Energizing Change

Join us for an engaging conversation with Nick Sherman, CEO of a transformative service company in  solar and EV sector. As he supports homeowners with solar installations, EV chargers, and batteries, Nick also shares essential advice on launching or revitalizing a business. Discover the keys to success in today’s competitive market and learn how to navigate the challenges of entrepreneurship!

Transcript

SPEAKER_01 0:00

Welcome everybody to the Blind Ambitions Podcast. This is season two. Welcome everybody to the Blind Ambitions Podcast. This is season two, and we are kicking off with a bang. We have an amazing guest joining us today. This is my friend Nick Sherman, the co-founder and CEO of Energy Aid. Thank you for joining us, Nick.

SPEAKER_02 0:27

Thank you for having me.

SPEAKER_01 0:28

I'm really excited about this conversation. This is going to be a really special one for those in the solar industry. And I feel like this conversation not only is timely, but very important because you come from a very, very specific side of the space that is hot right now, for better or worse, and it is service. Is that right? Tell me about it.

SPEAKER_02 0:46

Correct. Yeah. So we hired train deploy residential service techs, uh, solar battery, and possibly EV down the line.

SPEAKER_01 0:53

Okay, great.

SPEAKER_02 0:54

Yeah.

SPEAKER_01 0:54

So what sort of things are you seeing?

SPEAKER_02 0:58

I didn't really understand the industry until I started to get into service. So I started in 06, uh, been in all aspects of sales, production, operations, sold broofing to uh a bunch of the bigger, larger solar companies.

SPEAKER_01 1:12

Okay.

SPEAKER_02 1:12

Didn't know anything until I started service. Learned a lot.

SPEAKER_01 1:16

You guys have been in business about three years, is that right?

SPEAKER_02 1:18

Three years. We opened doors October 1st, 2021.

SPEAKER_01 1:21

And everything you focus on right now is on the OM side?

SPEAKER_02 1:24

Strictly OM, yeah.

SPEAKER_01 1:25

That's awesome. What um are you you're in California based? Is California your only market?

SPEAKER_02 1:29

Uh we cover 100% of California, 100% of Arizona. We're working on licensing in Nevada right now and uh possibly Texas after that.

SPEAKER_01 1:37

Yeah, very cool. So all those areas that were just plastered the last few years with solar, right? That's amazing. So tell me your perspective on the service side as opposed to, you know, I come from the dealer space. I come from the world of solar customer acquisition, you know, in a in a door-to-door direct-to-consumer model. Tell me what the industry looks like right now from your perspective where you're sitting.

SPEAKER_02 1:59

Well, service is a completely different industry. It's more of a logistics business. Right. So when you go from four people to going to one home on your typical installation contracting business, it's all about how do you improve on-site efficiencies, how do you get SLAs down, permit timelines, design timelines, how do we try to handle the non-permitting issues of unpermitted structures and all that other stuff.

SPEAKER_00 2:21

Right.

SPEAKER_02 2:22

When you have to send one person to four sites, it's all about drive time, right? You're looking at first visit resolutions, servicing customers. You now have 16 times more calls you have to make per person in the field. So it's just completely different. You start to understand a lot of the inside components, right? Like why a solar edge cell A versus cell B? What the heck is that?

SPEAKER_00 2:44

Yeah.

SPEAKER_02 2:44

Right? So those are the cellular devices of screen versus non-screen throughout the last years of solar edge equipment. You learn a lot of the inner components, and it's a lot more complicated when you're kind of plugging in new stuff versus where you now are kind of critically thinking and backing into things.

SPEAKER_01 3:01

Yeah.

SPEAKER_02 3:01

So it's kind of like we're looking at things backwards now.

SPEAKER_01 3:04

I I think there's a lot of lessons learned looking backwards. I think it's fascinating. But you just touched on something I hadn't thought of, which is as far as material and the direction going, what do you think we're gonna see as far as a change in adoption based on some of what we've learned on the service side?

SPEAKER_02 3:19

Yeah, well, we've tried a lot in this industry over the last, you know, 25 years. Some of the things that stand out, positively grounded versus negatively grounded, like we just ran across positively grounded sunpower roof tiles.

SPEAKER_00 3:30

Oh wow.

SPEAKER_02 3:30

I didn't even know those existed.

SPEAKER_00 3:31

Yeah.

SPEAKER_02 3:32

Right. I think the tile thing is going away. I think modulars are kind of here to stay. Um I think when you look at it, you know, six thousand six hundred thousand watt modules, whatever that looks like in a 15-foot frame long term. We're seeing micros are really hard to service. People are just not servicing them until there's multiple out.

SPEAKER_00 3:49

Wow.

SPEAKER_02 3:50

Um, the ROI is not there. And I think you'll start looking at components from a service ROI as well.

SPEAKER_01 3:55

Oh, that makes fantastic sense.

SPEAKER_02 3:57

Yeah.

SPEAKER_01 3:58

So a lot of companies I know come into this space as probably what I would refer to as an acquisition business or a solar acquisition business. Is that what you guys refer to them as?

SPEAKER_02 4:08

Yeah. Uh I would you say probably the other custom companies in the business, the dealer. We call them new installers.

SPEAKER_00 4:14

There you go. There you go.

SPEAKER_02 4:15

Which is weird because I've been, you know, you just call them solar people. And eventually repair companies who do new acquisitions and repairs will just be called solar companies. Yeah. Kind of like that's a plumbing or HVAC company, right?

