Deal or no deal? How to make sense of business energy offers

SME buyers are considering energy deals from multiple sources. Here's how to separate the good deals from the smoke and mirrors.

Whether it’s new office furniture or a business commodity such as energy, getting the best possible deal is paramount for cash conscious small businesses, especially as research from the Centre for Economics and Business Research shows that UK SMEs now spend an average £1 million a year on business expenditures. But the prospect of spending time sifting through numerous suppliers and deals to try and find the one that’s perfect for your business can consume time that the SME owner simply doesn’t have.

Take the energy market as an example. As there are now over 50 suppliers of energy and gas to businesses in the UK, in addition to the hundreds (if not thousands) more third party brokers surveying the market on behalf of customers, it’s perhaps not surprising that small business owners often struggle to decipher the offers available to them.

Energy should be a relatively simple purchasing decision for smaller businesses, but the sheer number of deals available makes switching contracts too onerous for many business owners to manage. Unfortunately the complexities don’t stop here. Gazprom Energy recently conducted research with 200 UK businesses, and while 95 per cent said price was the key influencer in their energy decision, a high number of them also said that other factors were involved, including the quality of service offered by the energy provider. SME buyers are considering energy deals from multiple sources and therefore it’s really important that they can distinguish between what genuinely is a good deal and what is smoke and mirrors.

It’s important that small businesses can quickly interpret the specifics of deals and offers, what they really mean and more importantly what the real cost will be. In particular there can be differences in terms of how promoted cost savings are applied in the contract and this could turn what looks like a great opportunity into not such a good one after all.

So, what precisely do businesses need to be aware of?

Fixed-term versus fluid tariff reductions

If an energy provider is offering a price discount, it’s vital to understand the difference between a reduced tariff that is fixed for the full term of the contract and one which is time-limited for an initial period only – for example just the first year. Equally, cash-back offers alongside temporary discounts might initially seem like a good opportunity to save some money however you need to be aware of the full tariff you could end up paying for the remainder of the contract. Ensuring that a tariff discount is fixed for the full contract term offers full price certainty and you know you won’t get any nasty surprises on your future bills which you haven’t forecasted for. Businesses want the certainty that they’ll be getting a specific price for a set amount of time. Discussing the deal and its small print with your supplier is a good way of finding any hidden charges that could be lurking.

Checking what the discount is actually applied to

Selecting an energy contract with what seems to be a significant discount may seem straight forward but it’s important to know what that discount actually applies to for instance, what charges are included or excluded from it. Some deals and offers might only discount the unit price and not the daily standing charges or vice versa, meaning you’re not actually getting the discount on your entire energy contract. When searching for discounted energy contracts reading between the lines and understanding the small print in the contract is vital to knowing exactly where the savings are being made. Calculate what the overall cost will be for the duration of the contract and use this to compare what suppliers are offering, bearing in mind that it will be impossible to forecast the total cost unless the rates are fully fixed for the duration of the contract.

Keep an eye on the market and seal a deal for the future

It’s a common misconception that you can only initiate a switch of supplier when your current energy contract is expiring. This means that a lot of SMEs ignore good deals (and indeed low prices) because they have months or years left with their current provider. By keeping a watchful eye on offers and prices throughout the year – maybe subscribing to receiving email offers from a few quality providers – SMEs can buy for the future when a great opportunity comes along. They can still see their current contract to fruition and also avoid the rush to find a good price when it does come to an end.

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Don’t trade in good service for best price

When researching a new energy contract, businesses often focus solely on the deals that are available and don’t do their homework on the actual supplier. Getting a good deal that saves the business a considerable amount of money is important however if you were to sign a lengthy contract with a supplier who has a bad reputation and offers poor customer service, you could end up with a bad deal no matter how big the saving. Issues could include poor quality or inaccurate bills, hidden costs, or lack of help and support. Review sites such as Trust Pilot, Feefo and Energy Advice are good places to start when assessing providers’ quality – allowing you to do your research based on other businesses’ past experiences, helping to ensure you get a good deal in every respect.

It goes without saying that it pays to shop around and read the small print when assessing energy offers and deals. With the recent Competition and Markets Authority (CMA) regulation changes it is now easier than ever for small businesses to see exactly what’s on offer. Under new regulations energy suppliers must provide quotes for small micro businesses based solely on the business’s post code and energy consumption – meaning quick and easy deal comparisons without having to provide large amounts of data.

So, we recommend shopping around and scrutinising deals on a like-for-like basis. The terms of an offer can vary a great deal so it is therefore important to understand exactly what you’ll be getting. Choosing a new energy contract can be slightly overwhelming but once you understand what aspects to look out for, coming out on top shouldn’t be too complicated.

This article was provided by Gazprom Energy

Further reading on business energy

Ben Lobel

Ben Lobel

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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