Setting Up as a Broker
Setting up an energy brokerage is relatively simple; there is no reason why you couldn’t be set up in a matter of days. Efficient!
This how-to guide will provide you with a comprehensive understanding of what setting up as a broker entails, how the process usually works, and what your future as a broker may look like.
Here at Niccolo Gas, we only partner with brokers who reflect the high standard of customer service we hold ourselves to. If you’re keen to join the team, continue reading.
Step One – Is This for You?
There are 6 main characteristics a good broker will have:
- A charismatic, confident persona,
- An idea of the direction they want their career to go in (self-employed, company manager),
- An understanding of the importance of sustainability, efficiency, and cost-effectiveness,
- Some background experience or sufficient interest in the industry,
- Good communication skills,
- An awareness and appreciation for legislation (and its updates!)
Step 2 – Which Way are you Going to Go?
The first decision you will have to make when setting up your brokerage is deciding whether you will be self-employed or be a company. There are potential drawbacks and advantages to both options.
The main areas where self-employed brokers, and broker companies, differ is how they pay tax, and how and when income is accessed. Below we will explore how both of these choices may look to help you make up your mind!
So, you have chosen the self-employed route to brokerage. Let’s find out a bit more…
This route may be good for you if…
- you are new to the industry,
- you would prefer to get started quickly, and simply,
- you enjoy managing your own finances, over have previous experience doing so, and/or
- you are starting a brokerage to supplement existing employment.
As a self-employed broker you will need to register as a sole trader on HMRC (even if this venture is additional to other employment). Sorted! You are ready to go.
As you are self-employed, tax isn’t automatically deducted from your income in the same way it is deducted by your employer on a wage slip. This means that once a year you will have to complete your own tax return. Some self-employed people find it easiest to outsource an accountant to help them with this process, and some people prefer to do it themselves.
TOP TIP – The tax return deadline is in April, try to keep up-to-date notes on your in and outgoings throughout the year to save a mad dash in Spring!
As you are managing your own finances, as soon as you get broker commissions coming in to your bank account you can spend them as you wish. You DO NOT need a separate business bank account for your business income, though you may find it useful.
Decided the company route is the best option for you? Let’s find out a little bit more…
Starting a company may be good for you if…
- you are planning to employ other people,
- you have forecasted high turnover,
- you would rather not have to manage your own finances/taxes.
For this process you have to register as a limited company – there are steps explained by HMRC here. The majority of people will contract a professional accountant to help manage large company in and outgoings.
As well as that, a professional accountant will be able to offer advice on any government schemes you are eligible for, which start up costs you can claim back, what to do about VAT, and how to go about registering your company at Companies House.
DID YOU KNOW? Companies House is a government body who manage and advise companies, you must register with them to begin trading.
A limited company means a company which is a separate legal and financial entity to you, meaning income from the company goes into a business bank account. As the company owner you then pay yourself with a salary from the company, as though you are your own employee.
Step 3 – Set Up and Train Up
Getting in touch with aggregators such as Evolve can massively boost your appeal as a broker. Evolve offer you business perks such as a Customer Relationship Management system (CRM). A CRM helps you keep track of leads and conversations with suppliers/customers, compliance support (for helping provide you with legal peace of mind), and a support line if you find yourself struggling.
Evolve also offer broker training sessions. The amount of training you require is based off your previous experience.
These opportunities, there are other options out there, give you a ‘foot-in-the-door’ to the industry and help you approach suppliers and deal with customers respectfully, and in a compelling, knowledgeable way.
Step 4 – Be Aware and Be Responsible
Third Party Intermediaries (TPIs) are not regulated by Ofgem in the same way that brokers are. This means there can be a lot of unethical practices within brokerage. Here at Niccolo we hold brokers we partner with to the following voluntary principles outlined by Ofgem, and it is a good idea for you to be mindful of them as well.
