yes, that motivation is withdrawn. Almost diluted.
Randy Zechman: Yeah. But I would say that people want their panels cleaned and there is a return on investment for panel cleanings.
But the tough part about that business is when you’re selling a product that’s generally $20,000 and now you’re also trying to sell panel washing for $300, how much time are you going to spend on that portion of it? You have to split the businesses. One must operate as a really small business, and the other has to operate as a medium or large business. It makes it tough within a business itself.
Mark Ambrose: Yeah, I agree. Even in monitoring service trends, there are small dollar amounts. There are small margins versus a very high dollar amount with good margins on the sales and installation side. I bring it up because staying in contact with existing customers is something most companies fail to do on the marketing side.
And it’s a really bad business practice to ignore them. They’ve already come to know and trust your business enough to pull the trigger and do business with you, but we just leave them behind. Especially in the solar business. Out of all the home service companies, solar is the most “one and done.” You come in, install it, make sure everything’s working, and then leave.
And even the homeowner doesn’t really see it every day. They just see a lower bill. They’re not physically using like a car or an appliance. It’s a little dangerous in that respect. Do you do an email newsletter? Are there other things you do to stay connected to your existing clients?
Randy Zechman: We’ve done on and off through the years to reach out to customers at their true-up bill time. It’s a good practice and we’ve had good success. I don’t know about great success because there’s a little bit of faith in the type of marketing with those customers. It doesn’t often generate the lead the next day. We reach out to customers at their true-up bill time, and we know when that is. You reach out to them and if you’re monitoring their system, you know the system’s working.
We do production guarantees. We can say, “Hey, congratulations, you saved yourself this much money. Your solar system saved you this amount of money. Oh, by the way, your system’s even producing more than we anticipated.” That’s the whole point of the production guarantee. It’s a good feeling. It’s a good practice. You’ll see a percentage of people that come back and say, “Oh yeah, that’s right. My neighbor is now thinking about solar. Let me go talk to them.” You will see a little bit of that trickle in over the weeks and months afterward.
Mark Ambrose: Yeah. Very nice. I like that. I like going back on that annual true-up day and showing them what it’s done and how it’s performed. Plus, it’s a great opportunity to create a case study. You could get a testimonial, maybe a video testimonial, or even get into a detailed before-and-after.
In California, I believe it was last year, 2020 in January, correct me if I’m wrong. The state passed a law that all new home construction had to include solar PV on every house. So how has that affected your business? Do you go after home builders or has that trickled into the average homeowner? Has that helped your business at all?
Randy Zechman: So those markets from a home builder standpoint, you’ve got the big home builders like KB Homes, and they just build cookie-cutter lots. On the other extreme, you’ve also got the custom home builder that might build one to 10 houses a year. The KB Homes model is typically going to be satisfied by the big solar companies. Companies like Tesla and SunPower are going to go into that lane and fill that market.
For the local contractor like ourselves, you’re really going after the local home builder. You develop those relationships over the years. And we have knocked on those doors since. Interestingly, less than half of them even know that this law exists.
Mark Ambrose: Wow, the home builder?
Randy Zechman: Yeah, the home builder.
Mark Ambrose: Wow.
Randy Zechman: More find out about it every day because as they build something and the jurisdiction says, “Hey, that thing needs solar on it.” But very little knew about the law leading into the project. I’m sure the KB Homes did.
Mark Ambrose: Right, the big guys.
Randy Zechman: But the little ones did not because they have so many other things that they’re juggling. And so, the interesting part about it is when you’re dealing in that space, you need all the jurisdictions to be up to speed, but they’re not, and they don’t make it happen.
I have two houses that are being built about six houses away from me. I went and stuck a sign for Clean Solar right outside where they were building. I’m like, “these folks are going to need solar soon.” And, sure enough, the building is done. They have been done building for six months. They started building after this law was put into place, and they still have no solar on it.
Right next to it, they’re building another property. They’re getting ready to put Spanish tile on it. It doesn’t look like they’re going to have solar, either. The jurisdictions need to enforce it. And there’s no one really telling the jurisdictions to do that. The only people that can are the trade organizations. In California, the California Solar and Storage Association does that. And they’re battling so many other things with PG&E; how much time do they really have to deal with the hundreds of jurisdictions in California?
Their response is, “Hey, you go say something to the contractor. If you know what’s happening, tell the jurisdiction.” But it’s really a bad position to put a contractor in because you’re trying to be nice to them. You don’t want to call them out on stuff that they don’t want to be called out on.
