Is your energy bill the first thing you dread opening each month?
You’re not alone. Thousands of small business owners have gone from thinking of energy as a boring background cost to one of their biggest expenses.
Here’s the problem:
Small businesses pay significantly more for their energy than large corporations. Much more. For example, micro businesses pay 63% more for each unit of electricity than the biggest energy users.
That shortfall is making owners think twice about where every pound is spent. Increasing numbers are implementing measures that permanently reduce their running costs.
Energy is no longer a fixed cost. It’s a cost you can manage.
Inside this guide:
- Why Small Businesses Pay More For Energy
- Heating: The Silent Budget Killer
- Where The Budget Squeeze Hits Hardest
- 4 Ways Small Businesses Are Fighting Back
Why Small Businesses Pay More For Energy
Large corporations have clout. They consume massive amounts of energy and negotiate big contracts with lowered rates as a result.
Small businesses don’t get that luxury.
Suppliers view smaller businesses as riskier. Therefore, you typically receive shorter durations and higher unit prices. It’s not fair… but that’s the reality of today’s market.
For the UK as a whole: electricity for medium sized UK businesses costs 92% more than the European average.
Then you have standing charges. These are the costs you pay per day before you even flick a switch on. In 2021 the average SME was paying about 38p per day. Now they are typically between 45p and 70p.
Pretty frustrating, right?
Heating: The Silent Budget Killer
Ask the average owner what drains their energy bill: lights, ovens or machinery will likely be their reply. But often it’s heating.
Think about it:
Retail stores, offices, salons, coffee shops and workshops require heat for employees and customers. Older gas boilers consume fuel (& cash) quickly.
That’s why many property owners are choosing to invest in a low carbon heating system such as an air source heat pump. Heat pumps extract heat from the outside air and can output around 3 times more heat energy than they use in electricity. Take a look at the average air source heat pump installation cost before you begin, so you know how long you’ll take to save money on a low carbon heating system.
The Boiler Upgrade Scheme offered by the government could also contribute towards the initial costs of smaller properties across England and Wales.
So what’s the result? Lower running costs, reduced carbon footprint and one less thing to stress about each winter.
Where The Budget Squeeze Hits Hardest
Rising energy costs don’t stay in one box on the spreadsheet. They spread.
As expenses rise, someone has to pay. For most small businesses, that someone is eating into their growth-related expenditures. According to a recent survey, 82% of small businesses experienced increases in their operating expenses this past year. A large culprit? Utilities.
Here’s where owners are feeling it most:
- Prices: Forced many to increase prices and drive away customers to less expensive competition.
- Hiring: New roles get put on hold because the budget just isn’t there.
- Investment: New equipment, marketing and upgrades get pushed back… again.
But here’s the thing most people miss…
Trimming the branch only solves the symptom. The winners are businesses that address the root issue.
4 Ways Small Businesses Are Fighting Back
Smart buyers are not waiting around for prices to drop. They are taking matters into their own hands. Here are four things that are working well for buyers these days.
Fix Your Energy Contract
This is the easiest win on the list.
Many small businesses overpay substantially simply because their contract expired. Once your contract expires, suppliers put you on “out of contract” rates. They will almost always be higher.
Mark your calendar a few months before your lease is up. Shop around and secure a fixed rate. It’s an hour of your time that can save you hundreds.
Cut Waste First
Don’t pay to keep the lights on before you buy that new gear.
Walk through your property after hours. What do you notice is still on? Most likely culprits are:
- Lights left on in empty rooms
- Computers and screens left on standby
- Heating running when nobody’s there
- Old fridges and freezers with worn seals
Simple timers and intelligent plugs solve nearly all of these issues for pennies on the dollar. Fast. Inexpensive. Simple.
Upgrade To A Low Carbon Heating System
Heating is numero uno. Of course most of your savings will be there.
A new low carbon heating system will reduce your dependence on gas and could reduce your running costs. Combined with effective insulation, more of the heat you produce will stay in your home. Less will be lost through your walls, windows and roof.
It’s an initial investment… but you continue to earn it back every year.
Track Your Usage
You can’t manage what you don’t measure.
A smart meter tells you precisely when and where you use the most energy. When you can see the pattern you can alter it. Lots of owners are surprised to learn how much energy they use overnight or at weekends.
Check your data once a month. Look for spikes. Then ask why they happened.
The Bottom Line
Skyrocketing energy prices are impacting the way small businesses budget and spend money. Those who fail to address the issue watch their margins slowly dwindle each year. Those who take matters into their own hands gain control again.
To quickly recap:
- Small firms pay more per unit than big companies
- Heating is often the biggest hidden cost
- Fixing contracts and cutting waste are quick wins
- A low carbon heating system offers long-term savings
- Tracking usage helps you spot problems early
Energy prices may be out of your hands. But how you use energy isn’t.
Begin with just one change this month. Then build upon that success. You’ll be happy you did.
Frequently Asked Questions
What is a low carbon heating system?
A low carbon heating system is something that heats your building, but emits substantially less carbon in comparison to a gas/oil boiler. This typically refers to air source heat pumps, ground source heat pumps and electric heating where the electricity comes from renewable sources.
Why are small businesses paying more for energy?
Small businesses pay more expensive unit rates as suppliers often view them as riskier. Small businesses also have shorter contracts and higher standing charges than larger companies.
