Small business operators are often the ones that are hit hard especially during an increase in gas prices. They must make business decisions in order to maintain their business models. Fuel costs often affect their company’s service territories, supply and overhead expenses, staffing, and the pricing of their products and services.
Supply and Overhead Costs
Fuel prices that have prolonged periods of increase raise the daily costs of doing business. This is crucial especially to a company that has sellers and suppliers that deliver services or transport goods for its daily operations. An example would be a horse farm operator that is affected severely by the rising costs for the feed suppliers and farm’s hay. Transportation costs hinder the capacity of the farm to travel to breed and showcase horses. This results in a diminishing income opportunity.
Businesses that are in the field of delivery and transportation are heavily affected by the gas of price. In order to save on the costs of fuel, companies must either decrease their geographic target service areas or find other methods to reduce costs in existing service regions. They can either change their driving practices or alter routes. Online grocery businesses can reduce their service area to nearly half to cut costs in fuel. A gourmet food truck operator can target his lunch and dinner stops in the same locality, rather than traveling all over town.
If businesses find it difficult to make the existing budget work because of a hike in fuel prices, and they have tried all other methods, but realize it not to be sufficient, the company might opt to trim down its workforce. Although trimming in the workforce may be undesirable, it means that there will be layoffs or reduced working hours.
If businesses are subjected to rising fuel costs for a long period of time, and they have conducted all measures in order to trim down overhead expenses, it is possible that the business will consider passing the costs on to its clients. There might be a probable loss of customers, depending on the competition and the field that these people are in. Businesses must find ways to meet rising fuel costs with the danger of losing clients.
Small businesses face challenges when they are subjected to rising costs of gas. However, with many strategies combined, it is possible that these businesses can combat rising costs of fuel.
If you need expert advice on how to combat prices on gas, you can ask our experts.