Mark Ambrose: Right. Yeah. Well, the jurisdiction, if they’re not informing the builder, they don’t always find out. In your Spanish tile roof example, he builds the house and finds out afterward that he can’t even sell that house until he installs solar. Now he’s lost the opportunity to run your conduit, your junction boxes, internally. He put that roof on before he put the drywall on. So now he’s got a big repair to do at additional costs. Those costs are probably double or triple what they would have been.
Randy Zechman: Yeah. And so, because we’re still in the early days of this law, the boom has been muted for sure. We see a little more business. We’re doing a little more work on new construction. We talked about developing a whole division and managing it because it’s very different from doing a new home than doing a retrofit. That’s a very different process. And you get some volume to start a whole division.
Mark Ambrose: Right. And if it’s just a custom home builder, he may only have one to five homes he’s building. So that volume that speaks of the KB volume is being handled directly by the solar manufacturer.
You touched on utility companies. They’re in the business of selling electricity, generating, and selling electricity through the grid. They have monopolies, or they’ve had monopolies for however long, almost a couple of hundred years. And now here comes a third-party product, solar PV panels, that people can put on their houses. If you’re a utility company, you look at solar as a competing product and not friendly to your business.
They have not been friendly to solar. What’s the obstacle? And they have a lot of power because of the bill. If I’m a homeowner and have solar on my house, I am still connected to the grid and the utility company grid. And I’m still paying them a little monthly thing. I’ve seen that in some states, they try to raise that monthly minimum. Then you have net energy metering where my solar system produces too much electricity in the day, sends it to the grid, and I get a credit. Or maybe I don’t get credit. That’s a war they’re fighting. So, talk about the utility wars that are going on. How do you see the future of solar when you’ve got these giant utility companies and your way?
Randy Zechman: Yeah, this is a super complex issue. If I think about it from a big picture standpoint, solar is here to stay at this point. And so, from a big picture standpoint, there’s no doubt that next year we’ll have more solar than this year. In 10 years, we’ll have even more. We’re going to have to get to a certain level of renewable energy on the grid, or else we’ve got catastrophic issues with global warming. How fast that happens is certainly debatable, but it certainly seems like it is going to happen faster than we want to believe it’s going to happen.
The solar industry is in good shape long-term. The problem is the “herky-jerkiness” of it. Most contractors can’t survive for a year, and when laws and hurdles get put into place, they need to work themselves out. Sometimes that can result in a cliff-drop off of sales.
As the utilities have fought this, they’ve gotten smarter in their fight. Their original fight was always silly and extreme. It relied on politicians who really can only absorb little pieces of information on a lot of industries. In that space, they could very quickly get the fact that it doesn’t seem right, and they shoot down whatever the utilities are trying to do.
But the utilities have gotten smarter and they’re big companies. You usually don’t get to be billions of dollars of a company without being an intelligent company. And so, for all the reasons you mentioned, they see an existential threat.
Especially because solar is one of the most popular industries in the world. There’s not much bad to be said about it, and consumers really stand up for it. It’s the poster child for saving global warming. It’s not the only thing, but it’s the poster child for it. So, we have all of that going for us in the interim, as the utilities do little things that potentially cause many problems.
I’m happy to get into a few underhanded things that they’re doing. I’d also add that if we rewind 15 years ago, the local utility PG&E was very forward about solar. If you went into their headquarters, they had wind farm pictures and solar panel pictures. You’d have thought they were a renewable energy company. They kind of saw us as this little child and they’d give us a sucker and tell us to go away. But then the ball started rolling. The big entity right now that we’re trying to battle is what’s going to happen with net energy metering.
Most people don’t know what net energy metering is. It’s a good battle to fight if your utility is trying to cloud the environment. What that essentially means is net energy metering is what happens when the meter spins backward. What happens with those kilowatts and the dollars associated with that kilowatt.
Four or five years ago, we had retail net metering. That meant that whenever the meter spun backward, the utility would have to pay the consumer for that, for the same amount that if the meter was spinning forward. We now have net energy metering 2.0, where there’s about a 10% tax on that meter. They’ve put a couple of cent tax on it so that whether it spins forward or backward, it gets paid.
The math still makes sense with that. But what most people don’t realize is when that battle was fought four or five years ago, the CPUC was the decision-maker in all this. They are appointed officials, not elected officials. So, they’re less consumer-driven and you can’t lobby them like you can politicians. Those folks make all these decisions and they go out to the industry and say, “Hey, tell us what you think net energy metering 2.0 should be like,” just like they’re doing now for an energy metering 3.0. So, what happened then was the utilities told them there should be an 80% tax.