SPEAKER_01 4:25

Yeah, I think it's interesting. I come from a space um on the O and M side, but in oil and gas. So as we came into solar, we moved into it in a you know, in a new build perspective. And I would argue with a lot of people that most companies move into it from a cus uh an acquisition company or an acquisition and a build company, and they really look at how can we get, you know, so many systems on the roof. And a very, very long after site, maybe 10 on the list is oh, and how do we continue to service these customers once they're installed? And you know, not to fast forward too much through our conversation here, but now we have the the shift in a lot of companies that have gone under and have sort of gone black on on customers and homeowners. And so is I guess I'll start there. Are you seeing a lot of those types of customers right now?

SPEAKER_02 5:13

Yeah. I mean, the the consumer journey has been horrible the last three years, two years with that companies going out of business left and right. A lot of that predicated by finance rates, NEM 3.0 legislation change, whatever you want to call it.

SPEAKER_00 5:25

Right.

SPEAKER_02 5:25

I give the analogy, it really happened because no one has a punter on their team. So they got 10 wide receivers, 10 quarterbacks, 10 running backs, and no one knows how to shed fixed costs because we haven't had to.

SPEAKER_00 5:36

Yeah.

SPEAKER_02 5:36

So a lot of these newer entrepreneurs that there's their first, second, third business haven't really learned what defense looks like. Fourth and ten at you know, your own three yard line, you punt in every scenario.

SPEAKER_00 5:46

I love it.

SPEAKER_02 5:47

And you get those uh fixed costs kind of kept up. It's harder to do.

SPEAKER_01 5:51

I think too, it's it's the perspective of what will we do if a customer calls for service? And it's never what are we going to do when and how do we structure and strategize for that and plan plenty in advance. And I think that's you know, it's a breakdown between allocating resources to warranty and service, but also ensuring that these things are sold at a price that's profitable enough to be able to source those sorts of resources for homeowners in the future. And so, you know, I think unfortunately what we're dealing with is the mass exodus of you know people in the space and a lot of customers with not, you know, no idea who to call. But the longer tail of it, at least from my perspective, and what we've seen, unfortunately, from lessons learned is that there's going to be even even more that, you know, call their their company that is still answering the phone and they don't really know, you know, where to take them. Would you agree?

SPEAKER_02 6:42

Yeah. I uh so we did an experiment when we first started uh the service side in B2C. And there was Solar Edge, fine installer, and they have service, battery, and new installation.

SPEAKER_00 6:53

Okay.

SPEAKER_02 6:53

So we called the 10 people like in Southern California. We only find nine first off. There wasn't even 10.

SPEAKER_00 6:58

Oh wow.

SPEAKER_02 6:58

And what we found was only one of the nine would actually help us. Half of them didn't even call us back.

SPEAKER_00 7:04

Wow.

SPEAKER_02 7:04

And they wanted to charge us like a $1,200 to drive 80 miles up to us because they were in San Diego and we were in Orange County.

SPEAKER_00 7:10

Wow.

SPEAKER_02 7:11

So that was like we don't have any competition, it's nowhere near here. The people that are doing service aren't really doing service. This trying to basically, hey, can I sell you some more batteries and panels? And you know, if you do that, maybe I'll help you out with that. Or why don't we just get you a new system? That one's not working. Because they don't understand what it goes in to actually fix the system first.

SPEAKER_00 7:28

Yeah.

SPEAKER_02 7:29

So I think that was a real telling sign. And I don't think that's much different than today. I think people are still service second, installations first. We haven't really found a real competitor other than a few SaaS models like Amidian and 365 Prano, who are really looking at service first.

SPEAKER_00 7:45

Yeah.

SPEAKER_02 7:46

It's a completely different business we talked about, like logistics side business.

SPEAKER_00 7:49

Yeah.

SPEAKER_02 7:49

And if you're not completely committed to being a service company first, which I find it very likely you're not gonna have to be at one point, right? This is a service acquisition model. And every scenario that makes sense to me. Um, like plumbing HVAC, we're gonna unclog your solar for $89 and then sell you some other stuff behind it. Right. Right. And that's a very traditional market that does make money. I don't think many companies have made money in solar today.

SPEAKER_01 8:12

It's a long-term model. And so much of what we've been seeing feels shorter and shorter term, right? It's like make money now and then what? I love that. I'm personally glad that there are companies like yours that have started, you know, taking my own hand of being part of a lot of customers that have sort of, you know, unfortunately been without. And I've seen that pain firsthand, and it is it's terrible, it's awful, as far as uh an industry black eye that we have to sort of move past. Um so I love that. And I love that your perspective that you can bring to this for those that are sort of still in the game. But um, you know, you talk about component cost, you're talking about cost of servicing. I do not know nearly as much in the space as you do, and so I'm I'm excited to kind of hear, but from my connectedness in the space and getting sort of a gauge in what companies are allocating out, you know, I hear numbers from two cents a watt to five cents a watt. And, you know, I've I've been quick to encourage people to look at a minimum of 10 cents per watt, truly allocate it out, you know, defer the revenue even, but really allocate that money out to long-term service. And I'm interested to know if you think that that's what you think on that too.

SPEAKER_02 9:19

I think it's absolutely crazy.

SPEAKER_01 9:20

Yeah. Right?

SPEAKER_02 9:21

When I was younger, I had a uh I coached my little brother's little leak, and I had a dad who came and said, All right, I'm gonna take you out to a nice country club and I want to invest a few minutes, four hours in you because you've invested years in my kit, right?

SPEAKER_00 9:32

Yeah.

