Solar Panel Business Model

Startup Expenses 

The startup expenses of the new solar panel business will include business incorporation fees, liability insurance, permits, licenses, plant facility construction cost, manufacturing equipment purchase, office equipment purchase, software application purchase, official website creation, and recruitment and selection costs. The new solar panel business will require roughly one million dollars to start. A major proportion of this amount will be used for capital expenditures. The business will need to be incorporated to operate as a public entity and, as a result, will spend $750 for government filing fees. It will require $3000 to cater for liability insurance, manufacturing permits, and operational licenses. The enterprise will also need to purchase land and construct buildings for manufacturing the solar panels and for the administrative staff. It is projected that the business will spend $550,000 for such activities. The new entity will need to purchase equipment and machinery for manufacturing the solar panels. The equipment will include repair tools for constant repair and maintenance of the machinery. The machinery and equipment will cost the business $350,000. The new business will need to set up an office for the daily running of the enterprise. The administrative staff will need equipment such as computers, printers, servers, projectors, furniture, filing cabinets, and telephones to perform their duties. It is projected that the business will spend $40,000 on such items. The solar panel business will require software applications such as Microsoft 365, QuickBooks, customer relationship management software, and marketing software to run its daily operations. It is projected that the initial purchase will cost the entity $4000. The solar panel business will need to have its own website to ensure customers can easily contact the enterprise. It will subcontract the website development task to a professional and, in this case, expects to spend $400 for the website development. The business will need to find new employees, including production and administrative staff. In this scenario, it will use job boards such as Indeed, Monster, and Glassdoor to attract qualified individuals. The owners of the enterprise will interview various candidates and select those who meet the requirements and fit the entity's culture. The entity expects to spend $10,000 on the recruitment and selection processes. The solar panel business cannot begin its operations without meeting these startup costs. 

Operating Expenses 

After meeting the startup costs, the business will incur operating expenses in the process of running. The projected operating costs from the first year to the third year include, research and development costs, sales and marketing, salaries, insurance, depreciation, and utilities. 

Research and development expenses for the solar panels are expected to be a major component of the entity's operating costs. The entity will need to carry out extensive research and development to develop solar panels that are highly efficient and durable. The entity will conduct research and development processes such as design, creation of prototypes, and testing (Martin & Hanington, 2012). In the first year, the entity is expected to spend $750,000 on designing and developing solar panels. These costs are expected to increase in the second and third years as the entity introduces a wider range of solar panel products. The business will need to advertise the solar panels to generate sales. The costs of advertising the enterprise’s products will include print advertising costs, commissions, and sales promotion costs such as discounts, rebates, and free products. The sales and marketing costs will total $100,000 in the first year. These costs are expected to increase significantly in the second and third years when the entity markets its products in new areas. The expansion of the entity’s marketing efforts is needed to generate greater sales which will lead to more profits. The administrative staff will need to be paid salaries while they work for the entity. The entity will begin its operations with ten administrative employees in the first year, and their total salaries will amount to $500,000. In this respect, each administrative employee is expected to earn around $50,000 per year. In the second and third years, the business will hire more employees given the projected increase in the number of customers and expansion of operations. Correspondingly, the salary costs are expected to increase. The solar panel business will need to insure its buildings and manufacturing facility to cover loss or damage caused by floods, earthquakes, hurricanes, tornados, and fire. It expects to pay premiums amounting to $100,000 in the first year. The premiums are expected to rise due to the anticipated increase in the value of the assets caused by the addition of manufacturing equipment and machinery. The business will need to account for the depreciation of its buildings, production equipment, and machinery. The depreciation cost is expected to increase in the second and third years due to the addition of equipment and machinery. The business will need to pay for utilities including electricity, gas, water, and telephone to ensure the smooth running of the firm's operations. The manufacturing capacity is projected to increase in the second and third years, and, as a result, the utility costs are expected to rise. The solar panel business will need to meet its operating costs to guarantee its going-concern status. 

Reference 

Martin, B., & Hanington, B. (2012).  Universal methods of design: 100 ways to research complex, develop innovative ideas, and design effective solutions . Beverly, Mass: Rockport.