It was so egregious that the CPUC came back and said, “we’re even going to go less than what the solar industry thinks the tax should be because you’re not putting in a serious offer for what an energy meter in 2.0 should be.” So, they really slapped their hands hard. And then they said to the solar industry, “you guys need to figure out batteries because net energy metering will have to change.”
And the solution is really batteries. If you’re a believer in karma, you’d say fires happening are helping batteries get adopted. We need to have batteries on the grid. It helps get us away from a centralized utility that doesn’t have consumers’ best interest in heart, and they repeatedly prove that.
The trick is to make sure that when net energy metering 3.0 comes out that it’s not hugely penal. If it goes to a 50% tax, if it’s 15 cents of your 30 cents that you’re paying for a kilowatt-hour here in the Bay Area, then solar makes no sense unless you get batteries at that point.
And ow your cost to do it is just doubled. And the sales will literally drop off a cliff face. We’ll go from pulling 55 people to employing five or 10 if that happens. But if it’s done reasonably and it’s maybe another 10% tax, something that goes from 2 cents to 4 cents or 5 cents or something like that—and by the way, I’m oversimplifying all this because there are lots of levers attached to net metering—then the business will continue growing and consumers can continually buy things. It will make sense for everyone to continue to buy solar. And it’s ultimately good for our planet and for every citizen living on Earth.
Mark Ambrose: Yeah, exactly. As you said earlier, the savings typically for a homeowner is 50 to a couple of hundred bucks a month, depending on the system’s size and consumption. So, if the utility can cut that drastically in half, the $50 a month savings is $25. The consumer thinks, “eh, do I really want to bother with all that stuff going on and commit myself for years on something that saves me $25 a month?”
It’s a war where they see they can drastically impact how many people convert over. On the other flip side, there’s karma. Because of their heavy-handedness and underhandedness, I see a future where they’re driving more and more people to a solar battery storage solution simply to get away from them. Forget the fires and the brownouts and the powerhouses, and they will just want to get away from the utility company.
You could choose to disconnect your meter at that point if you are sized properly. Do you see that coming? Battery systems and people actually disconnecting from the grid?
Randy Zechman: Will people disconnect? Sure. But that’s not the future of what happens. We need to have a grid and the grid serves as the ultimate backup battery. The goal here is not to cut everyone off from the grid. And most of the batteries you install now are not off-grid systems, they’re on-grid systems. That’s where all the movement is. And so, the real take here is that we should still have a utility. They still need to exist, but let’s have them manage the lines and the wires and minimize the fires. Let’s have them minimize all the stuff that happens and have them control all of that. And then let’s get our power from renewable energy and store it in batteries or other tools for storing energy. Let’s do that because that’s a smarter way to even out how energy is used.
There’s a thing called a duck curve that most people don’t know about. If you picture a duck and the tail of a duck is off the ground, the belly kind of goes down towards the ground and then the head comes up. Before solar became popular, this was essentially what the energy usage in the country looked like. The need for energy looked like was a bell curve. In the morning, the energy was low. And then throughout the day, it would go up, and then its peak of the day was three o’clock, four o’clock in the afternoon, air conditioning was on, and then at the end of the day, it would go back down.
When solar started to become popular, it started to look like the tail of a duck. In the middle of the day, you had so much solar that the need for brown power was so far down that you didn’t need as much brown power in the middle of the day, but you needed it at the end of the day. So, the head of the duck coming up at 4:00 or 5:00 to 6:00 o’clock in the afternoon or evening, that’s when the peak of energy was now needed.
Mark Ambrose: I see. It shifted.
Randy Zechman: The reason the duck curve is an analogy is what happens when the belly of the duck hits the ground, which means that you’ve got more solar power on the grid than you need. The problem is that energy gets buried. It gets unused. And what utilities would have to do is to turn off some of the solar farms that they’re literally paying money for. They don’t want that to occur, so the solution is to take power and dump it into a battery that then gets discharged. It raises the belly of the duck, lowers the head of the duck. And now you’ve got the straight-line usage. So as a society, straight-line energy usage, whether it’s 3:00 in the morning or 3:00 in the afternoon, is ideal and batteries help you get to that point.
Mark Ambrose: Interesting. So solar and batteries are actually friendly to the utility company as well. Instead of having these have massive power requirements on the peak day, they are drastically reduced with the combination of solar and batteries. That’s awesome. I can see the straight-line is the friendly option for everybody.