SPEAKER_02 9:32

And what he said was, he goes, Nick, here's a drink. We're gonna play 18 holes, and I want to tell you one thing about business, and that's it, and I'm gonna play golf. He goes, twice as much, twice as long. Remember that, don't forget it, and you'll be okay. And I think when you go to service side, it's kind of like a 4X on both sides of that. And it's so true. We continue, especially when you look at like a lot of salespeople that are leading these businesses. I'm sales-centric.

SPEAKER_00 9:55

Yeah.

SPEAKER_02 9:55

I think I'm still failing a lot of categories because I tend to overthink things are gonna happen quicker than they actually do. And I tend to think they're gonna cost a lot less than they do.

SPEAKER_00 10:03

Yeah, right.

SPEAKER_02 10:04

So I think we have a lot of sales-centric people leading these dealer models and and sales orgs and all this stuff. And it's really a dangerous person to be leading a company. There's especially when you have to punt, there's nothing but, you know, grass is greener, we're gonna allow this. Oh, of course we'll do that. Shiny objects, accept them all. And I think people put themselves in a really tough position in doing that.

SPEAKER_00 10:25

Yeah.

SPEAKER_02 10:25

What I've learned in the last three years is that I know that I'm not good at it, and I know what I'm gonna mess up on.

SPEAKER_00 10:32

Yeah.

SPEAKER_02 10:33

And I know that I need help. And I think once you can understand that you don't know, you're now in a position to get people that can know.

SPEAKER_00 10:40

Who I love.

SPEAKER_02 10:40

And they'll teach you those kind of tricks. And I think that's kind of the difference in my past business opportunities and in the my career. The difference of like I started a business in 20, uh, 2012 called Peak uh PowerAid.

SPEAKER_00 10:53

Okay.

SPEAKER_02 10:53

And PowerAid uh got up to like 20 canvassers. We were doing up a mill a month, Southern California. I had no idea what cash flow meant. I had no idea what accrual meant. I had no chance of succeeding. I had very little. I thought because I made $2, I could spend one. It was nowhere near that. Sure.

SPEAKER_01 11:10

That's up.

SPEAKER_02 11:11

I had no idea what operating income like had no chance.

SPEAKER_01 11:14

Yeah.

SPEAKER_02 11:14

I had absolutely zero chance for success. I would have had to be a unicorn who got lucky, and someone would have had to come in and mentor me.

SPEAKER_01 11:21

Oh man.

SPEAKER_02 11:22

Now you kind of know that I'm not prepared.

SPEAKER_01 11:25

Yeah.

SPEAKER_02 11:25

And I guess you're kind of more uncomfortable with the unknown.

SPEAKER_01 11:28

The power of knowing that you don't know.

unknown 11:30

Right.

SPEAKER_02 11:30

The power of knowing you don't know.

SPEAKER_01 11:32

Know that I don't know. That's real dangerous when you know you know. Exactly. Exactly.

SPEAKER_02 11:35

It's a place bad place to be.

SPEAKER_01 11:37

Um I very much love and appreciate that you're open and transparent about it because you know, I think that there's this conversation that we can, you know, sort of push over here for the time being, which is, you know, maybe there's some shady practices that need cleaned up in the industry, and that is an absolute yes, not a maybe. But I do think that there's this issue of a lot of very young first-time entrepreneurs that had a lot of success based on right place, right time alone.

SPEAKER_02 12:00

Yeah.

SPEAKER_01 12:01

And had great intentions. And I know that because I was one myself and I was very, you know, intimately connected with other business owners. And so I love that your perspective is from the space of we all start out not knowing and being able to say, hey, I don't know. It's the opposite of what you see online right now with everybody's, you know, is a business guru and it's, you know, if you don't know this, then you need to pay somebody to know it and you're, you know, an idiot or whatever it is. And I I think unfortunately a lot of people go, I'm supposed to know all the answers. And so I can't say that I don't. People won't work for me, people won't partner with me. It's the end of my business when in reality, getting out of that and saying, you know, killing this cloud of everybody has it figured out, nobody truly has it figured out. There's a lot of things you learn, valuable stuff that you learn, right?

SPEAKER_02 12:44

I think the more you figure it out, the more you realize you don't have it figured out.

SPEAKER_01 12:46

Exactly.

SPEAKER_02 12:47

So it's kind of like an oxymoron saying to have it figured out.

SPEAKER_01 12:49

So I will I gotta I gotta ask, what happened with uh this business then? Where did this go?

SPEAKER_02 12:54

I got a great story for you. So we had a canvas crew of like 20 guys, uh, which came down to about 10 at one point.

SPEAKER_00 13:00

Okay.

SPEAKER_02 13:01

And I wasn't making the money I thought I was making. Surprise, surprise, right? And there was uh like a one-week period where we had generated like 240 grand in revenue from that canvas crew, and three of them had bail bonds at like 250 grand. So we had uh the cops showing up, they were flipping tags at target in our vehicles, just all this stuff, and I'm like, this is not worth the stress.

SPEAKER_00 13:23

Yeah.

SPEAKER_02 13:24

And it basically kind of went from all right, I'm gonna grow this business, I'm not prepared for it, to kind of kind of turn this into a lifestyle LLC where basically I did services through that business and got down to one employee myself.

SPEAKER_00 13:36

Okay.

SPEAKER_02 13:36

And I did that for a long period of time and then had a kid uh five years ago, and that kind of re-sparked wanting to do more again.

SPEAKER_00 13:44

Love it.

SPEAKER_02 13:44

Yeah. And uh call my billion dollar baby. I don't know if it's true or not, but uh sparked it. Maybe it cost me a bill or he might help focus me to get to that. I don't know, but maybe maybe both. Yeah.

