High Gas Prices Hurting Small Businesses
It has been a bruiser of a summer for small businesses that must be on the road every day.
Gasoline prices may have moderated a bit lately, but business owners are still smarting from the run-up in prices this year.
John Nicholson, owner of Company Flowers & Gifts Too in Arlington, Va., was on Capitol Hill this week to tell members of Congress how his business has had to absorb higher costs. “Higher gas for our van alone runs more than $12 per delivery,” he said, though he added that so far he has kept delivery charges at $9.50. “We don’t want to discourage our customers from sending flowers.”
Still, he added, “After awhile I guess we’ll have to raises prices.”
Plumbers, contractors, data couriers, florists, limousine companies and other small and midsize businesses that rely on driving to make money are adapting to a volatile landscape in different ways — whether through higher prices or creative, long-term fixes. Energy prices are still high enough, and the economy still slow enough, that the changes made in the last few months by those small and midsize businesses may well stick.
“As the economic outcome remains uncertain, small business owners are searching for innovative ways to reduce expenses and increase sales,” said Bruce D. Phillips, senior fellow at the National Federation of Independent Business Research Foundation.
In fact, the business owners say they are glad to make adjustments before the next problem arises. “You can only see into the future so much,” said David Rosenthal of Rosenthal Plumbing in Santa Cruz, Calif.
Every six months or so Mr. Rosenthal tries crystal-gazing when it comes to fuel prices. If he’s wrong about how much it will rise — as he was this time with his recently published pricing list — then his company has to offset the difference. “I don’t want to inflate prices to where it’s uncomfortable to our client base,” he said.
So Rosenthal Plumbing adopted global positioning system technology this summer to track its fleet of service trucks so it can deploy them more efficiently and increase the number of jobs technicians can handle in a day. It will soon install mobile navigation devices in each truck so that his employees can find the fastest routes to save on fuel costs.
The high gas prices this year cemented a decision by Sam’s Limousine and Transportation in Houston to head in a new direction. It decided to sell its last two limousines, which seat eight. Replacing them are other vehicles to transport passengers, including party buses, sport utility vehicles and Town Cars. The party buses seat 16 to 20 passengers and have, according to the company’s Web site, “soft, black leather couch seating, a mirrored stargazer ceiling, opera lighting, laser lighting, strobe lighting, DVD screens and a custom stereo and sound system.”
Ron Jones, vice president of the company, said it has recently seen “an increase in larger groups pitching in and going out together,” which makes the $130-an-hour rate affordable for a night out.
“This is something that’s been going on for a year now,” Mr. Jones said. “We have completely changed how we do business” to accommodate those groups by buying four buses this year.
What small business owners say they fear is that they will lose customers because of higher costs, putting even more pressure on their bottom line. In a recent survey by American Express, the percentage of business owners reporting that they have lost sales, like an inability to deliver an order, has doubled to 35 percent from 17 percent last fall.
The semiannual telephone survey of a representative sample of 621 owners this spring found that small business owners are being squeezed by higher energy and gasoline costs. A third said they had raised prices, up from 26 percent last fall.
RDS Delivery Service in New York, for instance, has raised prices this year. If not for diversification, it would be suffering the typical summer slowdown, plus the ill effects of rising fuel costs, which have hurt its small business customers.
Larry Zogby, its president, said the family-owned company added document storage and retrieval as well as critical parts and retrieval services to its courier businesses.
It also now allows customers to store goods in its warehouses and will pack orders and deliver them upon request. The idea is to build a “longer and deeper relationship” with customers, he said, and of course, not be completely reliant on its main business — messenger and courier services in the New York region.
This summer, he said, he has seen more than a few smaller customers go out of business. One owner told him, “If you’re flat, your ahead of the game.”
The National Federation of Independent Business Research Foundation, which surveys more than 3,500 owners via mail every four years about problems of greatest concern, reported in June that energy costs, excluding electricity, were the second most pressing concern after the cost of health insurance. Energy jumped two spots from the earlier survey.
The primary energy cost for 38 percent of the companies responding to the survey was operating vehicles. Most small businesses cannot afford to switch to more energy efficient vehicle, the authors pointed out.
“For four years, the economy provided a good, stable foundation for small business owners to do business,” said Mr. Phillips, author of the report with Holly Wade, a policy analyst. “But as it started to take a negative turn over the last several months, they felt the effects of rising costs of doing business as reflected by these results.”
No comments:
Post a Comment