Randy Zechman: This is the ironic part of it all. Batteries are good, so the utility companies really can’t say bad things about batteries. Cause what it stops them from doing is having to build another peak power plant. And yet, they fear that the more that could store in the battery, the less you need power at the moment.
And so, PG&E acts a little bit like the drug dealer, right? They want you to watch your power now. And all they really care about is making the margin from what power they’re buying and selling it to the consumer. That’s all they really care about, and batteries do take away from that a bit in overall power.
Mark Ambrose: Well, so it’s fair in the NEM, net energy metering world for the utility to discount the power that they’re receiving from overproduction, from a residential solar system, in order to pay for the grid and to start burying some of the power lines that are causing fires—in wooded areas, there shouldn’t be exposed lines. There should be buried lines, right? They’ve been saying that for years. And suppose I go back in my head. In that case, I don’t know, maybe 10 years or so ago, I’ve been in Southern California for 30 something years—Before solar was really big and popular, we had utility power outages kind of regularly every summer.
And that has seemed to have decreased at least here in the South except for the fires. I don’t remember even having a power outage unrelated to a fire in the last five-plus years here in SoCal Edison territory. Of course, up north, it’s different. You got forests, and you got fires, you got utility fires. So cutting off power could be a preventative measure not to cause fires on hot or windy days, trees falling down, breaking lines, and things like that.
I was on your site, Randy, and I saw that you are a certified B Corporation. Can you explain what that means and who issued that certification? I found that very interesting.
Randy Zechman: Yeah, I would say this is one of the things we’re most proud of, and hardly anybody knows what a B Corp is. There are only a couple thousand of them in the world. I think there are about 3000 of them now. And B Corp is a literal designation, like a C Corp or an escort. And the certification is given by B Lab. That’s a separate entity that certifies companies can be a B Corporation. There are four pillars to being a B corporation.
We’ve been a B Corp now for about four or five years. And the four pillars for that are you must do exceedingly well in four categories. One of them is sustainability practices, which is easy for a solar entity considering the space we’re in. The second one is philanthropic giving.
We donate $250 for every job that we do to the charity of the customer’s choice. So, we kind of naturally does that. The third one is treating your employees well, and that is judged in multiple ways. Some of which is with benefits and some of which is with pay. So, you’d have to be in the upper 30 or 40 percentiles in pay and you have to give a certain amount of benefits. You must be in the upper echelon of your industry as it pertains to employees and employee treatment and employee benefits.
And then the fourth one is community involvement. What do you do within the industry? Are you just a self-contained entity that’s just making money and maybe taking care of your customers, maybe not? Or are you involved in the community? I’m a Rotarian. That’s the largest service entity in the world, the rotary is. And so, it’s like projects like that, where we help build a park or a playground for handicapped children in our neighborhood. And it’s the largest one west of the Mississippi.
Our rotary built it and Clean Solar helped to do some things involved with that. That’s just an example of community involvement. To be a B Corp, you have to make a certain score on their four things. There’s literally a score. It’s a lot of effort to fill out the application and to apply.
One in every 14 companies that apply gets in and most companies have to change some practices. Like, they get a score back and they might score high in three of the four, but maybe they don’t give enough philanthropically. So now they must donate more money. We were fortunate. We didn’t have to change any practices and we were able to become a B Corp.
And I’ve really found—I’ve told this story, a lot of entrepreneur friends of mine—I’ve found the first response is, “well, when do you get out of it?” That’s terrible, but in fairness, this is all entrepreneurs think, “how will it help you?”
Mark Ambrose: Yeah, we’re running a business.
Randy Zechman: And so, when we were thinking about that, my thought was, “well, we can market this.”
Most companies don’t talk to consumers and say, “we don’t give anything to anybody and we’re not involved in a community.” Nobody does that. And so, if you asked a company, do you do all these things? Of course, they’re going to say yes. So, it’s really hard for a consumer to know.
B Corp is a third party that kind of verifies it, that it’s a business that’s doing business the way it should. So, my thought was, first off; we’re already doing these things, so why not have a third party that says it?
But the thing I didn’t really realize was how it moved our employees. As an entrepreneur, you’re always talking to employees and trying to get them excited about different things that you think are important or think might be important to them, and some land and some don’t. And I was surprised how well this landed with folks.
I mean, I would go on sales calls with sales reps, and you could just hear their voice the emotional attachment to working for a place that was doing things the right way. W are involved in such a world now where it feels like in order to become a really big company, you can’t do these things. It kind of feels that way. So, when companies do things this way, it’s unique. The big companies of the world, if you think about them, they’re normally not helpful in all these areas. It’s nice, and employees gravitate to that thought process.
