ENERGY COSTS WORRY SMALL BUSINESS OWNERS

by Melissa Sharp
National Federation of Independent Business

Fewer than half have taken steps to reduce consumption

Energy prices may have eased lately, but the long term prognosis is that energy costs are headed higher over time. Yet in the last three years, only 43 percent of small business owners have taken steps to reduce energy consumption, according to a new survey released today by the National Federation of Independent Business Research Foundation.

“Most of what has been done to date are minor adjustments--changing to more efficient lighting, changing a thermostat, adding insulation and switching off lights,” said William J. Dennis, the foundation’s senior research fellow. “These are steps that are process oriented, rather than investment oriented. Replacing a fleet of vehicles or moving into more energy efficient space requires significant investment, and many small business owners cannot afford it.”

Energy is a major cost for a substantial share of small firms. One in 10 claims that energy is the single greatest cost, even larger than wages and salaries or materials and supplies. Another one-fourth indicate energy is one of the two or three largest costs that face their enterprises.

The majority--70 percent--associate their greatest energy costs with transportation and buildings, typically operating vehicles and workspace temperature control.

Nearly 40 percent report that their primary energy expenses are to operate vehicles, while one-third attribute theirs to heating and cooling. Slightly more than one in five spend most for operating equipment or processes. Just 5 percent consider lighting their main energy expense.

Although 84 percent of small business owners use vehicles in their operations, nearly half of those say they made no changes in the past year to counteract higher gasoline or diesel prices. Of those who did alter their operations, 18 percent changed routes or schedules, 16 percent reduced use of vehicles and 11 percent bought or leased more energy efficient vehicles.

Energy efficiency is an important influence on the decision making of 46 percent of owners. Eighty-eight percent of them say that while they cannot afford to simply discard their current fleets, when the time comes to replace vehicles, efficiency will influence their vehicle leases or purchases. However, 37 percent do not believe that vehicles exist today that can perform the same tasks as their current fleets while consuming less energy.

While most small businesses are located in commercial areas, more than a quarter of those that employ workers are housed in a residence or associated building. Fifty-seven percent of small employers own the building in which their enterprise resides. Of those who lease or rent, more than seven in 10 pay heating and cooling bills directly. As a result, between 85 percent and 90 percent of all small business owners have a direct incentive to reduce their heating and cooling consumption.

Twenty percent of those who directly pay heating and cooling bills say they have remodeled their buildings in the past three years to cut energy costs.
More than one-fourth report using equipment or processes that require large amounts of energy, which, given the importance of energy to their operations, often increases the difficulty of controlling costs.

Twelve percent of those who identified themselves as “heavy users” report investing in systems that could recycle the heat or cooling generated to other purposes.

Two-thirds of small firms have outdoor lighting.  A sizeable majority--80 percent--does so for safety and security.  Nearly three-fourths have made fluorescent lighting standard, while only 12 percent continue using traditional incandescent light. Nearly half of those responding to the survey said they were aware of additional steps to take to cut energy costs if necessary.

The executive interviewing group of the Gallup Organization collected the data for this National Small Business Poll for the NFIB Research Foundation.

The interviews were conducted between July 24 and Aug. 25, 2006, from a sample of small employers. “Small employer” was defined for purposes of this survey as a business owner employing no less than one individual in addition to the owner and no more than 249.

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