SME buying strategy: going direct or using a gas broker

When it comes to purchasing business gas or any utility for that matter, owner-managers have two main choices. Do you go to a supplier directly and try to negotiate your own rate. Or do you arrange a contract through a broker or third party consultant.

Your decision should depend on a few key questions:

• How much do you consume?
• Do you have a good understanding of the market?
• How much time do you have to manage consumption?
• Do you require budget certainty?

The key advantage of contracts which are directly negotiated with the supplier is that they tend to be simple and stable. These work well for smaller businesses where demand rarely fluctuates from month to month.

Most suppliers offer simple fixed-price contracts which provide budget certainty, leaving your top minds free to focus on what’s important to your business.

No risk no reward

As with so many other ‘safe bets’ though, the potential returns on a directly negotiated contract are small. If you are a manufacturer, or if you run another business where consumption fluctuates a lot then the potential rewards are a lot greater.

If your business has a lot of flexible processes, and doesn’t require as much budget certainty then you should at least discuss your options with a third party consultant or broker. Choosing to work with an energy market broker gives you the option of purchasing a more sophisticated energy ‘product’.

Instead of purchasing at one set rate, you can take advantage of different price bands and purchase energy at different prices throughout the year (at higher or lower prices).

Of course, if you purchase a lot of energy then there’s nothing stopping you from negotiating a more sophisticated contract directly with the supplier. However, a lot of businesses don’t have the resources to employ an energy market expert. And many more don’t want the hassle of negotiating and making big buying decisions month in month out.

This is where third-party brokers come in. The main function of an energy broker is to source contracts from a range of suppliers. If you choose a flexible purchasing arrangement then good brokers will give ongoing advice on when to buy, when to wait and any other purchasing decision you come across.

Choosing a good broker

Over the last decade or so energy brokers have received their fair share of negative press. Although I’m sure that most commentators would agree that it is a few bad apples spoiling the bunch.

Even so, it is important to choose a broker who you can trust. In response to some of the negative attention directed at third party intermediaries an industry binding code known as the Third Party Intermediary (TPI) code of practice was introduced which set certain standards for energy brokers.

Business Gas.com are proud to participate in the TPI code of practice scheme.

Download our guide on business gas buying strategies for more advice on information on going direct vs using a broker.