Small Business Options: Coping with High Gas Prices

Large companies and corporations don't have to worry about the rise of gas prices like small businesses do. Most corporations have contacts and discounts and other ways to absorb the rising cost of gas, but small business don't have any such recourse. The important thing is not to let gas prices ruin your revenue - or your expense reports.

If you own a small business, chances are that gas is one of your most necessary commodities. Door-to-door sales, for example, requires gasoline for transportation. Delivery businesses have the same problem. Or maybe you just use a lot of gas driving to visit clients or to run errands. Whatever the reason, gas prices are climbing by the minute, and small business owners need to come up with ways to reduce the monetary hit taken by high gas costs.

1. Evaluate Gas Consumption

Regardless of the outcome, it is extremely important that you evaluate exactly how much gasoline is used on a daily, weekly and monthly basis. Even if it fluxuates slightly from week-to-week, you should be able to determine a ballpark figure. Write down the names of ever employee or officer who uses gas as a company expense, then write down how many miles each person travels per day as well as the make and model of their vehicle.

Some cars, trucks, vans and SUV's consume more gas than others. For example, an employee that drives a Honda Civic on his or her sales route will achieve better gas mileage than an employee who drives a large delivery truck. In your estimates, make allowances for those types of variables to achieve the most accurate total.

2. Map Routes

Most sales associates have specific territories that they work each day. Delivery drivers have a route that is planned by the company. No matter what business you are in, you should know where and when your employees and officers are driving on a given day, especially since the expense is coming from the company bank account.

If you aren't sure, ask your employees to show you exactly where they drive and how long it takes to get from one point to another. Especially if you live in a large metro area, there are probably numerous ways to get from point A to point B. Sit down with your employees and determine the fastest and most energy-efficient way to cover their territory, and insist that the more effective route is used.

3. Inform Employees

Have a "gas meeting" with your employees and let them know the issue of gas prices. If your employees don't pay for their own gas, it's very possible that they don't understand the predicament high gas prices creates. Ask that everyone be aware of the gas that they use, and that they stay conscious of gas usage when out on company money. For example, if an employee is stuck in traffic, ask that they exit the freeway and find a different path rather than sitting in traffic eating up gas.

4. Incorporate Costs

It's a fact of commerce that customers are going to - at least in part - absorb some of the rising fuel costs. Customers know that when the price of materials goes up, that products will be more expensive as well. The same holds true for your small business. Once you know how much you are spending in gas each month, you can adjust your prices for goods or services to account for the higher gas costs.

The only problem with this scenario is that you might lose customers. I don't advise that you raise your prices by 20%, because your customers will find a better deal. Increasing your prices by 2-3% is acceptable, particularly if you have a high sales volume. This way, the price increase is hardly noticable.

Another way to get around this factor is to tack the added cost of gas onto the final bill as an itemized list. For instance, if you operate a flower shop that delivers, advertise your price as usual. But inform your customers that mileage will be added to the final price once it is calculated. This way, your customers don't see a visible increase in price, and they know exactly what they are being charged for.

The fact is that customers cannot possibly be unaware of the rise in gas prices, and as long as you don't dramatically increase your prices, they'll understand the need for incorporating charges for travel. My advice is to make the change as small as possible, and to absorb as much of the cost as you can by evaluating delivery routes and by informing your employees. Unfortunately, the cost of gas is nothing compared to the cost of losing half of your client base.