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Posted: Wed 28th May 2025
You're a small business owner, so we don't need to tell you that cost management is one of the keys to success.
In recent years, the increases to bills and rising prices of stock and many other essentials has caused many owners added and unwanted stress.
This has no doubt caused some businesses to have to close permanently. That isn't good for them, the high street or the local community.
Across the country, our high-street retailers are the beating heart of local economies and many people rely on the small businesses nearby. But now's a very tough time to run one.
There are a lot of alarming stats out there about the rate at which businesses are shutting up shop. The Guardian reported that in 2024 13,479 high-street shops closed down – a near 30% increase from 2023.
But there are positive signs. The Office of National Statistics has reported a drop in UK business closures in Q3 2024 vs Q3 2023. In Scotland, data shows that more businesses opened than closed for the first time in five years.
With hope on the horizon, how can you make sure the small business you run is best placed for success? Our tip – cost management.
In business, there are generally two main types of costs to consider: and .
Fixed costs remain the same regardless of how much you produce or sell. These would include:
rent
staff costs (salaries)
insurance premiums
property taxes
loan payments
costs to maintain equipment
Variable costs vary depending on your level of output or how much you sell. These include:
raw materials
wages for hourly employees
transport costs associated with delivering products to customers
running costs – gas, electricity, water
Although some costs are fixed and must be paid, there are ways for a small business to cut its overall costs. One of the best methods is to develop a budget.
Creating a budget can allow you to identify unnecessary expenses and adjust accordingly.
It also helps you plan and track for future costs and investments, so you know your money is going to the correct places.
Developing a budget is very straightforward. Simply track your overall costs (variable and fixed) and income for a set amount of time, and budget for each department based on the categories and expenses.
Here, we've used energy as our example, but you could use this structure for other bills and suppliers to help lower your operating costs.
Understand your costs: Know which energy tariff you're on and the costs included. Also familiarise yourself with your invoices – are the costs listed the ones you agreed to and were expecting (see Monitor your costs below).
Find the correct contract (tariff) for your business: Look at the standing charge against unit rates and consider that standing charges might not always be cheaper. Think about how long you want to fix for.
A four-year fixed tariff might give you peace of mind for a while, but is it truly right for you? Or, would you prefer to fix for one year and keep an eye on market prices?
Monitor your costs (consumption): Use your invoice and the online tools your supplier has provided. For example, at EDF, we give customers access to Energy Hub.
This allows you to see your energy usage online, and can be updated every half an hour. You can look for patterns in your usage and get unnecessary consumption down.
For example, if you stay closed on a Monday but find your bills are still as high as the days you're open, what can you do to fix this?
Only pay for the energy you're using: Make sure bills are based on actual consumption rather than estimated use. The easiest way to do this is to get a smart meter, which submits meter readings to your supplier automatically.
Reduce your usage without comprising on quality: When prices are rising, even small changes can make a difference. For tips on how to save cash and carbon, read on.
It's true that energy bills can be confusing. But Ofgem, the UK's energy regulator, has put a lot of regulation in place to protect customers.
Suppliers follow these regulations to make sure your bill is as transparent as possible.
As a small business customer, some of the costs on your bill will be different to those shown on your home bill.
Here's an explanation of the key terms you'll see on your business's energy bills:
Climate Change Levy (CCL): A government-imposed tax to encourage businesses to lower their gas emissions and used energy more efficiently. The tax is chargeable on units (kilowatt hours, or kWh) used, and is applied only when electricity consumption exceeds 33 kWh per day during a bill period or 145 kWh for gas.
You'll see CCL as a separate charge on your bill. If your usage is at or below 33 kWh per day for electricity or 145 kWh per day for gas, or you are supplied on our Renewable contract, you won't pay CCL.
Contract end date: The date your contract ends with your current supplier. This only applies if you're on a fixed tariff. If you leave a fixed tariff, early exit fees usually apply. This information will be in your energy contract.
Estimated yearly usage: A view of your predicted annual consumption in kWh (kilowatt hours).
Fuel mix: A breakdown of your suppliers' fuel, provided from the Department of Energy Security and Net Zero. Here, you can see what percentage of your supply is renewable, nuclear, coal, gas and other, including the impact on the environment.
Rota Disconnections Alpha Identifier: A code that identifies the area in which your business sits within the electricity grid.
Standing charges: A fixed cost included in every electricity and gas invoice, regardless of whether energy is used on that day. The charge covers the supplier's cost to maintain the energy supply network, take meter readings and support some government social and environmental schemes. Find out more about standing charges
Supply number/meter number: Your unique meter reference, which you'll need to submit meter readings.
Unit rates: The rate charged per unit or kilowatt hour (kWh) of electricity or gas you use.
VAT: A government-imposed tax on the supply of goods and services. Currently, two rates of VAT apply to supplies of electricity and gas – the standard rate of 20% and the reduced rate of 5%.
The rate that applies to your business will depend on your usage, and will appear on your bill as a separate charge. Find out more about reduced rates
VIDEO: What makes up your business energy invoice and why it changes
Ever wondered where your energy costs are really going? This short video breaks down the key components of a typical small business energy bill, clearly and simply:
Now you know what costs you're paying, how can you reduce them?
Wholesale energy prices have shot up in the last few years. In 2021, small businesses were paying an average of 16.5p/kwh for electricity and 3.6p/kwh for gas. Just two years later, the average price had doubled to 31.9p/kwh and 7.5p/kwh respectively.
While a number of factors have contributed factors to these increases, the figures are concerning and do leave a lot of small business owners asking how they can reduce their costs when prices are rising.
There are several ways to cut costs. Integrating these practices into your day-to-day can lead to significant savings and a more sustainable approach to energy consumption.
Use energy-efficient office lighting: Switching to LED bulbs can reduce energy usage significantly.
Install a smart meter: They give you more control over your consumption and help you track usage and costs.
Turn off appliances when you're not using them: Make this a habit.
Turn down the heat: Controlling the climate in your office can be a huge help in controlling bills. A big change would be to install smart thermostats and programme them to heat or cool the space depending on when you're open and how busy you are. A smaller change would be to use natural ventilation as much as possible.
Avoid wasting energy in customer areas: You can smartly position office appliances to stop cold air escaping and retain heat as much as possible.
VIDEO: Top tips to save time and money on your small business energy
Who better to give advice to small businesses than EDF's Small Business Energy Specialists? Here, one shares their top money-saving tips:
Depending on where you're based and how long you've been running, there may be an opportunity to apply for government grants or get funding from certain schemes.
These can provide substantial support to a small business, and some of these grants and loans are 100% backed by the government. Examples include:
grants for innovation and research and development (R&D)
regional growth fund grants
apprenticeship grants
export grants
Visit the UK government's website for more information.
The government in Northern Ireland backs the Energy Saving Trust with an £8 million fund through the Northern Ireland Sustainable Energy Programme. This helps businesses fund the cost of making energy efficiency improvements.
Use the business support finder to find various small business energy grants.
The Scottish government offers financial support through the Find Business Support Service. The Scottish Growth Scheme provides financial support of up to £500 million to help Scottish businesses grow.
The Welsh government teamed up with the Development Bank of Wales to offer financial assistance to small businesses via the Green Business Loan Scheme. This funding comes with lower interest rates and flexible repayment options.
