The number of SMEs in the UK is on the rise, and this growth is mostly down to micro businesses. Here, we examine how an SME owner can move from the consumer mind-set and negotiate as a business.
It’s all part 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.
The size of a business affects its decision making process at every turn. Around half of businesses find it easy to compare prices and find a suitable contract, but many believe it is difficult and smaller businesses are more likely to be among those that claim that it is difficult.
This is according to the Citizens Advice Bureau, which also found that price comparisons are not always straightforward, and customers need to be knowledgeable if they are to negotiate as a business and make financials gains from switching suppliers or contracts. Given that smaller and micro businesses are less likely to have this knowledge, it is easier for each to encounter dissatisfaction with suppliers.
An industry report found that dissatisfaction in energy suppliers in particular comes from rising prices, poor service, and difficulty switching. A staggering one in ten businesses claimed to have a bad experience with its supplier every time there is an interaction.
The challenge to negotiate as a business
Small businesses and micro-businesses consume energy at a similar rate to domestic customers, but with fewer protections in place. This puts small businesses at a poor negotiating standpoint, leading to price concerns.
There is a crossover between domestic and small business customers – many will be self-employed or working from home and therefore using their domestic supply, and even those with their own premises may have the consumer mind-set. For example, a friends’ supplier recommendations are only useful if they are for an office/workspace similar to your own. Who they use to heat their houses or keep lights on at home is irrelevant. Compare like for like, and look at trusted review sites to get a feel for customer satisfaction levels.
It might seem laborious putting so much effort into researching small business customer satisfaction, but in the long-run it could make all the difference.
Getting the best price
Around 65 per cent of SMEs use price comparison sites, but 46 per cent use them only to check that prices have not increased significantly. According to an industry report, only 40 per cent compare prices directly.
While such sites can be a good jumping off point, it’s not always the best idea to rely on them solely. Information can be misleading or absent, and some companies prefer not to be listed.
A recent Competition and Markets Authority (CMA) report found that the energy market in particular exhibits a lack of transparency, and many tariffs are not published but are negotiated on an individual basis between the supplier and its customers.
Granted, SMEs may feel that they are not in an ideal position to negotiate as a business. Yet while many small businesses see little differentiation between suppliers, it is worth noting that, even for those who plan to make their decisions entirely on price, it is necessary to research to get the best bang for their buck.
Getting the “extras”
Only 27 per cent of businesses research factors other than price when choosing a supplier. Although this may be the primary factor by which most small businesses judge suppliers, there are other important things to consider.
The main things customers want in a supplier after value for money are: great customer service (50 per cent), transparency in pricing and general information (36 per cent), flexibility (30 per cent), quick responses to queries (27 per cent), a clear renewable energy offering (26 per cent) and support in energy efficiency (26 per cent).
Businesses need to weigh up which factors are most important and make a point of assessing suppliers on these points. Look at a potential supplier’s website – is the information all there? Is a green offering clearly signposted? Would you know how to contact them for customer service requirements or complaints?
Ultimately, the key to negotiating a deal as a small business as opposed to a consumer is to simply know that you have options. Decide what factors mean the most to you and your business and judge each supplier by your own criteria, research on websites and maybe make some phone calls. Put the effort in at the start rather than getting caught out later on. You are then truly able to assess whether you are getting great value for money for your business.