Most business owners take energy for granted. As long as the lights are on and the laptop is running businesses can easily operate taking little notice of bills and suppliers. Yet we increasingly rely on energy hungry systems that can quickly eat into profits. Keeping offices, kitchens, IT, and communications powered can significantly impact operating costs.
Your average small business in the UK spends around £5,100 on electricity and £4,100 on gas every year. I think we can all admit that we have let this bill pass us by far too often – I know I did in my former career running care homes. Understandably, business owners are far more focused on making cash than taking the time to think about how they spend it on gas and power. However, this is a huge mistake. Every business owner should have a good grasp of how they buy and consume energy.
Part of the problem is that there is no such thing as an average energy bill for businesses. Let’s think about two hotels, stood side by side in middle England: each of them has around 50 rooms; both offer a decent three-star service; neither of them has any frills beyond your usual board and lodging. I can guarantee you now that neither of these hotels will have the same energy bill.
For one thing, the exact time of day when each of these hotels uses its energy will be a bit of a mystery. Peak energy consumption could be at midday for one hotel, and at midnight for the other; it all depends on how the systems are set up. Throw in different boilers, different lighting, and different heating systems and making an estimate for the two energy bills is a real stab in the dark.
These imprecise estimates have an important knock-on effect in that price comparison websites find it notoriously difficult to serve the business consumer. Thrown by an array of variables, the sites simply cannot cater to businesses in the same way that they do everyday household consumers. Not only does this leave business owners with a bad deal, but it also leads to a general lack of awareness when it comes to the cost of energy for businesses.
This point is crucial. While you may not be able to switch your energy supplier overnight, you can begin to get to grips with how you are spending your money. Rightly or wrongly, Ofgem assumes that business owners are clever enough to manage their own energy bills – this is why the business energy market is unregulated. So, for now at least, you are going to be expected to regularly review and understand your energy bills.
This can be a laborious process, but it has to be a top priority as energy bills can wreak havoc with cash flow. This meant that one of my first objectives when I founded Yü Energy was to ensure that my customers are able to set payment dates themselves, making sure that all bills fit into their business’ cash flow plans.
There are lots of other quick and easy ways to get to the bottom of your energy bill. First, take the time to understand your gas and electricity meters. Different types come with different settings and having a clear grasp of what you are reading is essential.
Also, it is always worth dusting off your contract to review your terms and conditions. Have a clear sense of when your contract comes to an end and seriously consider switching. Approximately 90% of SMEs are currently supplied by the Big Six, of which 40% have not considered changing supplier in the past five years. To me this figure is crazy – there is plenty of choice out there, with surely better deals and service than the Big Six can offer, so go take a look and see what is out there!
Energy is one of the largest expenses that you will have as a business owner. Take note of it and be the expert. That hard work studying your meters and scrutinising your contract will pay off sooner rather than later.
By Bobby Kalar, CEO and founder of Yü Energy