STAMFORD, Conn. — Coin laundry owners, you are not alone. A recent survey by the International Profit Associates Small Business Research Board published in CFO magazine cited energy and fuel costs as the top concerns of business owners, a fact that should surprise no one.America faces a growing energy supply shortage that affects the cost of nearly everything we do — driving our cars, adopting new technologies, heating our homes and businesses. Energy demand continuously increases while supply stagnates, forcing prices to rise higher.What does this mean for the average coin laundry? Higher energy prices squeeze profits; one way to compensate is to raise prices, but that comes with the risk of chasing away customers. Some coin laundry areas are very price-sensitive.When it comes to planning budgets and setting prices, you project the costs your laundry will incur and plan accordingly. That, however, can be easier said than done. 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 storeowner.At the same time, you cannot stop running your coin laundry, but you can take matters into your own hands by making wise, informed decisions about the energy plan you choose.PROACTIVE OWNERSChung Park, owner of Atlanta’s Wash House Coin Laundry, chose to insulate the business from volatile energy prices by taking a simple step — recently signing up to purchase natural gas from MXenergy on a 12-month, fixed-rate plan. This helps Wash House Coin Laundry manage its business costs, as the company can offer the same rate through next year.Deregulation of natural gas and electricity started in the late 1980s. Larger businesses have always had the option to use an alternative market for supply. Now smaller businesses are getting the opportunity to do what the “big guys” have been doing for years. Utilities are regulated by individual states so MXenergy, for example, is licensed by each state and sometimes utility territory separately.“After Hurricane Katrina, we had a difficult time and our natural gas costs nearly doubled,” Park recalls. “I have been running this type of business for more than a decade and I have always used a fixed-rate plan.”Wash House Coin Laundry uses natural gas for its water heaters and dryers, and for heating the facility, Park says.In Georgia’s deregulated market, MXenergy is just one of 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 laundry owners like Park to budget more effectively and precisely during times of traditional energy price volatility.“I realized it is a good decision to do a one-year plan,” Park says. “There are a lot of new coin-operated laundries being built in this area and my No. 1 priority is the competition because my profits may go down. With a fixed-rate plan, you don’t have to worry about going up and down.”QUESTIONS TO PONDERIf you are thinking about fixed-rate plans, you probably have some questions. Many states have their own websites that list all competitive marketers and their current rates. For example, there is www.powertochoose.com in Texas.All of our rates and marketing materials are reviewed by individual government regulators and approved before we can go forward with any campaign.Here are three things to think about:Fixed or floating: Should I lock in my energy price or let it float with market prices? The answer depends on whether you can pass on increased energy costs to customers. If your laundry can charge higher prices, than 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. Your type of store figures into this question. If you have a card store, for example, passing on a price increase shouldn’t be that difficult to do, at least from a “mechanical” perspective.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.Price: How much should I pay and whom should I pay? Price is key, but sometimes it is more important from whom 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 that 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. Also make sure that the supplier you are dealing with has the seal of approval from the regulatory commission.Coin laundry owners 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 like 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.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 that you are doing what is best for your laundry, your employees and your customers.Jeffrey Mayer is CEO of MXenergy, a retail natural gas and electricity supplier in North America serving 500,000 customers in 32 utility territories in the United States and Canada. For more information, contact MXenergy customer care at 800-785-4373 or go online at www.mxenergy.com.
Have a question or comment? E-mail our editor Bruce Beggs at [email protected].