How to Manage the Rising Energy Costs in Small Businesses?

How to Manage the Rising Energy Costs in Small Businesses

Many small businesses pay their energy bills without much thought, but with energy costs soaring, it’s time to pay a little more attention to energy expenses. With the global demand for energy rising, wholesale energy prices have experienced massive hikes. The high energy costs are putting a strain on small businesses. While the government has offered support to businesses, the ballooning bills are affecting their incomes.

You must minimise expenses by keeping your energy bill low for your business to survive during the trying period. If you aren’t considering energy-efficient measures, you are missing out on significant cost-reduction techniques. Let’s explore ways to minimise energy bills and keep your business afloat.

What Causes the Rise in Energy Bills?

The limited supply and increasing demand mean energy prices are still through the roof, and the bills are a major concern for businesses. While the UK government has supported businesses through the Energy Bill Relief Scheme, many businesses still feel the strain of energy costs. With the continued supply issues, energy prices will remain volatile, forcing many businesses to look for alternatives.

The rising inflation isn’t helping matters, and suppliers are raising their prices to cover the extra costs. While an increase in fuel prices is nothing new, the current fuel costs are soaring and volatile, making it difficult to predict the prices in the next few months.

What Is the Effect of the Rising Energy Bills on Small Businesses?

Small businesses are already feeling the pinch of soaring energy prices. More than half of small businesses spend over £3,000 on their yearly energy bills, and the cost is rising consistently. The rising energy costs have impacted the growth of small businesses. With the prices set to climb further, it will have a detrimental impact on your business.

While large companies can absorb the running costs for some time, small businesses have a tighter margin, and the low cash flow can impact their growth. You may be forced to pass on any running costs to the buyers as a business owner. Consumer price hikes put you at a disadvantage when competing with large companies. Some of the effects of the energy price hikes for small businesses include the following:

• Operating expenses: Energy bills are important for businesses. With the increased cost, it becomes more expensive for businesses to keep their equipment running, distribute products to customers and keep the lights and air conditioning systems on.

• Supply chain disruption: High energy costs affect the supply of products. Small businesses have to purchase products at a higher cost. Businesses that rely on raw materials, transport and office supplies will feel the impact of the price hike on the supply chain.

• Revenue reduction: Supply chain disruption and rising purchase costs of products and services force businesses to hike their pricing. Besides, consumers are also tightening their spending and buying only the bare necessities. When you combine the reduced sales with the higher overheads, your revenue reduces significantly.

• Reduced employee confidence: When businesses face a financial strain, employees lose confidence in their job security. The rising living costs increase anxiety levels for employees, which impacts their productivity.

The rising energy costs are causing significant effects across all business sectors, and small business owners feel its effects. If you want to keep your business afloat during difficult times, you should make some adjustments to improve energy efficiency in your company. Devising strategies for dealing with energy crises is a great start.

How Can You Minimise Energy Bills in Your Business?

Lowering energy costs can free up your cash, and you can invest it in other areas. Some of the strategies for managing your energy bills include:

Conduct an Energy Audit

You can only lower prices when you know where you are losing money. An energy audit helps you identify areas that consume the most energy in your business. You can also determine areas where energy use has a negative financial impact. Besides, an energy audit helps you understand the energy needs of your business and provides suggestions on how to reduce usage. The energy audit is quick, and some commercial energy suppliers offer energy audits as a free service.

Change Your Energy Supplier

Most small businesses review their contracts with energy suppliers yearly. If your energy contract is ending, ensure you tactfully negotiate for your next contract. Energy suppliers offer different tariffs and rates depending on your needs. You can shop around for affordable contracts or look for suppliers that offer additional services. With the rising energy costs, negotiating an energy contract is tricky. Due to price uncertainty, energy suppliers quote higher prices to compensate for the cost fluctuations. You need to be a good negotiator to get the best deal. It is advisable to get a long contract that offers security in case of a future rise in prices. While short-term contracts allow you to switch to other suppliers, price hikes can increase your energy bills.

Adapt Energy Efficient Practices

After the energy audit, you know the equipment and areas in your business that consume the most energy. Before you explore capital-intensive energy-efficient options, consider introducing better energy practices in your business premises. For instance, you can switch your light bulbs from incandescent to LEDs to reduce energy consumption. LEDs use 75% less energy and can last for years saving money on replacing broken bulbs.

You can also introduce energy-efficient behaviours on the business premises. For instance, ensure employees turn off the lights and equipment when not in use. Alternatively, install motion sensors to ensure lights are off when no one is in the room. You can assign the responsibility of switching equipment off to specific employees to ensure energy isn’t wasted by idle equipment. Some machinery needs to be on 24/7. In such cases, purchase energy-efficient office equipment to keep the cost low. Check the energy ratings of the equipment before purchase for better energy performance.

Good Housekeeping and Maintenance

Small businesses can reduce their energy bill significantly by implementing maintenance and good housekeeping measures. For instance, you should ensure the workplace is insulated to minimise utility bills. In well-insulated buildings, less warm air escapes during winter leading to lower energy bills since you won’t over-rely on thermostats. Insulation also reduces the need for air conditioning during summer, and you will spend less keeping the internal temperatures regulated. It is also important to get a programmable thermostat installed. It helps you keep the heating off when the temperature is high and switch off the air conditioning systems remotely when no one is at the office.

Consider Renewable Energy Sources

When exploring long-term alternatives for reducing energy costs, consider renewable energy sources. That doesn’t mean you invest in capital-intensive sources. You can explore energy suppliers that provide electricity from renewable energy sources. For instance, solar and wind energy is cheaper than electricity from gas or oil sources. That means electricity from renewable energy is likely affordable and can significantly lower your energy costs. A great alternative is to generate renewable energy. Some renewable energy like hydro and wind are capital intensive, but you can install solar panels in your business without a huge capital investment. A renewable energy source is a long-term strategy that can significantly lower energy prices. Besides, you will contribute to sustainability goals.


The uncertainty in energy prices means businesses need strategies to remain resilient in the existing market conditions. Government support may be short-term, and you need to find strategic measures to protect your business from collapsing. Adapting energy-efficient habits and working with your employees to save energy can lower utility bills. You should also consider investing in long-term strategies to improve energy efficiency.

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