Especially if you do any research on it, if you Google and you spend five minutes on what this means, it’s pretty moving for consumers and the employees. And at the end of the day, all these things cost money. If I’m going to donate money to charity, that’s money I can’t invest in other things. And so, consumers have to be willing to pay a couple of dollars more for companies that are willing to do all this stuff.
And we, fortunately, live in an area where we have consumers that not only respect and appreciate that, but they have extra dollars to be able to do it. It’s a nice circular relationship in that one.
Mark Ambrose: Yeah. Well, that’s fantastic. My hat’s off to you and congratulations for having that business practice in the first place and then going through the certification. I’ll have to look into that myself.
Yeah. I, 100% degree, you know Simon Sinek, I believe his name is, always asks, “What’s your why?” And I have found that with my employees, they want to know why. Not just the big picture stuff, but why am I doing this one particular task? What’s the “why” behind everything?
I’m an older guy. I didn’t grow up like that. In all the companies I worked for, there was just “do,” there was no “why.” But we’re in a different world. Now, the world’s gotten both bigger and smaller. The new generations definitely care. Like you say, climate change and other factors have affected the upcoming generations of younger people. It’s no longer about profits and shareholder value for the youth of the world.
For them, it’s what are you doing for your community? What are you doing for the planet as a whole? Yes, you could market that, and you should market that. That’s part of branding and telling your story. And this is what you’re about. This is your philosophy as a company. That’s a beautiful story. And my hats off to you for doing.
So Randy, you, know my team searches for guests by looking for many different companies, but among solar and plumbing companies, we’re looking for companies with great reviews out there. We don’t want to bring on guests who run marginal companies, maybe not in the best interest of their community and such.
So we found that you had just an overwhelming number. I think you had 300 plus reviews on Yelp with a lower number on Google. And for most companies, it’s usually the opposite way around. So, tell me, what do you do on Yelp? What’s your secret sauce for getting people to go onto Yelp and give you reviews?
Randy Zechman: The answer is not very sexy. I do find that in general, in good business, the things that happen are just kind of day in and day out, following a process and doing the things you need to do. And it’s the wash, rinse, repeat, and if you’re doing it well and having to consumer front of the mind, this is what a good business is.
And it’s not very sexy, and the things that get reported on our revolutionary new products and these crazy new ideas, and let’s have this new way of managing people, like things like Zappos does things like that. Those are all the things that make flashy headlines, but the majority of us out there are just trying to do a good job and trying to take care of a customer.
So, the answer to that question is that the first thing you have to do is do a good job and care for customers. You’re not going to get any good reviews unless you do that. And where the contractors generally fall short is doing the last 5% of the work. This is where contractors fall flat on the face.
And this was something that when I started a solar company, 15 years ago, that we were focused on. We were going to finish the work. We’re going to have stuff that dragged on, and contractors in all trades struggle with that today still. So, complete the work. And then, when you complete the work, you can go back to a customer and say, “Hey, did we do a good job?” Just ask.
It really just does a good job and asks. And if someone says you did a good job, then you say, “Hey, we’re a small business. It helps if you go tell the rest of the world that.” And it’s really as simple as that, do a good job and ask.
Mark Ambrose: I like that. That’s part of your being a certified B Corp too, your philosophy there. I 100% agree. You could do a great job if you’re a plumber, electrician, a roofer, whatever you service, but everything at the end of the day is the quality of the work, the speed of the work, and the cleanliness of the work.
I’ve seen many jobs that were done great, even contractors coming into my own home. But then the very last thing was drilled into the drywall in my garage, and they thought it was acceptable to leave a little bit of dust on the floor. It’s a tiny little thing. And yet, it makes a giant impact on the consumer’s viewpoint of just how great that job was done. Or like you’re saying, they get 95% of the way. We’re almost done, so now I’m going to jump over to this other project and work on that for a little while before I come back and finish you up. That’s a bad practice also. So, you’re right. Do great work, and when you’re done, ask how their experience was. Do you guys use an automated reputation management system at all, or you’re just going out through emails?
Randy Zechman: It’s manual. And so, we do that because it’s a personal relationship, right? And so, we’re going to reach out to them personally, get personal feedback from them. We always make our sales rep go back at the end of the job and talk to the customer at the end. So, they do a final walkthrough essentially. It used to be in a living room, but during COVID, it’s been mostly virtual. But if the salesperson knows they will have to go back in the backend, they’re less likely to make some promises that aren’t kept along the way. Not if they have to go back and look the consumer in the eye. And so, it helps with that process as well.
