Wednesday, February 29, 2012

Seven Facts about Energy that All Business Leaders Should Know

1. Without energy, you have no business.
Fuel and power are inescapable ingredients of all business activity. Without energy, there’s no production, and without production, there’s no revenue. End of story.

2. You can either control your energy, or it will control you.
Understand this: energy is never neutral. When it is not working for you, energy is working against you. Think of this the next time you see equipment running without purpose. Think of this when you consider the emissions or safety consequences of your facility's operations. Think of this when your cost margins prevent you from matching competitors’ offers. Failure to control energy is a failure to control your cash outflow and returns to your shareholders.

3. You cannot “walk away” from an investment proposal to improve energy efficiency.
Never confuse an investment OPTION with an investment OBLIGATION. As long as your business remains in operation, money WILL BE spent on energy waste in one of two ways. You will either: (1) buy and waste the energy, or (2) spend money on a solution to reduce the waste. In either case, you are obligated to spend money. Unlike an investment in energy efficiency, money "invested" in energy waste adds nothing to your income margins.

4. Energy waste destroys capital.
There is much more at risk than your utility bills. Energy waste will destroy the capital on your balance sheet. By refusing to improve energy performance, you incur expenses that reduce your retained earnings. You may invest your capital in alternative assets, but those assets should provide a rate of return to pay for themselves PLUS the energy waste that you decide to live with. Add to this the deterioration of assets through the heat, friction, corrosion, and other consequences of energy wasted by your equipment.

5. Energy choices will “future-proof” your cash flow for years to come.
In addition to improving operating income, energy efficient assets are a hedge against current and future energy price turbulence. Similarly, efficient assets reduce exposure to evolving emissions and safety regulations. Finally, energy use is the primary contributor to sustainable or “green” business performance. The assets you choose today help to future-proof your facility (and perhaps your job).

6. Energy improvements: hard to find a better low-risk cash flow.

The majority of energy improvement opportunities represent simple, proven technologies. Each dollar saved through energy efficiency is one full dollar of operating income. Of course, you can increase income through sales, but sales are not achieved without cost or risk. You create this extra income simply by operating more efficient assets.

7. Your facility is like an ATM machine ready to dispense cash.
Energy serves every square foot of your facility. Just by opening up shop each morning, you commit to some cash outflow for energy. Energy efficiency allows you to recapture that cash flow. Imagine a cash flow, tapped literally under your own roof, to finance your working capital or to subsidize the capital investments needed to grow your business. You need simply to choose it.



At 1:31 PM, Anonymous Nancy Adams said...

Excellent points, well articulated!


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