SPEAKER_01 13:56

So it sparked the the love for starting off your own thing, being an entrepreneur. So is that when energy aid kind of hit the scene?

SPEAKER_02 14:02

Yeah, I I think that's when it kind of took off. Um I had a partnership with a past friend of mine for a couple of years and just didn't come to fruition the way I thought it was. And uh had some money and the right timing, and uh that person actually brought the service idea to me. I had no idea about service or even thought about the liability that's coming.

SPEAKER_00 14:22

Yeah.

SPEAKER_02 14:23

And then it just became really clear of like that is the future.

SPEAKER_01 14:26

Oh, it is.

SPEAKER_02 14:26

I don't see any scenario that this isn't a service acquisition model long term.

SPEAKER_01 14:30

Absolutely.

SPEAKER_02 14:31

The question is when and where and why and and what markets first.

SPEAKER_01 14:35

And you get to be one of the very, very few that are paving a path, right, for a lot of those sort of question marks to be filled in. What are you seeing then as far as the as far as the landscape on the service side, what do you see the industry moving in the direction of? What sort of changes do you see, think that we'll start to see over the next, I don't know, five and ten years even?

SPEAKER_02 14:56

Yeah, uh, I think the service models, like I can say that because I believe in it.

SPEAKER_01 14:59

Yeah.

SPEAKER_02 15:00

I think you're gonna see the dealer model start to phase out as there's not much control. There's not really an asset there, right? I had a um guy who ran Jeff Bezos' Green Fund came to the other day, goes, What do you think about me buying a uh a dealer canvas company? One of those guys go knock doors and sell deals. And I said, What do you own? Good training, good process, right? But it's a cattle call business, it's exhausting. Do you really want to do that? Is it scalable? I don't think so. Right. And then you're really just predicated on how much I can go leverage the dealers of you know, freedom and titans of the world or penguins, and how much can I grind them every week? What an exhausting life that is.

SPEAKER_01 15:36

Yeah, poaching, right? It's the game of coaching.

SPEAKER_02 15:38

It really is. Reminds me a lot of uh we talked about like kind of the mortgage industry of 03. I think I explained it to you like everybody drove Lamborghinis around Orange County, and then a year later they were in their mom's basement. And uh I think when you look back at that, you're like, we gotta learn from that type of stuff. That feels a lot like what we're doing now. A lot of these sales dealers are gonna be their mom's basement in 2025, 2026.

SPEAKER_00 15:58

Right.

SPEAKER_02 15:59

And the good news is there's you can you can stop that, you can change that. Um, you need to educate yourself a little bit more, but I don't think that model is very sustainable. We're already seeing some finance lenders that are starting to bring the dealer model in house. Um that makes more sense. Uh, even the third, the traditional third party ownerships are starting to bring stuff in house. Yeah. The only way they're doing that uh is so they can compete against their dealers, which means they're trying to bring it all in house at one point or some aspect of it.

SPEAKER_00 16:26

I agree.

SPEAKER_02 16:27

So I think that seems that right on the wall seems really clear. I don't think solar like our investment thesis of energy, right? It's a service-based business. I I don't see a scenario where we don't electrify over the next 80 years, 100 years in total. And um we also see this the average ticket price really, really going up with it too. So it used to be um a $25,000 solar system is now turned into a $35,000, $40,000 battery solar combo is turning into a kind of a $100,000 system of $50,000 in solar, $50,000 in batteries, and a his and her car charger.

SPEAKER_00 17:01

Yeah. Okay.

SPEAKER_02 17:01

So I think the car chargers are a big indicator of where the industry's going. Um I think we have like $1.2 to 1.7% in California right now, but by 2032, it'll probably be more than half.

SPEAKER_00 17:11

Wow.

SPEAKER_02 17:12

As no new vehicles can. That whole infrastructure of like Jiffy Lubes are going bye-bye, and um, you know, your shell gas station is gonna start transforming into whatever hydrogen or EVs, whatever it is. So I think a lot's being predicated on home consumption. And my guess is this starts to transition over the next 20 years. And typically we're smart enough to kind of transition enough early enough. So I think when you look at 2040, the average home has two of those little Molly maids, one's doing your lawn, one's doing the the homes. You've got 16 iPads everywhere. So you've got like double the home load with the EVs and that, yeah, which doubles the need, which now makes it financially more coerced by the utilities to push you towards that. And then you get into home management, you get into kind of consumer goods. I think a lot of like what spans doing, Amazon's building a similar product, and I think a lot of people are gonna try to control home inside the home and outside the home all in one.

SPEAKER_00 18:07

Okay.

SPEAKER_02 18:07

So imagine like a light bulb goes out next Wednesday and two show up at your front door on Tuesday.

SPEAKER_00 18:12

Oh, that's so cool.

SPEAKER_02 18:13

Right? I mean, you could be Amazon for inside the home.

SPEAKER_00 18:15

Yeah.

SPEAKER_02 18:16

So I think that's a a big indicator of what's happening, but EV infrastructure issue we have is gonna be a big one, right? When your typical solar job within a main panel upgrade took took six months or four months versus two or three months without an MPU. I think you're gonna see nine, twelve months. We do see local utilities like Southern California Edison starting to get ahead of this curve. They're often incentives to do main panel upgrades now. Okay.

SPEAKER_00 18:40

Okay.

