The impact of higher gas prices on small businesses can be significant. If your business is located in an area where people commute, higher gas prices can mean fewer customers. And, if you rely on deliveries or trucking to get your products to market, rising gas prices can mean higher shipping costs.
Prices fell a few months ago because the US was pumping its own oil again. However, prices may start to rise again with the war against Iran.
These soaring costs can have a ripple effect throughout the economy. It can be a domino effect on small businesses. According to Triple-A: $4 GAS IS THE TIPPING POINT FOR MOST AMERICANS
Table of Contents
Key Takeaways of Higher Priced Gas
- Higher gas prices reduce small business demand when customers drive less, commute less, or cut discretionary spending.
- Rising fuel costs increase delivery, shipping, and service call expenses, which can squeeze profit margins fast.
- Small businesses can lower fuel costs by maintaining vehicle tires (especially tire pressure), driving at steady speeds, and reducing unnecessary trips through teleconferencing.
- Shipping and inventory changes help control cost spikes, compare carriers and shipping speeds, reduce package size, and avoid over-ordering inventory.
- If fuel-driven inflation raises your costs, adjust pricing, review budgets, and explore funding options, while still protecting core marketing spend.
Too Expensive
New survey data from AAA finds that gas prices fell just a few weeks ago to an average of $2.97 per gallon.
Over half (59%) said they would change their driving habits or lifestyle if the cost of gas rose to $4 per gallon. If gas were to reach $5.00, which it has in the Western part of the country, three-quarters said they would need to adjust their lifestyle to offset the spike at the pump.
Fortunately, there are ways to help your small business survive these higher prices.
Here Are Some Tips For Dealing With Higher Gasoline and Diesel Fuel Prices:
Your Vehicle
Make sure your tire pressure is correct. The U.S. Department of Energy says that for every 1 psi missing from your car’s set of 4 tires, you lose 0.1 percent of your gas mileage. (Every psi lost also means that tires wear 10 percent faster.)
By properly inflating your vehicle’s tires, you can improve your gas mileage by 3.3 percent. That can save you money amid rising pump prices.
Furthermore, drive at the speed limit to help your fleet run more efficiently. Mileage decreases quite rapidly over 50 mph in most cases. To save gas, stay at or below the speed limit and drive at a consistent speed. Of course, use cruise control on long trips to save more on fuel costs.
Travel
Cut back on non-essential travel. If you have to travel for business, make everything on the same day. That way, you can drive just one day a week vs. every day.
If you don’t have to travel for work, try to find another way to get the job done.
Teleconference, video conference, and email are all great ways to communicate with team members and clients without leaving the office.
Carpooling
Consider carpooling. If you do have to travel for work, see if you can carpool with a colleague. Not only will you save money on gas, but you’ll also save on wear and tear on your vehicle.
The prices for repairs can make a huge difference in your automotive expenses.
Not only that, but you may be able to save on your automobile insurance. Now, that’s worth a phone call to your insurance company!
Reduce Shipping Costs
Look for ways to reduce shipping costs. If you rely on deliveries or trucking to get your products to market, explore different shipping options.
- Renegotiate carrier rates
- Use zone skipping or regional carriers when available
- Set free shipping thresholds
- Offer local pickup
- Batch shipments on set days
- Compare prices from multiple carriers
Can you make the packages smaller? I’ve seen Hello Fresh shrink their boxes recently with their food delivery service.
Cut Inventory
Cut back on inventory. Higher prices can mean higher shipping costs, so it’s important to keep your inventory levels in check.
Don’t order more products than you need, and consider scaling back on seasonal items.
The only problem you may have with this is supply chain shortages if ships are stuck in the straits. You will have to stay informed of your industry’s supply chain situation before cutting inventory.
According to Business Insider, A significant number of shipping vessels are currently stuck or forced to reroute due to military conflicts. Following U.S. and Israeli strikes on Iran, container ships are avoiding the Suez Canal and Strait of Hormuz, causing major disruptions.
Automate More
Automate as much as possible. If you can automate tasks such as ordering supplies or shipping products, you’ll save time and money.
Automation tools can help you save on labor costs, and they can also help you reduce errors.
Pricing Strategy Adjustments
Evaluate your pricing strategy. Higher gas prices can cause inflation, so it’s important to ensure your prices remain in line with the market.
Make sure you’re charging enough to cover your costs but don’t price yourself out of the market.
Therefore, look around at your competition’s prices. They may have raised their prices since you last analyzed them.
Funding Opportunities
Seek out funding opportunities. If high gas prices are putting a strain on your business, consider seeking out funding opportunities.
There are several government programs and private lenders that offer to finance small businesses.
You want to be careful not to cut your advertising budget when things get tough. You may even want to advertise more to gain new business, as you lose some due to inflation.
“Stopping advertising to save money is like stopping your watch to save time.”
Check Gas Prices Nearby
Use an app like GasBuddy, Gas Guru, or AAA’s app to help you find the lowest gas prices around. However, you don’t want to spend more gas and time driving around to save a few cents.
How does the Gas Buddy app work?
Saves 5x as much as its app and more than either a debit or a gas credit card. No credit check is required.
How does Gas Guru work?
GasGuru pulls nearby gas-station prices (from station data and driver reports) so you can sort by fuel type, price, and distance to find the cheapest stop fast. Once you pick a station, it provides directions and updates prices as new reports come in.
How does the Triple A app work?
AAA’s app uses your phone’s location to show nearby gas stations and their current prices, then lets you sort by cheapest, distance, or fuel type. Prices come from station data and user updates, so you can spot a better deal before you pull in.
Conclusion: Surviving Business With Higher Fuel Costs
By following these tips, you can help your small business survive high gas prices. And, who knows, the fuel prices may even lead to increased sales as people look for ways to save money.
So stay positive, have no fear, and keep your head up – Let’s not let higher gas costs kill your small business!
Has your small business been affected by the recent spikes in gas prices? What other tips would you offer here?
Frequently Asked Questions About Higher Gas Prices and Small Businesses
How do higher gas prices affect small businesses?
Higher gas prices can reduce customer visits, especially in areas with high commuter traffic. They also raise costs for deliveries, trucking, and other transport needs. As a result, small businesses may see lower sales and higher operating costs simultaneously.
What can a small business do right away to reduce fuel costs?
Start with vehicle basics and trip planning. Keep tires inflated to the recommended PSI, drive at a consistent speed, and combine errands into a single route. Also, replace some in-person meetings with phone calls, video meetings, and email to cut non-essential miles.
How can small businesses reduce shipping costs when fuel prices rise?
Compare carrier pricing, then choose the slowest shipping method that still meets customer needs. In addition, reduce package size when possible because smaller, lighter shipments can cost less. Review delivery frequency, too; fewer, larger shipments may lower total cost.
Should small businesses raise prices when gas prices go up?
Review your costs and your competitors’ prices before changing yours. If fuel-driven cost increases hit shipping, labor, or supplies, a price update may be necessary to protect margin. Keep the change clear and tied to real costs, and avoid pricing yourself out of the market.
Why might gas prices rise during a US conflict with Iran?
Gas prices often rise when markets expect oil supply risk. Conflict involving Iran can increase concern about shipping routes and regional output because Iran sits near key transit areas for global oil shipments. If traders expect disruption, crude prices can rise, and fuel prices at the pump can follow.
