The looming global financial crisis has us all looking over our business plans and finding ways to save and cut back. Consumer jitters, rising fuel costs and a host of uncertainties has more small businesses looking at their operations and planning survival strategies than ever before.
But don’t panic. An economic downturn is the best time to focus on making more with less, including one of the largest concerns we all have: our energy bills.
Along with the lending and mortgage crises affecting America, we also face a growing energy supply shortage that affects the cost of nearly everything we do—as consumers and as business owners. What we pay and what we charge is being dictated by an ever-changing marketplace.
How long and often we drive our cars and vans, how quickly we adopt new technologies to grow our businesses and how we heat and cool our places of work—those are questions that take on increased importance every day. Questions we all seem to be asking more than ones about our own operations. As an industry and as a society, our energy demand continuously increases while supply stagnates, forcing prices to rise.
What does this mean for your spa or private practice? What questions and what struggles do the current energy crunch force you to face every day? Should you raise prices? Should you cut back on staff or shifts? Should you decrease the number of products you offer? Yes, each one of those measures may decrease energy costs; worse, they may chase away business and customers.
When it comes to planning budgets and setting prices, you project the costs your company will incur and plan accordingly. The trouble with budgeting for energy is that, while you can estimate many of your expenses, your energy costs are unpredictable. Sudden increases in energy rates can bust the budget of even the most successful enterprise. What’s more, energy is the only cost for which you learn its price after you’ve consumed it. Imagine one of your customers knowing the price after they’ve had a massage.
While you can’t stop running your business, you can take energy matters into your own hands by making wise, informed decisions about the plan you choose.
There are several companies offering price protection in the form of a supply agreement that locks in the cost of natural gas. As the seasons and weather conditions change, so can natural gas prices, but a fixed-rate plan allows business owners to budget more effectively and precisely during times of traditional energy price volatility.
Three Questions Your Spa or Private Practice Needs To Consider
Every spa owner or private practitioner should ask three questions before choosing an energy provider and plan:
1. Fixed or floating: Should I lock in my energy price or let it float with market prices?
This answer depends on whether you can pass on increased energy costs to customers. If your business can charge higher prices, then locking in is probably not necessary. On the other hand, if prices cannot be passed along to the customer, locking in energy rates may be necessary.
2. Term: How long should I lock up my prices?
The duration of fixed price protection is generally from one to three years. If a business believes prices may come down in the future, a shorter term is advisable. If a business does not have confidence in its long-term projections, then longer-term protection may be advisable. That way, if prices go down in the short term but bounce back in the long term, the business will be protected.
3. Price: How much should I pay and whom should I pay?
Price is the third question, but sometimes it is more important who you buy from. A fixed price from a supplier that goes bankrupt when prices spike will be as helpful as a policy from a bankrupt insurance company. Beware of low-ball prices. If you get a quote that looks too good to be true, it probably is.
Before signing up for a fixed-rate energy plan, be sure to do your due diligence on the providers you are considering. Make sure the provider you choose has a strong balance sheet, access to financial capital and the risk-management processes that are necessary to enable it to offer the long-term protection being advertised.
Spa owners and private practitioners can take control of energy bills by choosing energy providers and enrolling in fixed-rate plans that lock in long-term price protection. Fixed-rate energy plans safeguard your business from unexpected increases in energy costs, regardless of whether prices rise because of natural disasters, limited supply or political crises.
Imagine what you’d be paying if you could have locked in the price of other items, such as gasoline or cable television, one, two or even three years ago. While that isn’t possible for most recurring expenses, it is possible for your energy costs.
By choosing a fixed-rate plan, you will be insuring your business against future energy price increases that could cut into your profit margins or force layoffs. If history is any guide, locking in energy rates is one of the most sensible things you can do to lessen the financial impact of the constantly increasing demand for energy.
Taking control of your energy bills will allow you to sleep a little easier knowing you are doing what is best for your business, your employees and your customers.
In 1999, Jeffrey Mayer, CEO of MXenergy, founded MXenergy on the idea that residential and small-business customers should have the same free market options available to giant industrial customers when choosing their energy supplier. MXenergy supplies natural gas and electricity to residential and commercial customers in deregulated energy markets. Since its inception, the company has grown to serve more than 500,000 customers in 39 utility territories throughout the U.S. and Canada. Mayer is an expert in the field of energy risk management and developed the Energy Traders Institute, a seminar on risk management heard by more than 30 utilities and energy producers in North America. Between 2000 and 2004, Mayer served as a member of the Risk Oversight Committee of Northeast Utilities.