SPEAKER_02 18:40

When you look at like kind of the underground wiring that was done, well, now you've got a huge infrastructure issue. So you're even looking at bi-directional loads and how we do that. If my air conditioner or my washer dryer is on, I can't charge my car, or I need to go spend 20 grand to redo all the underground feeds. So we've got a huge infrastructure issue coming up. That is, what does that look like? That probably sky rights skyrockets utility bills.

SPEAKER_00 19:05

Right.

SPEAKER_02 19:05

Because someone's gonna pay for it, and that's gonna be the consumers building the infrastructure grid. So I that's kind of what we see. Kind of going back to we're trying to focus on what we're trying to do in the market. We're trying to be rescue router, rotor router for the service business, right? Where it's a service acquisition model. We unclog your solar system, right? Um and learn a lot from that. There's also a lot of transition of products in the market and what's going to be in the market. When you look back at kind of like the 50 different old PV-powered Xantrex inverters that we installed, you know, in 2005. Like my family put a system on their home in 2001. It was uh 3,500 to 3,500 PV powered and Sharp 175.

SPEAKER_01 19:44

So like a string inverter?

SPEAKER_02 19:45

It was a string inverter. It worked for till we left there in like 2013 somehow. That was the one thing I remember about it. It did break somehow.

SPEAKER_01 19:52

Yeah, you don't even think about those.

SPEAKER_02 19:53

I doubt if it's still working. But uh when you look at that, now we've kind of got solar batteries and EV. And I think what Solar Edge and N phase are doing but kind of piring that all together, I think that's the future. We see manufacturers in our relationships that we have yelling and screaming at each other, and it kind of reminds me of the uh kind of like the solar and roofer going, it's the solar guy's fault, it's the roofer guy's fault. And the consumer's stuck in the middle going, well, someone's got to take blame here.

SPEAKER_00 20:18

Right.

SPEAKER_02 20:18

Because it's not me.

SPEAKER_00 20:19

Right.

SPEAKER_02 20:20

And I think we're starting to see that on the manufacturers with you know, battery manufacturers that aren't the inverter manufacturers. I think when you start to get the EV, there's a lot less confusion there. Is is servicing and fixing and replacing an EV, it's kind of like putting a vacuum on your wall. Like you don't go fix your vacuum, you just pull it off and put a new one on. Right. So we don't know how much service liability is there, but we do see all three of those components kind of being tied together. And there's probably some type of home energy management system like like span or something that has that kind of gets tied into all that. That we haven't figured out yet.

SPEAKER_01 20:52

Oh man, there's a lot there. That's great. So d do you anticipate that most solar companies five years from now will be solar plus service and we'll learn from where we've been? Or do you think the service will continue to be outsourced to folks like yourself in the f in the future?

SPEAKER_02 21:07

I I don't think uh this industry gets starts to get service focused till probably the 2030s.

SPEAKER_00 21:12

Okay.

SPEAKER_02 21:13

Reason being is when you talk about that 25 grand going to 100 grand, there's a lot of new installs they can go knock doors on still.

SPEAKER_00 21:19

Right.

SPEAKER_02 21:20

Sell more batteries, more battery add-ons, more solar panel batteries. I don't notice you need an EV now.

SPEAKER_00 21:25

Right, right, right. Right?

SPEAKER_02 21:26

2032 California, wherever else it may be. Right. Everything else is gonna follow the California market. By 2040, everybody's gonna mandate EV.

SPEAKER_01 21:32

Oh. Okay. So uh from a warranty perspective, I know that a lot of companies put 20-year warranties on these things. Unfortunately, a lot of them aren't there anymore. 20 year warranties. Two questions for you, and this is just my genuine curiosity. There isn't a lot of 20 year systems out there that we have a lot of data on.

SPEAKER_02 21:49

Yeah, who knows?

SPEAKER_01 21:50

Say five to 10 year systems, because we got a lot of I don't know, we got a lot of five year unless. Let's focus on the five year. What would be your gut stab at how many warranty calls these systems out there in? The last five years are requiring, is it once per year? How many, how many?

SPEAKER_02 22:07

We're seeing an event of probably around one every two to four years.

SPEAKER_01 22:09

Okay, okay.

SPEAKER_02 22:10

So I'll give you an example of something you're having. It's just a ton, right? That's 60, 70 cents a watt, not two cents a watt. And when you talk about third party ownership like leases, it's probably closer to a dollar.

SPEAKER_00 22:23

Wow.

SPEAKER_02 22:24

So an event that happened the last uh 24 months is all the 2G, 3G towers switched to 4G, 5G.

SPEAKER_00 22:30

Okay.

SPEAKER_02 22:30

Who the heck planned for that in 2020? Right? Every single system from 2018 before needed a new cellular device and a trip, sometimes multiple trips, to go put a two to four hundred dollar component on their own. So a lot of the stuff we do is like low voltage communication stuff.

SPEAKER_00 22:46

Okay. Okay.

SPEAKER_02 22:46

Imagine utilities can't see how much you're consuming. Well, they've got to send someone out to fix that meter.

SPEAKER_00 22:52

Yeah.

SPEAKER_02 22:52

Same thing happens for the the leases and PPA uh PPAs of the market. Someone needs to make sure that that consumption and production is all being monitored from a warrant production guarantee.

SPEAKER_00 23:02

Yeah. Yeah.

SPEAKER_02 23:02

If you can't do that, you're in breach of the contract and they're not going to do that. So that like that alone, the largest holder in the market, Sunrin, probably spent $40 million putting that together.

SPEAKER_00 23:11

Wow.

SPEAKER_02 23:11

And that's it's a lot of money when you think about like that one item alone for all those components added, you know, 10 to 12 cents.

