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Choosing a supplier: What should you look for as a business?

When it comes to choosing a supplier, there are lots of things you might not have previously considered. Here's a guide to finding the right fit.
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When it comes to choosing a supplier, whether it’s for gas, electricity or broadband, it’s a necessary chore for the majority of small businesses. However, knowing what to look for needn’t be as complicated as you might think.

It’s the subject of our new “Choosing the right supplier” hub, produced in partnership with Total Gas & Power. Throughout 2017, we’ll be guiding you through all of the important considerations that come with those all-important overhead costs.

But first, many small businesses are time poor and cost-conscious which, while it might mean a lot of late nights, is not a bad way to be if you want your company to be more profitable. However, if you’re not careful, it can lead to cutting corners and making mistakes.

For example, when choosing a supplier for say, utilities, it is tempting to think the best move involves switching to the cheapest tariff – as the product itself is homogenous. In fact, what this ultimately means is that you need to focus on choosing a supplier based on its other attributes, rather than simply looking at the product and the price. Without this approach, frustrating problems could occur.

Eight per cent of businesses have experienced a problem with electricity supply, and three per cent have experienced a problem with gas supply. Problems ranged from a sub-standard service to bills being incorrect. An energy supply is essential for many businesses to keep going and, for an SME especially, poor service such as this could spell the end.

However, price is undoubtedly still a factor. While it is never advisable to choose a service based entirely on costs, it is important that business owners are at least sure they understand the costs and consider the overall value for money they’re receiving.

Choosing a supplier: Price comparison sites

Interestingly, a lot of business owners use price comparison tools simply to check they are not being ripped off rather than choosing a supplier. They check their prices haven’t risen significantly, and that the business is not on the most expensive tariff. But other than that, a price comparison site is not all that likely to prompt a switch.
In the event that a business owner is thinking of switching providers, one of the first things they are likely to do is key in their details into one of these online tools and pick the cheapest option.

However, there have been concerns raised about such sites, and some listings are reportedly false or exaggerated – for example, a basic price is listed without mentioning other charges incurred for the service to boost its ranking in the listing.

In fact, only last September, the Competition and Markets Authority (CMA) launched an investigation to address what consumers expect from digital comparison tools, their experiences and how it effects competition within the market.

Andrea Coscelli, CMA acting chief executive, said: “Since emerging a decade or so ago, such tools have helped to inject significant competition into a number of markets, including private motor insurance. They have made it easier for consumers to engage in many markets. However, they have been more successful in some sectors than others. We want to understand why this is the case and whether more can be done to ensure consumers and businesses can benefit from them more widely.

“Some people have also raised concerns about certain issues, including whether consumers can trust the information that’s available, and the study will look at these issues too.”

Furthermore, some providers are not listed on price comparison sites, so the only way to be sure of getting the best value for money deal for your business is to shop around.

The SME approach

Taking time out of your hectic schedule to shop around when choosing a supplier might be easier said than done for many business owners. With that in mind, here are a few simple pointers to guide your decision making process.

  • Products: Are you being offered a choice of business energy products that are easy to understand and have clearly stated benefits? If you’re not 100 per cent sure of your decision making criteria, understanding the products available may help you to establish your business energy product requirements as well as understand the value for money each product will give you
  • Customer service: Of the businesses that experienced a problem with the energy supply, 20 per cent claimed a supplier failed to provide the promised service and 18 per cent cited poor customer service. Speak to other business owners, find out what they have to say about their provider, or check out some review sites. You can even check the supplier’s website to read up on the customer service procedure, and make sure that if you ever had a complaint you’d know how to reach someone as soon as possible
  • Green credentials: Do you pride yourself on your dedication to the environment? Look to see whether your energy supplier offers a green service that can help position your business as one of the good guys
  • Advice and expertise: If you’re looking for a provider, it’s perfectly understandable for a small business owner not to be a gas expert or a broadband expert and so on. But when it comes to making these decisions, you need to be as informed as possible. You need to be able to rely on the professionals – does your supplier have a team of experts or an advice page?

While the priorities for each individual company can vary greatly, it is clear that no SME should judge a provider on price alone. You certainly don’t want to end up paying over the odds, but buying cheap and not being able to contact the customer service team in a pinch won’t do you any favours. Weigh up what your company’s needs are and act accordingly.

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About Author

Letitia Booty

Letitia Booty is a special projects journalist for Real Business. She has a BA in english literature from the University of East Anglia, and since graduating she has written for a variety of trade titles. Most recently, she was a reporter at SME magazine.

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