By Daniel Hunter
When you’re starting a business, managing costs and maintaining cashflow is vital, so your energy bills shouldn’t be ignored or written off as a fixed cost. Smart businesses plan effectively for inevitable price rises and take action to keep their energy costs as low as possible.
Energy Forecaster recently published the results of their quarterly Business Energy Barometer (a survey of 500 businesses) which found that rising energy costs are a major concern for many businesses.
In fact, more than 90% of businesses are concerned that if the trend for year-on-year price rises of 25% continues, it could have devastating effects on their future — with one in 12 saying this would put them out of business.
Energy hasn’t always been at the top of the business agenda because the cost was so minimal in relation to the profit margin, but between 2010 and 2011, energy costs soared from0.3% to 0.51% of turnoverso businesses are starting to feel the impact.
If you’re a start-up or you’re thinking about taking the plunge, here are some smart tips from our energy experts to help you keep your energy bills under control:
1. When you move into new premises, make sorting out your energy contract a priority - If you don’t, you’ll be paying out-of-contract rates, which are usually double the normal rate.
2. When you’re forecasting or preparing a business plan, assume that your energy bills will rise by at least 15% per annum - It might seem high, but 15% price rises are fairly typical. This obviously doesn’t apply if you sign up to a longer-term contract (see tip 5). You should also think about your plans for expansion and how they might affect your energy usage — taking on more staff or buying new pieces of machinery will push up your consumption.
3. Think about making some energy-saving improvements to your workplace - There are plenty of measures you can take that will pay for themselves in savings on your energy bills. You could be able reduce your annual energy bill for a minimal upfront investment. For example, according to the Carbon Trust, businesses waste 20% of their energy. See our business energy efficiency guide for advice.
4. Make sure you make a note in your diary of when your energy contract is due to - If you don’t pay careful attention and take action in the last few months of your contract, your energy supplier can roll you over to a new contract. It probably won’t be the best deal for your business and you’ll be stuck with it for 12 months, so you should avoid this at all costs.
5. Think about a longer-term contract - Most businesses prefer one year contracts, but long-term contracts (two, three or even as long as five years) can be a good opportunity to lock-in on low prices. The market fluctuates, but the overall trend is up, up, up. Prices have fallen in the last month, and the average unit rate is at its lowest point since November 2010, so now is a great time to sign a contract — long or short-term. If you’re planning changes to your business that will have an impact on your energy usage, a long-term contract might not be such a good idea, as you might want the flexibility to switch to a different kind of contract in the future.
6. Do your homework - Research the energy market thoroughly before you sign a contract. If you work with an independent business energy broker, like our parent company, Business Juice, they will be able to compare the market on your behalf, getting you quotes from a wide range of suppliers. They can also take a lot of the admin involved in the process off your hands — and who doesn’t want less paperwork?
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