SPEAKER_00 23:17

Wow. That makes sense.

SPEAKER_02 23:20

You do that two, three times over 20 years, which is probably likelier, more likely than not. Plus, you get into all the other communication issues, squirrels biting through wire and you know, grandma drinking some eggnog and hitting the uh inverter with the bat during Christmas, whatever it is, right?

SPEAKER_00 23:35

Yeah.

SPEAKER_02 23:35

You you get into these things that just no one thought of. And until we have probably 25, 50 years of data, we probably won't be able to think of them.

SPEAKER_00 23:42

Right, right.

SPEAKER_02 23:43

We just know it's twice as much and twice as long. Shh.

SPEAKER_01 23:46

Or 4X. Wow. What is uh what is the next in line after low voltage communication issues? What's the next in line that you're seeing the most of?

SPEAKER_02 23:54

You know, it's pretty much everything but the panels.

SPEAKER_01 23:56

Okay.

SPEAKER_02 23:56

So anything from junction box down is what we're seeing. A lot of inverters, which kind of goes in, there's a whole like a game plan of, you know, like Solar Edge is doing a lot of this re-energize program, which is putting energy hubs in. So they're charging you a little bit for an energy hub to get rid of the RMA product or not, not depends on depends on the situation. And in doing so, they're lowering their liability and now setting you up for their next sale, which is their battery attached to it.

SPEAKER_00 24:20

Okay.

SPEAKER_02 24:20

So there's a lot of that kind of strategy happening. I'm actually amazed by how well a lot of these people did on keeping inventory 20 years ago, 10 years ago. Like cell A's, there's still tons of them in the market from a product that stopped five years ago.

SPEAKER_00 24:32

Wow.

SPEAKER_02 24:33

So they really stocked well for this service on like the solar edge side. I think we're seeing things being simplified down, one comp like one manufacturer, and I think people are gonna get smart about the real cost. We've continued to kind of, I guess, pay new money's been paying for old habits for long enough. And smart people start to get educated and learn about that stuff in time. And it's really kind of like sink or swim. Like you're either gonna learn, figure out that it's it's 60 cents to a dollar.

SPEAKER_00 25:02

Yeah.

SPEAKER_02 25:03

And you're gonna upfront charge for that, and you're gonna be okay not having business that won't let you get that.

SPEAKER_01 25:08

Right.

SPEAKER_02 25:08

Or get into different business.

SPEAKER_01 25:10

Um You and I were talking about that. We were talking about that. The power of knowing what to say no to, number one, and then being able to say no. I I personally think that's a level of maturity as a business owner that you get to. It's you know less operational in a in a you know fear space. And um, there's nothing better than being able to say, you know what, that type of business doesn't really serve me.

SPEAKER_02 25:33

Yeah.

SPEAKER_01 25:33

I couldn't imagine saying that, you know, last time around, but it's like my entire day-to-day mantra today, right? There's lots out there that can keep you spinning.

SPEAKER_02 25:41

And you can say no more than yes these days. Yeah.

SPEAKER_01 25:44

Yeah. Yeah. Probably, probably a little too much, honestly. But uh it's what you learn. That's probably the most valuable lesson I think that I learned is to learn how to say no and when to say no.

SPEAKER_02 25:54

Yeah.

SPEAKER_01 25:55

So um how are these homeowners with problems reaching you? Can can a homeowner call today and get energy aid out to fix their own issue.

SPEAKER_02 26:05

Yeah. I think for a homeowner, you're trying to identify do I have anybody who will cover this cost first? Yes. Right. That's kind of the consumer journey, right? Okay. Kind of what you're asking for is how does someone go from I have a solar system where I just bought a home, I don't even know who sold it, right?

SPEAKER_00 26:19

Right, right, right.

SPEAKER_02 26:20

Uh let's start with the customer who knows who did it.

SPEAKER_00 26:23

Sure.

SPEAKER_02 26:23

They contact that person, see if they're still under warranty, seeing if that liability can be covered, if there's manufacture warranties. Then they go through some other process of no or yes or I don't know, and they start reaching out and Google or you know, Yelp, and they start trying to educate themselves. How do I fix my inverter? What does this red dot mean? Right? They start calling around, and the consumer journey is kind of similar to that solar edge story I gave you. Most people won't touch the system unless it was theirs, right? For multiple reasons, because they're more focused on new new revenue coming. Sure, sure. And then from there, you know, you kind of get stuck with the point where we had multiple people that would just I called for years trying to find someone and there was never anybody I could find. I just gave up.

SPEAKER_00 27:04

Oh wow.

SPEAKER_02 27:04

That was a real popular like one that stood out in terms of consumers' journey.

SPEAKER_00 27:08

That's too bad.

SPEAKER_02 27:08

But they reach out to us, we go out and do a troubleshoot for X amount of money.

SPEAKER_00 27:12

Okay.

SPEAKER_02 27:13

And if they decide to move forward on the repair work, we give them that troubleshoot money back. And then at that point, um you know, the whole point of service acquisition is to try to keep that customer happy. And when they need batteries or more panels or his and her car charger, we're there for them.

SPEAKER_00 27:28

Okay, okay.

SPEAKER_02 27:29

So we're I guess you could say our whole model is based on gathering uh a a forgotten about consumer base or non-attacked consumer base and trying to monetize the $25,000 to $100,000 aspect of that consumer we see over the next 20 years.

SPEAKER_01 27:47

So for those out there listening who are connected to homeowners that don't really know where to turn, a great direction is to key them over to Energy8.

