One important point to make is that renewable energy will become increasingly critical to meeting the energy demand of the world. As more people become educated on sustainability, the demand for clean energy will increase. At this point in time, clean energy points towards renewables, which are naturally replenishing and work to reduce carbon emissions. Show the investor that you have a plan for growth. Explain how ongoing mitigation efforts are changing strategies in various parts of the nation – with REC policies stimulating the use of renewable energy.
Why is this important for an investor to know? They must have confidence that they are putting money into a viable product; one that will have an expanding customer base, producing profits. For example, solar PV energy is growing in demand. Presently, it is largely dependent on governmental subsidies/incentives. This information can turn an investor away. However, having a business model that will not rely on incentives can influence potential investors to invest. Showing that a company can sustain sales and operations, by providing not only sales, but continual service in maintenance and repairs can boost revenues. Also, material costs are projected to decrease in the next decade, lowering financial outlay for supplies. Furthermore, showing that maintaining good personnel on the payroll is a model for success, less turnover will reduce training costs and shows stability within the company. When talking with investors I need to talk in “specifics” when pointing out the profit potential of my company.
Even more importantly, when talking with potential investors, I need to convey that I know exactly what they expect from their investment. This can be done by providing projections for sales growth and calculating a positive NPV for an investment will entice investments. Additionally, I must tell the investors what I intend to do with their money. If I am going to use it for advertising, I need to demonstrate an effective advertising plan, with minimal costs, that will also show how marketing the business will grow sales.
Bottom line is to show that my business is in line with expanding into a larger customer base and that the company will be run as lean as possible while maintaining customer satisfaction. This is important to preserve a good reputation for more business opportunities, hence more revenue and more profits for investors.
Hi Rob,
I like that you pointed out that having a business model that will not rely on incentives can influence potential investors to invest. Right now the solar photovoltaic industry is looking at the tax incentive that is about to expire, when I interviewed the owner of an installation company and asked him what his outlook on it was – he said that he doesn’t expect it to affect him because of how high the current rate of electricity in California is along with how much less he charges vs. big companies. In all honesty when I calculated the payback for my own system, I didn’t even factor in the tax incentive because I wasn’t confident that I could afford to have it installed before the tax incentive expired. As it was, I still calculated an excellent return period before accounting for the tax break.
Thank you for the discussion.
Best Regards,
Cheri
Here is the link to my post:
http://engr312.dutton.psu.edu/2014/10/21/raxters-understanding-of-the-cost-of-capital/
Hi Rob,
I do agree that investors must have confidence that they are putting money into a viable product. When in vesting in anything you must know what the rate of return is and what the risk is. There is a lot of potential for wind power in the U.S. so I made up a company to look at installing a small wind farm. I would like to own one someday. Pennsylvania has a good supply of northwest wind. There is also a lot of money out there from the government.
Hello Rob,
I didn’t think to inform investors exactly where their money would be going. It makes sense as I can understand wanting to know if an investment is funding a superficial commercial or ground breaking research that will effect the future of renewable energy. Also your point of showing that you will run your company ‘as lean as possible’ is intriguing. Could you give an example as to what you mean by that?
Laura
Here’s a link to my post!
http://engr312.dutton.psu.edu/2014/10/20/investing-in-renewable-energy-hammonds/
Thanks for responding to my post Laura!
I’d be happy to explain lean principles with you. To run a company “as lean as possible” means to minimize labor and other operational costs.
To explain further, labor costs can be minimized through only keeping personnel that keep the business moving forward – no need for a supervisor for the supervisor so to speak. That’s not to say that on the job training would not be beneficial. I find OJT very important. Training people to do the job the way you want is necessary. Also, keeping supply costs down is another to run lean. Another thing is to streamline processes – this minimizes waste, idle time, and makes the business more efficient. If you would like to learn more look up a concept called “Kaizen”, the company I work for practices this – it really is a great way to run a business.
Best,
Rob