So yeah, it’s the personal relationship and that 5% that I refer to. It encompasses a bunch of stuff. It is the picking up of the wire shavings, right? It is that it’s the, “Oh shoot, we stepped on the rosebush and broke it. Sorry, Mr. Homeowner, we broke your rosebush. Can I plant another one? Can I do something else?”
And all that stuff takes time and energy. And we all have these pressures of, I got to get to the next job, or I’ve got to earn the next dollar. It’s, in general, saying that pressure exists for everyone. It exists for Clean Solar like it does for everyone, but if we can just pause for a second and finish the 5%, which is sometimes is going back to the house and doing something extra, and sometimes it’s just sweeping up before.
Mark Ambrose: Right. But if it’s your “why,” if it’s your company philosophy that we’re going all out to satisfy this client and do our job perfectly, it’s part of your employee’s mindset to make sure all the I’s are dotted and the T’s are crossed.
For some of our solar guys out there, I saw you have corporate partnership agreements with some large employers, and then you offer their employees that discount on solar. And I thought that was brilliant. So, did you go yourself and reach out to large local employers who are in your area? How did you formulate those relationships?
Randy Zechman: We did it a couple of ways and it’s been difficult during COVID. We did some reaching out to companies and we’d just take time to network with them. I mentioned I’m a Rotarian, right? So just our normal course of daily walking the Earth and I would go in and offer that.
And the thought process is, you know, let us talk to 50 employees and 10, and then 9, and then that makes sense. So, all the way around. That’s the general thought process. Some of the bigger companies are all tied to entities that are doing that. And then they interview solar companies that can then be that company to go into.
It’s like the Apples and Googles of the world. I don’t know Tim Cook or Surge or Larry, I don’t know that to go knock on doors, but these big companies now have these entities that do this, and then they bring in solar companies or other things for their employees. They see it as an employee benefit. So, the employee doesn’t have to go somewhere else, not on their own time. They can do it at work time.
Mark Ambrose: So local companies could reach out to large employers in their area, ask for the human resources department may be, and see if they’re actively seeking employee benefit programs.
Randy Zechman: Yeah. So, for the big companies, there are third-party entities.
So, if you call one 1-800-Google, Google would push you to this third-party entity. If you call a million-dollar company or a hundred-million-dollar company, they don’t have those. And those are the ones that you would then formulate the relationship with. There’s more of those hundred-million-dollar companies and billion-dollar companies.
Mark Ambrose: Yeah. Way more. And there were more apt to be local and in your neighborhood. What would you say to somebody who was just starting a solar installation company?
Randy Zechman: I think I’d say that in general, this is a tough trade because it encompasses two different actual trades, electrical and roofing, just by that nature. It’s doubly difficult. It’s also difficult because it’s still a newer trade, right? Carpentry and plumbing have been around for a hundred plus years, right? This has been around for essentially 15, while the changes jurisdictionally in rules and regulations happen over time. Like the fire code, like what can happen on a roof and walkways, you can have or must have on roofs and things like that.
We gave an example of something to change, kind of midstream here in California. Those things have died down a little bit. There’s still a movement to it. And now that there are batteries, we’re going through that all over with batteries, right? Like when our bollards are needed in a garage, so someone doesn’t run their car into a battery?
So, just using that as one example, that’s kind of front of mind now cause jurisdictions to have different feelings on that particular policy. So, because there’s all of that, it makes it an exceptionally difficult trade. So, if you’re going to get into it, you have to be super organized and you have to be super process-oriented. You’ve got to be able to understand all the steps along the way.
Mark Ambrose: Right process. And it sounds like you’re going to have to be highly adaptive and fit that into your processes. And now change your SOPs accordingly, which might happen kind of often, it sounds like.
Randy Zechman: Yeah, and one change can have a domino effect on the whole process down the road. Using the bollard example, if I have to do that now, I now have to come back to the front. And my sales team now must figure out where a bollard is going to go, how a car can fit in the garage, and all the steps along the way that have to be kind of check. And you must be willing to change. You must be the type of contractor that likes change. That has to be what gets your juices going.
That change is happening, and you can be creative and innovative with what happens. I liked it. I’ve mentioned I’ve got a roofing company as well, and roofing is pretty status quo. And frankly, from a business perspective, it’s a better business. It’s easier to make money in that space.
