The self-employed must also have their operating costs under control. After all, it’s about making a profit. Because the costs are not correct, the company’s livelihood can be jeopardized in the long term.
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Operating Costs Electricity
For the first time, the self-employed are faced with the need to list their costs when setting up their business plan as founders. In addition to personnel costs, material costs, or the operating rooms’ costs, energy costs are among the most important types of costs. The cost of energy also includes electricity costs. As founders, the self-employed have to estimate their expected electricity consumption and then calculate their electricity costs. Later they have empirical values on which they can rely.
Empirical Values For Electricity Costs
Even if the self-employed have experience of electricity consumption and its costs, they still need a secure basis. It is determined by reading the electricity meter on a monthly or annual basis. However, this factual finding is not sufficient to assess whether electricity costs can be reduced; because the amount depends mainly on the company itself or its industry.
The manufacturers’ businesses need a lot of electricity to be able to manufacture their products. This is especially true if they belong to the chemical, automobile, paper or food industries, to name a few.
However, electricity costs are also an essential issue in service companies because telephone systems, IT technology, fax machines or even air conditioning systems can turn out to be unpleasant “energy guzzlers”.
That is why the empirical values of electricity costs are made up of those of the self-employed company and its branch.
Lowering The Cost Of Running Electricity
At least once a year, the self-employed person asks himself how the operating costs for electricity can be reduced. It allows for different answers. On the one hand, he can intervene directly in power consumption by changing the work processes or controlling the machines and devices. On the other hand, the indirect measure is open to him to choose a cheaper electricity provider. If the self-employed are still in the start-up phase of his company, he should apply the same criteria for his initial selection as are required for a later change.
Change Of Electricity Provider
Switching from one electricity provider to another to reduce electricity costs has only been possible since 1998 with the liberalization of the German energy market. This means that the self-employed no longer necessarily have to accept the offer of the local electricity supplier but can look around the electricity supplier market, which now comprises around 1,000 companies, which in turn offer different tariffs.
The paths into the thicket of this market are complex. The self-employed can inform themselves on the Internet and make the comparisons themselves. You can also get professional help from consumer centres or energy advisors and use a power comparison calculator. All you need is two numbers, your zip code and your electricity consumption.
Commercial Electricity Or Private Electricity
The first decision that the self-employed have to make is the choice between commercial or private electricity.
From commercial electricity, one speaks when between 30,000 kWh and 50,000 kWh are consumed per year. So if the self-employed man runs a production company, he will tend to purchase commercial electricity. If he needs even more electricity, it is already about industrial electricity.
Some electricity providers start commercial electricity for smaller businesses with a purchase of 10,000 kWh per year.
Private electricity for a family of four is around 5,000 kWh per year. For a “small” self-employed person, private electricity comes into consideration.
Nevertheless, every self-employed person should calculate his own electricity needs and relate them to the offers to be able to decide the best alternative for himself; because the empirical values for commercial electricity and private electricity are not “set in stone”, and the choice of commercial electricity does not have to be the best.
Conditions With The Electricity Providers
In any case, the self-employed must check the following conditions of the electricity provider:
- Duration of the contract: the shorter the duration, the sooner the self-employed can reorientate themselves to the market.
- Notice period: The same applies to the notice period as to the term of the contract.
- Contract extension: If the contract is concluded for an indefinite period, the self-employed person must observe the notice period to terminate the contract.
- Price guarantee: A price guarantee protects the self-employed against unpleasant price increases.
- Prepayment: With prepayment, the self-employed person pays in advance to purchase electricity for a certain period. If the electricity provider goes bankrupt, the amounts paid in advance are lost.
- Deposit: The same applies to a deposit as to a prepayment.
Pitfalls When Changing Electricity Providers
The pitfalls of deposit and prepayment have already been mentioned. However, there are two more:
- Bonuses: The granting of bonuses is primarily a marketing measure. To assess their value and determine the associated benefit, the self-employed have to evaluate the offered bonuses themselves to not fall for a sham.
- Electricity packages: Electricity packages are cheap for the self-employed because they commit to a fixed purchase for a certain period. However, if he does not precisely meet the obligation from the package with his actual power purchase, he pays too much; this applies both to the case of under-purchase and for over-purchase.
The Nature Of The Stream
The types of electricity are based on how it is obtained.
- Hydropower,
- Wind power,
- Nuclear power and
- Fossils.
Each type of electricity has its price and is therefore not necessarily suitable for reducing operating costs. Also, green electricity is not the same as green electricity and differs from provider to provider. The selection of the type determines the low price of the electricity tariff. Self-employed people who only value price should not make a selection and go straight to a low-cost provider.
Conclusion
Lowering operating costs is a constant task of every self-employed person. In addition to direct intervention in electricity consumption, he can reduce costs by changing the electricity provider. However, he must first check whether commercial or private electricity is suitable for him. Then he has to compare the conditions of the providers and watch out for pitfalls. Each type of electricity has its price range. Therefore, it is not a criterion for a reduction in operating costs but must be taken into account by the self-employed.