In their own words, Ofgem suggest TPIs should adhere to:
|Principle||Example of Behaviour|
|Honesty||You should identify yourself, the services being offered and any organisations you represent (directly and indirectly) clearly at the start of any interaction with a customer and obtain their consent before any marketing|
|Respect||You must at all times respect the consumer’s wishes and should cease the current contact and avoid future contact if the customer requests|
|Accuracy||You should make the customer aware of how much of the market you searched to obtain the offers you propose to them and ensure all offers are accurately presented|
|Transparency||Before obtaining their agreement to the contract, you should make the customer aware of all principal terms of the energy contract, including the services you provide and how the customer will pay (directly or indirectly) for those services.|
|Customer-focussed Practice||You should record and investigate all complaints fully and act quickly to put things right when you make a mistake|
|Professionalism||You should ensure staff are adequately trained for dealing with customers and adhere to these principles|
Source – Ofgem
Step 5 – Partnering with Niccolo
The Big 6 (or 5) Energy Companies will not negotiate, or even really engage, with small, limited companies or self-employed brokers.
Here at Niccolo we do things differently.
Partnering with a company like Niccolo gives you access to a supplier with competitive prices. We have access to wholesale energy prices and this means you will not have your customers coming back to you asking to switch supplier, as we offer low, practical prices.
We market towards Small and Medium Enterprises (SMEs) – this is a growing sector, and a very attractive option for a broker. Partnering with Niccolo means you can market towards this large consumer base, and help other small businesses find the best deals possible.
We have long-term goals here at Niccolo and want to include smaller brokers with us on our upwards trajectory.
Step 6 – Attracting Customers
Here, your real work as a broker begins. It is important to build up a rapport with a client base, as otherwise you will have nobody to market the energy to!
It is the best idea to find your niche. Why should businesses choose you to help find their energy? What can be offered? Why should you be trusted?
Previous experience in a sector is a massive appeal for customers as they will appreciate that you know both sides of the coin; what you can provide, and why that is relevant to them.
Experience in leisure, education, retail, industrial, medical companies is invaluable to mention, and may just secure you a customer from that area. Previous experience means that you will be able to knowledgeably and insightfully discuss a company’s particular needs and explain how you can support them as a broker. Experience lets you offer a personal, seasoned insight into their situation despite being new to the industry.
Step 7 – Understanding Your Finances
There are three main types of commission which may pay you for the work you do:
Commissions Using Uplifts
This means adding commission onto the prices you offer to customers. The customer pays the invoice and you get your share from the supplier. Some suppliers may pay this commission upfront and then claw it back. Niccolo don’t.
You take a % cut of the savings you manage to access for customers by buying energy directly from suppliers. Say you saved a customer £100, they save £50 and the other half is your payment.
As a Service
You bill the customer an agreed fee for the work you do, and they then pay you in the same way they pay their other bills.
Step 8 – Sell, sell, sell!
So, you have got a few customers, you are partnered with brokers. Wonderful. What now?
If you are wanting to grow your business substantially then you will need to put some effort into your marketing. Word of mouth and personal connections agreeing to sign contracts will tide you over well for a while, but for sizeable expansion you will need to start to think bigger.
Here is a Top Tips Tick List to work through:
|Register Your Business on Google Maps|
|Set Up a Mini Website with Google Business|
|Set Up a LinkedIn Page|
|Improve Your General Social Media Presence|
|Look for Useful Connections, Create a Mailing List|
Registering with Google Maps is an excellent way to provide customers with a platform to leave reviews and star ratings. Do not worry – you do not have to put in your address if you are self-employed!
Google Business Mini Websites are another quick and free way to improve your online reputation. This provides a space that you can refer potential customers to in order for them to gauge an idea of who you are, what you offer, and how people think you have been doing.
LinkedIn is a great way to list your previous experience to help attract new customers from that sector. Also, LinkedIn helps provide you with contacts so you can grow your business through networking.
All of these marketing strategies are ultimately aiming to help you develop a presence, reputation, and establish your brokerage as a credible business. Anonymity is not your friend in the world of sales, so get people talking about you!