Small businesses facing higher gas prices
Although gasoline prices are picking up again in the last two weeks of September, they may finally be falling after hitting record highs earlier this year. Either way, gas prices aren’t where small businesses want them to be. In times of turmoil and high fuel prices leading to inflated prices across the board, what can a small business do?
CallerSmart.com and SpreadGreatIdeas.com COO Kathryn Boudreau and Evan Singer of AI-powered financial platform SmartBiz discuss these long-term issues with Small Biz Trends and offer some helpful tips for help you meet these challenges. -on.
Ways Higher Gas Prices Are Impacting Small Businesses
Shawn Hessinger: To start, what are some of the key ways that rising gas prices can impact small businesses?
Kathryn Boudreau: I really think in different ways as rising gas prices affect our daily living costs, forcing people to cut costs. So people spend more at the pump and they’re less likely to buy that t-shirt or whatever. Food prices go up, so they are less likely to go to your physical store and buy it.
Additionally, you may need to increase the salary of your employees as their cost of living increases. You know, you’ll have to make up for that as well, which can be a big burden for small businesses.
You’re probably going to have to raise your prices to compensate for the increased cost of producing your products, especially if your products are plastic or any type of petroleum-based product, you’re going to see big increases in those prices.
And it’s also harder to find good job candidates, because you may have a problem where, you know, a 40-minute drive 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 gas prices continue to rise. And I think a lot of small businesses have already felt those effects.
Better planning for long-term prospects
Shawn Hessinger: Gas prices are coming down. But I mean, realistically, they’re not as low as they were a year ago, and who knows? We could see more spikes. It’s a reality that people are probably wise to plan for.
Kathryn Boudreau: I think simple things you can do just create a more flexible work environment. Say, for example, I mean, instead of a 9 to 5, you allow your employee to work a 7 to 3 to avoid peak hours and things like that, so they’re not sitting in traffic jams. Or create a hybrid type work environment where they don’t have to come to the office every day. So they save money that way.
You can reduce your service area. For example, if you’re delivering things, don’t deliver that far. You can also make group deliveries.
How Higher Gas Prices Are Affecting the E-Commerce Industry
Shawn Hessinger: I imagine that even e-tailers are affected by the increase in shipping costs.
Kathryn Boudreau: E-commerce companies are definitely feeling it. I work for several e-commerce companies 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 raise the prices of the products we sell 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 the different parts of your business to see where you can cut costs – maybe there’s a better competitor who offers a better price for the services you need outsource, such as delivery.
Shawn Hessinger: What are the really important questions that you might want to consider if you go back to your business plan to try to deal with rising gas prices?
Kathryn Boudreau: One of the things I like to do with the different types of brands that we manage is to track all the key performance indicators. And I think it’s important to follow them all the time. Also, I think you can connect the dots if you track them consistently and see what’s affected by rising gas prices.
Then you can analyze your business plan and say, “Okay, you know what? “Delivering to such a wide area is not profitable for us. We will therefore reduce our delivery area. Or “…having so many stores is not profitable.”
So we are going to reduce the number of stores we have. Or involving our customer service team is not cost effective. We’re going to put them on a work-from-home program. So it kind of allows you to analyze where you can cut costs… what you can fix in your business plan so you can continue to survive in these uncertain times.
The rise of electricity
Rising 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 SmartBiz, the AI-powered financial platform, has some suggestions on how small businesses can meet this challenge and thrive.
Shawn Hessinger: So, Evan, let’s talk about the rise of electricity and its impact on small businesses. Plus, how they can pivot in response to that.
Evan Singer: We certainly see that with the clients we work with. For example, we help service stations set up an electric module for electric charging. And as more and more consumers buy electric cars, gas stations need a place to charge that person.
And it’s interesting because often if someone charges for 15-20 minutes, they’ll go inside and buy extra food or other services. This ends up being a very profitable option for a service center.
But the modules are expensive. And we will often do long-term equipment financing so that someone can invest it. And they can fund the unit and increase the amount of money they earn. This is a very interesting pivot that we see happening in the market.
Shawn Hessinger: What other small businesses could benefit from the electricity boom?
Evan Singer: Beyond gas stations, we serve many electricians, plumbers and contractors. And we’ll see these people get some extra capital either to increase the workforce or to have their employees install units in people’s homes – for a big battery that someone could put in their garage.
They will hire a contractor, an electrician, to install this unit. And that electrician might have to hire a few people, and they’ll use the funds from an SBA or a bank loan that we helped them get to get the right people to do that job.
Shawn Hessinger: What kind of financing options can you help companies with, I guess, not just rising gas prices, but rising prices in general?
Evan Singer: What we do at SmartBiz is really help companies get the right financing at the right time. It is often not only the interest rates, but also the duration of the loans. We find, especially in these times, that getting a low monthly payment can really help.
We specialize in helping businesses obtain bank loans and, in particular, SBA loans, with some of the longest tenors. But finding loans with a low monthly payment can give businesses maximum flexibility. And in these, I would say, more turbulent times, getting that maximum flexibility can really help.
Shawn Hessinger: In what ways are small businesses affected by gas prices beyond what they pay at the pump? And then how can they work to control factors that go beyond the amount of gas they actually use?
Evan Singer: Gasoline price increases affect everything, especially from a supply chain perspective. So you’re right, it’s not just about driving to that pump and going to work. This affects the entire supply chain, driving up prices. If that particular small business has customers and customers coming to them, it affects the amount of money in those people’s pockets..
As for what people can do to help improve this, we’ve talked about a few around securing additional funding that can help withstand the pressure.
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