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If it’s the bright lights you’re after, don’t sweat the power bill

If it’s the bright lights you’re after, don’t sweat the power bill

Hamish Edwards

[offshore]

It’s the paradox of modern travel. You get a cheap £50 business flight and end up paying £60 for a cab to the airport. And then the budget airline stings you £15 to carry your own bag on the plane.

This happened to me the other day at Glasgow Prestwick Airport. It was annoying, but it’s also a reminder of two things. First, the cost of doing business in a large sophisticated market like the UK is high. And second, even when things seem cheap over here, they probably aren’t.

The incentive of course is that there is a huge potential upside for any business that can crack the UK market. The UK economy is 20 times larger than New Zealand’s and it’s integrated with the European Union, which has a combined GDP of more than US$12 trillion. But to tap that potential you have to be prepared to invest, and you have to be realistic when you set your budgets. As someone once said, only half tongue-in-cheek: start with your original budget, double it, and add an extra zero.

Take the biggest overhead of most businesses, the cost of staff, as an example. Wage rates are significantly higher in the UK than in New Zealand.  Employees cost between 1.5 and two times more than their equivalent in New Zealand. This means if you’re paying someone $60,000 in New Zealand, you’d be looking at paying £30,000 to £40,000 over here.
Renting office space is another example. A two-person cupboard in central London could cost up to £2,000 per month. And that’s before you start paying for phones, Internet, meeting rooms and other such luxuries.

However, because the market is so large there are opportunities to save money if you work at it. By hunting around, I found a great four-person office south of the Thames for £1,000 per month.

And because it’s such a competitive market, everything is negotiable. You don’t have to accept the sticker price. Everyone is on commission. If you leave your offer on a lease until the second-to-last day of the month, chances are the rep (who will be trying to make that month’s bonus) will be more amenable to cutting a deal. As well as haggling over price, hold out for favourable terms. Don’t get trapped into a long lease that could end up costing you if your plans change. Demand a short lease with a month’s notice period. You can get them and it means one less thing to worry about.

The price of accommodation is another area where you can make savings with a bit of effort. I use lastminute.com and select the Top Secret Hotels. I have stayed at the Hilton Green Park for £120—where a room usually costs £350 a night. If I’m staying in one place for two nights or more, I try to find a serviced apartment, which can be cheaper than hotels.

But even when things appear to be cheap there can be hidden costs. Rental cars are fairly cheap. You can pick one up for anything from £30 a day, and if you’re like me and like driving yourself they can be an attractive option. However, there are traps for newbies that can cost you. I learned an expensive lesson when I drove into London for a meeting and paid £25 for six hours parking. And it took me twice as long, because of the congestion, than if I’d taken the train.

Relying on cheap flights can also have hidden costs in terms of time wasted. You have to check-in two hours before domestic flights depart and budget airlines are notorious for cancellations and delays. If you have to be somewhere at a specific time it’s smarter to travel with a more expensive, reliable mainstream airline.

My experience with the budget airlines shows that while you can be smart about saving money there are limits to how far you can take it. As an accountant, the words ‘cost control’ bring a smile to my face—but you can’t spend all your time trying to save money, because you’ll never get on with making money.

It’s all about evaluating cost versus benefit. To get a realistic assessment of your costs, talk to others who are already operating in the UK. I’ve found that in a big market there are no short cuts to success. A well-thought-out budget with realistic expectations will give you peace of mind.

Also vital for peace of mind is getting used to thinking in pounds rather than Kiwi dollars. Otherwise, every time you think of the exchange rate when buying a beer or a burger you’ll have heart palpitations. Like every Kiwi who has ever been to the UK, we have to get over the exchange rate and move on. It’s a fact of life, like wind in Wellington or traffic congestion in Auckland. As a mate of mine says: if it’s the bright lights you’re after, don’t sweat the power bill.