Building a pay-as-you-go (PAYGO) solar-energy business is both exciting and challenging, with each PAYGO business having to navigate complex operating environments and continuous fundraising processes. Applying a robust financial model to manage liquidity, analyze unit economics, and forecast finances makes the journey smoother and helps your business raise funds. Yet, financial models can seem complicated and difficult to create and understand. This is why USAID Power Africa and Persistent, Africa’s Climate Venture Builder, developed a financial-modeling tool that is freely available to any aspiring or current PAYGO energy access company. The tool provides an industry benchmark model that can help especially early-stage entrepreneurs to better understand their path to profitability and financing needs.
The 12 key lessons we share in this document emerged from Persistent’s decade-long experience helping startups in off-grid energy model their finances and its recent involvement in developing the financial-modeling tool with Power Africa. This report details these lessons, together with examples and clear explanations of what actions companies can take based on real-world experience. Although off-grid solar startups stand to benefit greatly from the lessons presented in this report, the insights on profitability are valuable also for more mature companies that want to scale. For example, sound unit economics will help a company of any size avoid scaling the wrong products, which will cause financial losses. This report is also helpful for readers who have invested or are planning to invest in PAYGO solar businesses, or who provide technical assistance and other support to companies operating in the solar-energy sector.
Power Africa aims to help companies make the right operational and funding choices so that they scale sustainably. We hope that the financial-modeling tool, the accompanying user guide, and this report will help demystify best practices in financial modeling for PAYGO businesses and guide you in using financial modeling to make business decisions and raise funds. We welcome feedback and questions on the tool and accompanying materials; please get in touch at a2f@powerafrica-offgrid.org.