Mark Ambrose: It’s more predictive.
Randy Zechman: Because everything’s more predictable, but it doesn’t get the juices going because nothing really changes. The change is minimal in that space, where here something changes, and you go, “aha, we can be better at that than the competitor, because now we’re going to do this, that, and the other to make sure that this isn’t a hiccup along the way.”
I think it becomes part of the culture. If you’re a process-driven company, people are always trying to get out all the problems along the way. The employees will go, “hi, new problem. We need to fix this somewhere along the way.” And everyone’s kind of minded in that way not to accept little bumps in the road. And they see the little bumps in the road and help change the whole process along the way, instead of just kind of coming in and bang the same nail every single day.
Mark Ambrose: Right. And it sounds like you encourage that amongst your employees, right? So, we encourage you to find the bumps along with our SOPs and we’ll reward you for making them more efficient.
Randy Zechman: I am involved in all the orientations we do with every employee who comes in. And one of the things I always talk about is empowerment and how it’s lacking in the workplace today. The general human that comes into the workplace is looking to be led down a path. And we encourage people to say, “we’ll train you to do something. And then don’t be afraid to make some decisions, be empowered, communicate, let us know where the problems are. And if you make a mistake, you’re never going to get yelled at. If you make the same mistake three times, then maybe. But don’t be afraid to make a mistake.” And that’s where empowerment comes in. If people feel like they’re going to move forward and it’s okay to make that mistake, they’ll just generally do a better job and they’ll be more rewarding.
Mark Ambrose: Yeah, absolutely. You’re valuing their input. They’re the ones in that job every single day. And they have an idea. “Hey, Randy, I think if we did this and this, that would shorten the time.” And so now they feel like more of a team player, as part of the company, instead of following a “here’s my way and don’t you dare vary from it” policy.
Are there any resources or books you recommend to our listeners out there that might help them along their path?
Randy Zechman: For resources, I would say anyone in the solar industry needs to be involved in the trade organization. So, in California, it’s, Kelsa; I’ve mentioned that before. So kelso.org, I think it is. Look up California. Solar and Storage and you’ll find them. The reason that’s important in the solar space is that we have all these battles going on, there’s an entity that needs to fight that and that entity needs membership and needs dollars to be able to hire folks to go out there and have these battles, right?
Because PG&E and other utilities are hugely funded, so, we’re a member and I happen to run the Bay Area chapter of it. That’s been very important, not only for the industry but for us as well. It keeps me in the know a bit about what’s going on in the industry.
And just as far as the book, the Bill Gates book that came out about climate change, I read and we now actually offer it to all of our customers at their final walkthrough. It’s How to Avoid a Climate Disaster by Bill Gates. We asked customers if they’d like that book and we’ll buy them the book. It’s really a layman’s look at what can be done differently and how we should think about things.
Mark Ambrose: The whole energy and pollution thing, and of course, global warming, those major topics also opened the door for the naysayers to make it a complex argument.
I wish that instead of using that argument, especially in the energy world, we would have just said, “well, we have 800,000 respiratory diseases per year in America and X number of cancer cases per year, asthma, and all these things that we can directly contribute to CO2 gases.” Part of me likes that simpler argument, and nobody can argue with that.
If you stand behind the gas-powered automobile in 1870, would you say that this was an intelligent thing to mass produce while you’re breathing in those fumes? So, we should go solar just for health, and that’ll ripple out to the health of the planet and so many other things that affect the health of the planet.
Any question you wish I had asked you at all?
Randy Zechman: One of the things that’s kind of been on my mind lately that might be important here is about the battle between solar and utilities. Utilities are getting better about that battle, and one thing that is starting to happen in the space now is they’re starting to use the unions to be the mouthpiece for utilities.
And they’re doing that because utilities don’t have much of a mouthpiece because no one likes PG&E right now. There’s not much to like, and politicians don’t like them because they’re burning down the state. Utilities are generally not liked. Even if they do a perfect job, people generally don’t like them in their world.
So, it makes it tough for them to speak out. And so, they’re using unions and unions have a lot of power, which is good, but they have the relationship with PG&E, which gives them a lot of business, right? So, there’s a significant monetary connection there. I’m not necessarily for or against unions.
I think there’s a good place for unions. And I think part of the argument being made now in the solar industry is that the jobs in solar that are being created are not high dollar jobs; they’re the lower dollar jobs. So, creating jobs is a good thing, but creating a person that makes $50 an hour is better at the end of the day.
