We have recently started to work with Rishi and the team at Yorkshire Gas & Power in Leeds and he kindly agreed to answer some of my questions on the Industry as a whole.
AC) Give us an overview of your experience within the sector?
RR) 12 years industry experience, 11 of which are as the owner and Managing Director of Yorkshire Gas and Power.
AC) That’s great, what made you decide to setup an energy supply business?
RR) Back in 2008, the ‘big 6’ controlled the vast majority of the energy retail market and consumer perception of the big 6 was at an all-time low. I personally had poor experiences as a consumer and I made the decision to cease the opportunity to make a difference in the industry by setting up my own energy retail business. I quit my job at Total Gas and Power in November 2008 and took the plunge in to the world of business.
The reality was that I had no funds to start an energy retail business, with only 6 months of savings to live off, which meant that I had to launch the business with no staff and to run things single handedly for 4 years. We started under a white label supply model, which removed the high cost of systems that are required to launch an energy retail business.
It was an intense amount of hard work, with no annual leave being taken for many, many years, however, this approach allowed me to gain a robust understanding of the business fundamentals and forced me to invest every penny of profit wisely in to the business. We now have 30 employees, with a growth of more than 50% of revenue over the past 12 months, with a forecast to increase turnover by almost 100% in the next 12 months.
AC) In your opinion how much has the industry changed since you started?
RR) The change has been on an incredible scale. The number of energy retailers back in 2008 was approximately 20, and we are currently at over 100. Furthermore, the progress of decentralisation of energy generation is moving at an incredible rate, which will help to put some control back in to the hands of the consumer and may help to progress a much needed overhaul the energy industry.
AC) What are your thoughts on the current energy market?
I believe that the industry is currently going through a natural cleanse of retailers who are unable keep pace with the aforementioned change and who lack the necessary experience to operate an energy retail business. We have seen more than 10 suppliers go under over the past 12 months, and I believe that we will see many more casualties in 2019 for these reasons.
AC) Given the recent collapse of Extra, Spark Energy, One Select and now Economy Energy, what are the biggest threats that would cause a supplier to fail in your opinion?
· Inability to forward hedge on a long-term basis;
· Selling contracts below break-even prices (or worse, not even knowing what the break- even point is);
· Not having robust processes and policies in place across all departments (this links back to the point about lack of experience).
AC) What are your thoughts on the price cap?
RR) I can see why it was introduced – it’s a pleaser to the public and if the government did not introduce it there would have been an even greater public outcry over the lack of any price regulation. However, the big 6 have bunched all their SVTs at just a few pounds under the price cap and this was inevitable. This has led to decreased competition, which has had the opposite effect to what people have been lobbying for.
Ultimately, it comes down to the lack of consumer engagement and there is no short-term solution to this. It requires a long-term approach to change how consumers interact with the industry.
AC) To what extent has the price cap influenced the energy market?
RR) I don’t think it has influenced much in my opinion. It has benefitted small and medium sized energy retailers, who positioned their rates below the price cap before the cap was introduced, by forcing the big 6 to increase their fixed price contract prices. However, it has significantly affected the big 6, whose profit margins will be squeezed even further. I certainly wouldn’t want to be involved in trying to overcome the difficult challenges ahead for the big 6!
AC) What challenges do start up supplier’s face?
RR) Lack of experience and lack of credit cover.
AC) What do they need to do to succeed?
RR) They require some experience in the industry. I am a strong believer of starting small, building knowledge and processes over time. A lot of business owners in the energy retail sector are looking to make millions of pounds in a short space of time, which isn’t possible. They have to be in it for the long haul and be prepared for hard work and long hours over a prolonged period of time, which some aren’t prepared to do.
AC) From a small sized supplier’s perspective, to what extent will the current market conditions affect you attracting the best talent within the industry?
RR) We don’t have this problem, due to the fact that the business is well established and we have worked very hard to instil the right culture over a number of years. This naturally propagates to help us to virtually automatically attract the right talent (the term ‘best talent’ is too subjective and doesn’t accurately reflect what we’re about. The terminology I would use is that we seek to recruit the ‘right’ talent– staff who fit in well with the culture of the business and have the right attitude/mentality).
AC) When hiring, what do you look for in a candidate?
RR) The number one trait we look for is attitude. Everything else will naturally follow from this.
AC) What is your perception of recruiters that work in the sector?
RR) As with any recruitment industry sector there are good eggs and bad eggs. It’s about trying out different recruiters until you find one that works well with your ethos and business culture, which AD Energy does well on.
AC) What can recruitment agencies do to improve their service?
RR) The mistake that a lot of agencies make is to use a ‘numbers’ game to pull in as much revenue as possible. The best advice I can give to recruiters is to take your time to understand the culture of your client, and to fully understand what the role entails. This will allow the right candidates to be sourced and it will increase the probability of a long-term relationship developing with the client. AD Energy have been very good in this area.