SPEAKER_02 27:54

We can help.

SPEAKER_01 27:55

I love that. Um not a lot of solutions. So I love that. That's beautiful, unfortunately. Yes.

SPEAKER_02 28:02

And it's incredi uh one thing that really stands out too, and we talked to some of our B2B partners, the things that we can't do on a working with an asset manager, finance company manufacturer, which is our B2B customer, about half of our work today.

SPEAKER_00 28:15

Yeah.

SPEAKER_02 28:15

So we did about 600 service appointments last week. Half was B2B, half was B and a C.

SPEAKER_00 28:18

Okay, okay.

SPEAKER_02 28:19

Direct to consumer, the people we talked about. But those groups are gonna have a really hard time getting direct to consumer because they're building everything off of what they've sold. So when you get into service, you're not just solar edge, you know, seven inverters, you're not one monitoring system, you're not two panels.

SPEAKER_00 28:37

All the complexity. Right.

SPEAKER_02 28:42

And you've got to be able to design, engineer, and complete and service the job.

SPEAKER_01 28:47

Just that many different inverter types alone.

SPEAKER_02 28:48

Like you have no 440 work types we work on.

SPEAKER_01 28:51

Wow.

SPEAKER_02 28:51

Yeah.

SPEAKER_01 28:52

That's wild. I mean, I got a fraction of that, so I feel like I can grasp it slightly. Um, that's that's a lot, though. I don't think a lot of people have even thought of that.

SPEAKER_02 29:00

Yeah.

SPEAKER_01 29:01

That's crazy.

SPEAKER_02 29:02

It's complicated. It is complicated. They do it good. There's a big difference in doing three service appointments versus four a day.

SPEAKER_01 29:08

Right.

SPEAKER_02 29:08

And that comes down to density, lowering drive time, and understanding work type allotments, time allotments.

SPEAKER_01 29:13

Sorry to keep going back to this, but I'm just fascinated about the stuff that you're seeing. Because there's been this question mark, right? So of the stuff that you're seeing on the warranty side, how much would you say is directly connected to poor workmanship? That guys on the roof did it?

SPEAKER_02 29:27

I think it's more of components going out.

SPEAKER_01 29:29

Yeah.

SPEAKER_02 29:31

There's a good portion of both.

SPEAKER_00 29:32

Okay.

SPEAKER_02 29:33

So when you look at the actual service like liability curve, you have a spike year one from poor workmanship. And a lot of that's pretty much gone. Maybe there's poor decisions, like I put a new roof, new solar system on a 25-year-old roof.

SPEAKER_01 29:46

The roof viability not being determined early on and just installing on a crappy roof. That's I love that you brought that up. Continue, sorry.

SPEAKER_02 29:52

Yeah, the industry's getting dramatically better at that. When I first started, it was like 2% of resolved roof, and now it's like 30, 40.

SPEAKER_01 29:58

Such a shame that we created problems to begin with instead of the stuff.

SPEAKER_02 30:01

You're kind of doing your roof and your solar at the same time. Right. Every 20, 25 years.

SPEAKER_01 30:05

I think that's huge.

SPEAKER_02 30:05

Big spike year one starts to get into kind of like this eight, nine, 10-year mark, and that's where really service really starts to kick in. People are getting past five, 10-year workmanship warranties if their contractors are still in business. Then we think somewhere around year 15-20, and we think because nobody knows, right? There's not enough data to really say we know.

SPEAKER_00 30:20

Right.

SPEAKER_02 30:21

Somewhere around year 15-20, the asset becomes more of a liability.

SPEAKER_00 30:25

Okay.

SPEAKER_02 30:25

And people will start changing their perspective on it's not worth my my long-term, short-term, and do nothing options. I'm doing more long-term at that point. So that really doesn't have a cost for servicing at that point. It's just really a new system.

SPEAKER_01 30:40

I feel like I could talk about this all day. Yeah. I'm of the mindset, or at least you know, from a lot of what I've witnessed, that contractors are usually really good at staying focused on either new installation, some on you know, repair, the OM type of stuff. Then when you get into the battery, the EV chargers, seems as though when I see companies try to take on even just new installs and EV or, you know, in battery, that in in itself, you know, we've got so far to go just between permitting and licensing requirements and standardization, and hopefully that catches up with you know this growth that I you've depicted that I think you're dead on with. But are you also of that mindset that maybe contractors should stay in you know a specific zone from installation purposes?

SPEAKER_02 31:20

Yeah. I think you should uh I call it the buffet analogy. Never been to a buffet that had the best of.

unknown 31:25

Right.

SPEAKER_02 31:25

It's not like, oh my God, that that uh you know Rio Hotel in Vegas had the best steak I've ever had. No, it doesn't.

SPEAKER_00 31:32

Right, right.

SPEAKER_02 31:32

They're good at you know, giving you a bunch of food for value. That's all they're good at.

SPEAKER_00 31:35

Yeah.

SPEAKER_02 31:35

So I think a lot of consumers start to get into this buffet and before they know it, they're like, I'm making business. I was making money what I was doing.

SPEAKER_00 31:42

Yeah.

SPEAKER_02 31:42

I was making more. Why not just do more of that versus being distracted on maybe I can only cap at 50 mil in my market versus 70. But I make money on the 50, I don't make money on the other 20, so why do it?