So, the solar industry needs to do a better job at that overall. And the union is trying to push that and the solar needs to keep up with that a little bit. And there’s this push and pull here with the strength that unions have. And many people believe in the concept of unions. And so, the fight that they’re having here is politicians will then site, “Hey, these entities need to pay more for their employees,” and we absolutely do.
And here the issue is you’re dealing with consumers and there’s a lot of people in the space. There are hundreds of solar installers. So that push and pull of how much we do actually charge is really an issue with what the customer is willing to pay. And at the same time, if consumers are willing to pay more, employers can pay more.
We talked about the B Corp thing before. Consumers are willing to do that for the companies that do that. Clean Solar does pay more for our labor. Hence the reason we’re a B Corp, but the industry can do a better job overall with not always trying to squeeze more out of that dollar from the employee and do a better job like unions do to get more wages.
And I don’t think things like prevailing wage makes any sense in residential work, but getting a little more wage for those folks is huge because at the end of the day, the installer, the blue-collar worker is the hardest working person out there, right there on roofs. It’s 20 degrees hotter on a roof than it is underground.
These folks should be higher paid, just like schoolteachers. We don’t value those businesses or those trades quite enough. So, I hope that as an industry, I hope we think about that as we’re hiring and not be afraid to pay that extra dollar or $2 or whatever it is so that guy who’s going to crawl under the house doesn’t have to go to McDonald’s for dinner. He can go to Chili instead.
Mark Ambrose: I like that. Share the wealth with your employees. I didn’t know that. So, the workers’ unions for the utility companies are being used as a lobbying force to the public.
Randy Zechman: Yeah. So, there was a bill; it was AB 1139. You can look it up. That was proposed by the second most powerful democratic congressperson down in San Diego. And she was trying to push this through theirs. It was basically short-circuiting, net energy metering 3.0. It was complex. I’m simplifying a bit, but there was a powerful democratic Senator behind it, pushing it. And so, because she’s tight with the unions, which again, that’s okay. There’s nothing the matter with that, but she didn’t understand the full circle of it, of what she was really doing. If that bill had passed, sales of solar would have gone down 90%.
Mark Ambrose: Wow. So, her argument was union workers for utility companies were better-paying jobs than solar installers.
Randy Zechman: It was multiple folds. One of them has some truth to it in the wages paid by the union. So, all this work should be done by unions. Okay. The problem is realistic, there’s not enough of that and there’s not going to be enough in a decade. And how fast are we really fighting global warming? Can we really wait? So, there’s a little bit of flawed logic, but there is a little bit of truth. The other one is, is entirely flawed logic and it’s the wrong way of looking at statistics. And one of the other arguments in this particular case was saying that only the rich are buying solar.
There’s this narrative out there that only the rich are buying solar. And it’s just not the case. If you look at the statistics, it is early adopters, certainly more rich people doing it. It’s now at a point where there’s more average income or less or average income buying solar than there is wealth. And so, there’s, you can find all these statistics out there, but it’s kind of looking at that the wrong way.
And so, it goes in line with democratic thinking, right? The democratic policy is thinking of taking care of people, paying them well, and taking care of the underprivileged. It’s a false narrative and the outcome is really devastating and not what you really want to happen.
So, at the end of the day, if AB 1139 had gotten passed, it would’ve gotten repealed somewhere along the way. Companies like Clean Solar just have to cross their fingers, that we can make it to that point.
Mark Ambrose: So, you got this dangerous sort of misinformed or not fully informed people out there. The road to Hell is pathed in good intentions.
Good intentions initially, but lack of data, knowledge, and experience would have had devastating effects to not only the field, but again, pollution, the state, global warming, everything trickled throughout it all. Wow. Interesting. So be aware of state policies and bills and dive deep before you vote, basically for sure, which is all our responsibility anyway. Good stuff. So, tell me, Randy, where can our listeners connect with you online if they would like to?
Randy Zechman: We’re Clean Solar, so it’s cleansolar.com as a website. We have LinkedIn pages and Facebook pages and all that stuff. You can just look up Clean Solar. The roofing entity is called Clean Roofing, so that’s cleanroofing.com also. And yeah, we’d love to connect with the community and appreciate the time we’ve had to chat here today, Mark.
Mark Ambrose: Yeah, same here. And for those who didn’t catch it, Randy’s company is up in San Jose and services the whole Bay Area. Good stuff. Well, thanks for coming on the show, Randy. I really appreciate it—great information for our audience. So, thank you there.
Randy Zechman: Thank you, sir.