Although gas prices are going up again for the last two weeks of September, they may finally be heading down after record highs earlier this year. Either way, gas prices are not where small businesses want them to be. In turbulent times and high fuel prices leading to inflated prices across the board, what’s a small business to do?
Operations Manager of CallerSmart.com and SpreadGreatIdeas.com, Kathryn Boudreau, and Evan Singer, of AI-Powered Powered Financial Platform, SmartBiz, discuss these long-term problems with Small Biz Trends and offer some helpful tips to help you meet these challenges head-on.
Ways Higher Gas Prices Impact Small Businesses
Shawn Hessinger: To start out, what are some of the basic ways higher gas prices can impact small businesses?
Kathryn Boudreau: I think really in a lot of different ways since rising gas prices affect our everyday living costs, making people cut costs. So, people are spending more at the pump, and they’re less likely to buy that t-shirt or something else. Food prices are going up, so they’re less likely to go to your brick-and-mortar store and buy it.
Also, you might need to increase the salary of your employees because as their cost of living goes up. You know, you’re going to have to compensate for that, too, which can be a big burden on small businesses.
You’re likely going to have to raise your prices to offset the increase in the cost of producing your products, especially if your products are plastic-based or any type of petroleum-based product, you’re going to see big increases in those.
And it makes it harder to find good job candidates, too, because you may have an issue where, you know, a 40-minute commute for someone just isn’t doable at the end of the day.
So, I think there are a lot of different things that will affect small businesses if the price of gas continues to increase. And I think a lot of the small businesses have already been feeling these effects.
Better Planning for the Long-Term Outlook
Shawn Hessinger: Gas prices are on their way down now. But I mean, realistically, they’re not as low as they were a year ago, and who knows? We might see more spikes. It’s a reality people are probably wise to plan for.
Kathryn Boudreau: I think simple things that you can do are just creating a more flexible work environment. Say, for example, I mean, instead of like a 9 to 5, you allow your employee to work 7 to 3 to avoid rush hour and things like that, so they’re not sitting in traffic. Or doing a hybrid type of work environment where they’re not having to come in every day to the office. So, they’re saving money in that way.
You can reduce your service area. For instance, if you’re delivering things, don’t deliver as far. You can also do batch deliveries.
How Higher Gas Prices Affect the E-Commerce Industry
Shawn Hessinger: I guess even e-commerce people are affected by the increase in shipping costs.
Kathryn Boudreau: E-commerce businesses definitely feel it. I work for several e-commerce businesses and websites, and our third-party delivery companies, service providers, etc. raise their prices. This, in turn, forces us to charge more for shipping and increased prices on the products that we’re selling as well. So, you can also shop around for different service providers, you know, see and compare prices.
I think it’s a good opportunity to look at all of the different parts of your business to see where you can cut costs–maybe there’s a better competitor out there that’s offering a better price for the services that you need to outsource, like delivering.
Shawn Hessinger: What are some really big questions that maybe you need to look at if you’re going back to your business plan to try and deal with rising gas prices?
Kathryn Boudreau: One of the things that I like to do with the different kinds of brands that we manage is to track all of the key performance indicators. And I think it’s important to track them all the time. Also, I think you can connect the dots if you’re constantly tracking them and seeing what’s affected by higher gas prices.
Then, you can analyze your business plan and say, “Okay, you know what?” Delivering to this wide of an area isn’t cost-effective for us. So, we’re going to decrease our delivery area. Or “…having this many stores isn’t cost-effective.”
So, we’re going to reduce the number of stores that we have. Or having our customer service team come in, isn’t cost-effective. We’re going to put them in a work-from-home program. So, it allows you to kind of analyze where you can cut costs…what you can fix in your business plan so that you can continue to survive during these uncertain times.
The Rise of Electricity
Higher gas prices may be a problem for some small businesses, but an opportunity for others. In this second interview with Small Biz Trends, Evan Singer, CEO of AI-Powered Powered Financial Platform SmartBiz, has some suggestions for how small businesses can meet that challenge and prosper.
Shawn Hessinger: So, Evan, let’s talk about the rise of electricity and how that can impact small businesses. Plus, how they can pivot in response to that.
Evan Singer: We’re certainly seeing that with the clients that we work with. For example, we have been helping service stations put in an electric module for electric charging. And as more and more consumers buy electric cars, service stations need some place for that person to charge.
And it’s interesting because often, if somebody is charging for 15-20 minutes, they’ll go inside, and they’ll buy additional food or other services. It ends up being a very profitable option for a service center.
But the modules are expensive. And we will often do equipment financing with a long term for someone to put that in. And they can finance the unit and drive up the amount of money that they make. It’s a very interesting pivot that we’re seeing happen out on the market.
Shawn Hessinger: What other small businesses might benefit from the rise of electricity?
Evan Singer: Beyond just service stations, we serve a lot of electricians and plumbers and contractors. And we will see those folks get additional capital to either bring on headcount or for their employees to put in units into people’s houses–for a large battery that somebody might put into their garage.
They’ll hire a contractor, an electrician, to put that unit in. And so that electrician may need to hire a couple of people, and they’ll use funds from an SBA or a bank loan that we’ve helped them get to get the right personnel to do that job.
Shawn Hessinger: What kind of financing options can you help businesses deal with, I guess, not only rising gas prices but rising prices in general?
Evan Singer: What we do at SmartBiz is to really help businesses get the right financing at the right time. It’s often looking at, not just interest rates, but also the term of loans. We’re finding, especially in these times, that getting a low monthly payment can really help.
We specialize in helping businesses get bank loans and, in particular, SBA loans, with some of the longest terms out there. But finding loans with a low monthly payment can give businesses maximum flexibility. And in these, I’d say, more turbulent times, getting that maximum flexibility can really help.
Shawn Hessinger: What are some ways that small businesses are affected by gas prices beyond just what they’re paying at the pump? And then how can they work to control factors that go beyond just how much gas they’re actually using?
Evan Singer: Gas price increases affect everything, especially from a supply chain standpoint. So, you’re right, it’s not just about driving to that pump and going to work. It’s affecting the entire supply chain, which drives up prices. If that particular small business has clients and customers that come to their location, it affects how much money is in those people’s pockets.
As far as what folks can do to kind of help make that better, we talked about a few around getting some incremental financing that can help withstand the pressure.
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This article, “Small Businesses Dealing with Higher Gas Prices” was first published on Small Business Trends