Path-Q Solar
How should a business account for lost revenue during a commercial solar installation?
Answer
Treat expected lost revenue, contribution margin, extra labor, temporary relocation, reduced capacity, and customer disruption as installation-period cash-flow costs. Use lost contribution profit rather than gross revenue alone when estimating the financial impact.
Key points
- Identify which operations will be interrupted, for how long, and at what capacity.
- Separate lost sales from costs that are avoided during the interruption.
- Include overtime, temporary facilities, rescheduling, inventory, and mitigation expenses.
- Model schedule uncertainty and a contingency for delays.
What it depends on
- Installation schedule and work phases
- Business operating capacity during construction
- Contribution margin and customer demand
- Available mitigation and contingency plans
Risks and trade-offs
- A short delay can have a large effect for a high-margin or time-sensitive business.
- Optimistic scheduling can understate interruption costs.
- Cheaper installation timing may be more expensive if it coincides with peak operations.
Information you may need
- Detailed installation schedule
- Revenue, variable-cost, and contribution-margin data
- Capacity and customer-impact estimate
- Delay, mitigation, and contractor responsibility terms
Your next step
What to do next
Map installation activities to operating impacts and add base, delay, and mitigation scenarios to the project cash-flow analysis.
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