None of us can ignore the fact that gas prices are rising exponentially. And the news that Russia has invaded Ukraine has pushed the price of oil to over $100 a barrel for the first time since 2014. So, what does this mean for small businesses?
When the price of gas and oil rises, small companies are usually hit hard in many ways. Fuel is already a major expense for many people starting small companies on a budget and they rely on vehicles to deliver products and services. And as prices continue to rise, they’re going to be facing increasing pressure on their finances. It’s not just about accommodating higher energy costs; there are many other considerations to take into account to enable them to sustain their operations. Increasing gas prices impact their supply and overhead expenses, staffing, the pricing of their products and services and more.
Over the last year, we’ve watched as prices of gas have continued to soar. This prolonged increase has the effect of raising the everyday costs of doing business, especially where transporting goods and the delivery of services is crucial to the daily operation. In particular, the delivery and transportation companies themselves are heavily impacted by the price of gas. To cut fuel costs, they either must reconsider the geographical locations they’re prepared to deliver to or look at other ways to reduce costs, perhaps by altering the routes they take or modifying driving practices.
Some businesses have been able to cut back fuel consumption significantly by simply reducing their service area; although, for some, this may not work as reducing the distance they travel will, in the short term, reduce their number of customers. AI technology is also helping fleet managers to improve the efficiency of their fleet. By installing dash cams in their vehicles, they obtain more visibility and control over the way their drivers drive with the added bonus of improving safety. While some small companies may have resisted using this technology, it now makes sense to invest in dashcams and other software to ensure the efficiency of each vehicle on the road and you can review a guide on the different types of dash cams for trucks.
Of course, if increasing fuel prices mean that it’s difficult for a small business to make ends meet, they may need to start reducing their ‘ends’. And that often means reducing the number of staff they employ or reducing the number of hours worked by staff members. Unfortunately, this often has a knock-on effect of making the business less efficient which may mean a smaller turnover and less profit.
Ultimately, a small business can only absorb increasing costs for a finite period. Eventually, most companies will need to pass these costs onto their customers in the shape of rising prices for products or services. We’re already seeing the cost of food, clothing, and furniture and other products rise. For some small businesses, increasing prices may result in losing some customers so there’s also the need to balance the need to accommodate rising gas prices with the risk of losing customers and much-needed income. We’ll all be watching very carefully to see what will happen with gas prices and in the meantime looking at ways to reduce costs and keep our businesses running.