SPEAKER_01 31:53

This conversation is so exciting for me because I again I just think it's so important and it's so gratifying because nobody's talking about it. But that's exactly that's exactly the point, right? Is staying really focused on what it is that you can deliver an excellent value at and not trying to do everything or doing everything really, really poorly. And um, I don't know, I'm a big believer in supporting contractors and the guys out there that are making this stuff move. And it's been far too long that I think in this space we've devalued the work being done. We've said, ah, you know, you can run a truck out for a hundred bucks. It only cost you, you know, X amount to do these little things. And it's just simply not the case. And so we've got really call quality contractors who have never given themselves enough of a ramp or enough of a budget to deliver, continuing to deliver a quality product and it eats them alive. And I think that's unfortunate coming from a space I think that you are too, where you care about the homeowner, the consumer, and you care a lot about the contractors and the guys out here doing really, really good business and moving into a service space. So I love this. This has been really, really exciting for me. I want to end on some advice from you. You've had some challenges in business, um, which I always love to dig a little bit deeper into because a lot of my viewers are entrepreneurs who are trying to either figure out how to relaunch um or to, you know, rebrand and re-identify themselves and their next goal. And some of them are just straight up hurting right now because that's really what's happening in solar right now with a lot of uh companies. What is your advice and lessons learned on being CEO, leading a vision of a company that's moving very, very um, you know, paving a new path, as we talked about. What would you say maybe two key pieces of advice that you'd give?

SPEAKER_02 33:35

Number one, understand your costs. There you go. Like like religiously, I I think a lot of CEOs spend too much time in the value proposition.

SPEAKER_00 33:42

Yeah.

SPEAKER_02 33:42

Right. And the culture is very important as well. But if you don't understand your costs, you don't have a business.

SPEAKER_00 33:46

Yeah.

SPEAKER_02 33:47

So really getting granular and understanding and the simple way of starting that is just weekly reviewing every cost that comes out of the business. Never surprised on why are we still paying for that?

SPEAKER_00 33:57

Yeah.

SPEAKER_02 33:58

And that's a quick way to save money. A dollar save is a dollar profit.

SPEAKER_00 34:02

Okay.

SPEAKER_02 34:02

A dollar more revenue is not a dollar profit.

SPEAKER_00 34:05

Right.

SPEAKER_02 34:05

So the quickest way you get to operating income is lower cost. Um I think that's number one. Number two would probably be forecasting and modeling. We were lucky enough to have uh five great advisors. One of them was the head of mergers and acquisitions for Oracle Oil for 25 years. Wow. So we we knew how to model very early in the business, and that allowed us to kind of doesn't mean we still do it right, but that allows us to get more visibility of where we're going. I think one of the most important things is modeling cash. So when you look at model, you're trying to model revenue, you're trying to model cost, and those things become actually pretty easy to do. Cash is like the equivalent uh the sum of everything that could go bad and good.

SPEAKER_00 34:44

Yeah.

SPEAKER_02 34:45

And then I think a lot of people try to scale their business before operating income and cash will actually allow them to.

SPEAKER_00 34:51

Right.

SPEAKER_02 34:51

I'll give you an example. If you are 5% operating income, you can scale your business at like 1.3 times a year. In a typical solar business, we have like a 90-day cycle. Sure. If us today, like a 60-day average, 50, 60-day average cycle with everything we do, we could scale like 1.3 at 5%, we could scale at like 1.8 at 10%, at 15%, we could scale like 3.5x. And at 20% operating, we could scale like 12 times a year.

SPEAKER_00 35:14

Okay, okay.

SPEAKER_02 35:15

So it is a completely different business when you are creating cash, creating an operating income, you control your destiny, and the business can then grow. So, like if you're looking at kind of this this trip you want to be in of growth, too fast, not enough cash, bad business. Too slow, too much cash, you lose momentum, not a great business. So you've got to kind of watch this teeter-totter of how do we kind of grow, grow, uh, grow at the right speed and not overwhelm our people, not break our processes, but more importantly, have cash to do so.

SPEAKER_01 35:49

I had to giggle at those numbers that you were throwing out because not only are they so right on point valuable, but when you compare them to a lot of the flex culture in solar, which is like we grew 250x this year, right? How many times have you heard that? And until you're sort of on the other side and looking at it, you gotta go, that's a terrible flex.

SPEAKER_02 36:06

It it is really hard to control uh to grow a service-based contracting business at anything more than like 1.5, 1.7 year. Right. You're talking about SaaS and stuff like that. Yeah, you can make five, six X jumps.

SPEAKER_01 36:17

Sure, sure.

SPEAKER_02 36:18

It's less human capital needed. But in terms of service and human capital-based businesses, absolutely insane.

SPEAKER_01 36:24

Yeah. I yeah, I absolutely agree. Um thank you for absolutely pouring into this episode so many really, really good facts, figures, thoughts. I just can't stress enough how important the advice that you've given from my experience really truly is for anybody out there that's trying to make it go. And um, as a last little plug here before we leave, how can my audience find you? EnergyAid is huge on you guys are very active on LinkedIn. Give us your website.

SPEAKER_02 36:53

Uh energyaid.net.

SPEAKER_01 36:54

Okay, perfect.

SPEAKER_02 36:55

Yeah, energyaid.net, just like it sounds.

SPEAKER_01 36:58

Awesome. Is that the best place for them to um connect and reach out?

SPEAKER_02 37:01

Yeah, I'm I'm heavy into LinkedIn and everything. Uh I have access.

SPEAKER_01 37:05

I love being connected with Nick on LinkedIn. He is amazing. Follow him for sure. That's perfect. Thank you so much, Nate. I appreciate Nick, excuse me. I appreciate you being on today. I'm gonna have to do that.