Try sleeping with a mosquito….(Brokers vs Consultants vs Doing it yourself)24 Apr 2012 | Filed under: Cost & Purchase Management
Posted by: David Powell
Brokers vs Consultants vs Doing it yourself
One of the most common questions we get asked is why should I use outsourced specialists when we can do it in-house for free or use a broker for free. In this article I try to address some of these issues with some pro’s & con’s for each type of approach.
This is by no means exhaustive because to go through all the pitfalls would take a small book and would still probably miss something out. I’ll also concentrate on Energy because it’s relatively easy to explain with simple examples, though the same could be applied to Telecoms, Stationery, Freight/Courier brokers etc etc.
Doing it Yourself
- You get the cheapest price you can find on a given day and don’t have to pay commission or a fee to an external party.
- You have full control and can make an instant decision
- Do you have time to read all the T&C’s? e.g. one of the big 6 has a Directors Clause i.e. the Director that signs the contract is personally liable for the energy bill should the company not pay.
- Are you sure you have called ALL the suppliers, on gas for example there are several players outside the Big 6
- Have you kept up to date on the energy market? How do you know that today is the right day to fix your energy price for the next 1, 2 or 3 years?
- If you are currently on high out of contract rates do you have the skills to calculate 6 weeks on out of contract rates if you transfer suppliers vs taking a slightly higher price with the incumbent – which works out better?
- Have you checked that each supplier is quoting you on the same basis e.g. same number of kWh’s, have they all included all charges e.g. VAT, Transportation, DuOS and TuOS etc
- Do you know if your meter type is right for your business operations, could a different meter profile save you money?
- You are at risk of a clever/slick salesmen conning you into a deal that’s not right for your company.
Using a broker
- You get a range of prices from several suppliers with one phone call / internet enquiry
- Some good brokers will also give some advice on market conditions and predicted movement.
- Has the broker highlighted any problem clauses? E.g. Take or Pay i.e. use only 79% of your contracted consumption and end up paying an extra 21% for energy you haven’t used at the year end.
- For suppliers the broker hasn’t included in their quote has the broker told you why they haven’t included that supplier? E.g. failed credit check or no commission agreement?
- Is the broker open book i.e. have they told you what commission they’ll earn from each quote presented?
- Has the broker highlighted any service concerns? i.e. if you’re going to be stuck on hold with a call centre, assuming the broker doesn’t offer this service, which supplier is better to deal with.
- Has the broker highlighted if a supplier bills monthly or quarterly or by flat rate direct debit with year end catch up – this can have a major impact on your cashflow, especially for Gas which can be very seasonal usage?
- A volume driven business i.e.
i) the less time they spend on a client the better and
ii) the longer the contract they sell you the longer their commission is locked in
iii) the further in advance they lock you in the better for them.
- How has the broker measured savings? Unscrupulous brokers and by no means all, in a declining market will claim savings against your prior year spend, so they’ve not actually made a saving, the market has just fallen.
Using a specialist consultant paid by share of savings
Clearly we’re biased but I wouldn’t be doing what I’m doing if I genuinely didn’t believe we were offering a valuable service that had the clients best interests at heart and we just happen to earn from a share of savings where we find them, if we don’t make a saving we still do the work. Win some, lose some.
- We check & do all of the con’s above.
- We are a low volume business and the more time we spend per client the more we can save. We deal with the minutiae.
- We take the risk away e.g. a broker will want to consolidate all your supplies into one contract end date, so they only have to visit you once a year and re-sign one contract. However in the energy market multiple contract end dates and multiple contract lengths means you spread the risk and don’t end up fixing all your supplies at the peak of the market.
- A share of savings charging structure means you can see how much you are paying for the service and you can be comfortable you are getting good value.
- Small changes can make a large difference or as the Dali Lama said “if you think you are too small to make a difference, try sleeping with a mosquito”. We’ll deal with your annoying mosquitos for you, so you can get on with day to day management of your business.
- If a new FD comes into the business our fee can look like a cost that can easily be cut and you’ll have to explain what we’ve done and what we do on an ongoing basis.
- Ummm – I can’t think of anymore cons, please let me know in comments below if you can and I’ll respond.