An often-overlooked aspect when you come to calculating your expenses and cashflow is energy costs. When you're a startup, every penny counts - and tiny differences that you might not think worth your while can really add up after a year, saving you money and also making your business more sustainable and planet-friendly. We decided to pick the brain of Jason Smith, a blogger and energy expert who has helped businesses increase their energy efficiency for over 10 years. He manages the website Business Electricity Prices, which advises small- and medium-sized businesses on reducing their utility bills. Here are Jason's recommendations for cutting your startup energy costs.
'There’s probably just one line from your business plan that’s ignored, because most people see it as a fixed cost they can’t influence: your energy contract. But as business energy costs continue to rise, it’s worth spending a few minutes looking at your options to reduce them. Many new businesses fall into several well-laid traps by the energy companies that bring about higher costs. There are also simple changes you can make to your business operation that will help reduce consumption and lower bills.
While negotiating your contract is an easy task to undertake, almost 40% of businesses have never even gotten quotes, and simply renew at increased prices each year. Below are several situations where a new startup can save money, as well as tips to decrease your bills by reducing the energy you use.
If you’re taking over new premises, take action now
When moving into your new shop or office, the last thing on your mind is to check your gas and electricity contract. After all, the lights are working and your broadband is connecting to the internet, so you must be fine, right?
One of the biggest money-makers for the energy companies is a change of tenancy for any premises. New tenants get placed onto so-called “deemed rates” that are the second-highest tariff there is. You won’t move off these rates until you contact the supplier.
So, you need to find out who your supplier is right away. If you don’t know, try and find a recent bill or contact one of the many brokers who can find out for you. You should then check who has the cheapest prices in your area and arrange a switch straight away.
Don’t renew a contract—shop around
All microbusinesses are automatically sent renewal reminder letters before their current contract is up for renewal. This system covers the majority of small businesses owners in the UK. The second tactic used to keep your rates high, much like in all the insurance industries, is to propose new rates for the coming year without showing a comparison against your current agreement. Most renewal proposals increase rates by as much as 30%!
Therefore, it’s essential to use the renewal letter simply as a reminder to shop around and compare rates from all providers. You’ll still need to formally terminate your current contract, otherwise it will renew to the higher rates you get sent.
Switch contracts with ease
Switching electricity suppliers from one to another is totally stress-free. If you’ve ever switched your car insurance or energy for your home, then you’ll know what to do. There are multiple comparison sites and brokers that’ll check the lowest prices available in seconds. For the majority of businesses, it’s a simple decision to just select the cheapest option, because electricity and gas are a commodity.
Once selected, your tariff is switched over at the end of your current contract. There’s no loss of power during the process, and the suppliers do all the legwork when it comes to the administration for the change.
Don’t forget to make that change, though!
Although a businesses must terminate its current contract before entering into a new one, there’s one final trip hazard left in the energy obstacle course.
If you’ve terminated correctly and moved to a new tariff in time, then all is good. However, if you send off your termination notice but fail to change, then your existing supplier places you onto extremely expensive “out of contract” rates.
These tariffs are punitive and are usually double a typical bill. So watch out and ensure you complete the process in good time. A good broker will handle all of this for you, and remind you next time your contract is due for renewal.
Employ energy efficiency measures to cut your bills
It’s all well and good having the lowest tariff, but if you’re wasting energy, then your bill is likely to stay high. Simple changes can cut consumption by as much as 20%. In fact, the industry as a whole has seen a reduction in consumption over the past ten years, due to changes made. Here are some quick fixes to reduce your consumption:
- Ensure you use energy-efficient lighting in your buildings. The current crop of LED bulbs is the most efficient, followed by fluorescent lights. These bulbs are almost 90% more efficient than traditional bulbs and the cost has followed suit in recent years.
- Controlling heating and cooling systems by just a few degrees can have a dramatic effect on your costs. Turing a thermostat down by just one degree can save £100 per year for a small shop. Have timers to shut systems off when the office or shop is closed and no one needs the warmth.
- If you can, change desktop computers for laptops, as they use 85% less power.
With the average business electricity bill at just under £3,000 per year, even the smallest changes can bring about substantial savings.