Sunday, March 21, 2010

8 Effects of High Gas Prices on Small Business Owners

Direct Cost Increase

Whenever you drive for a business purpose – even to and from work – you are paying more then you did a year ago. This direct price increase may only be slight for wage earning employees, but small business owners typically drive a lot more. Between trips to the local Office Depot, frequent visits to their place of business, trips to the bank, and trips on behalf of customers, that extra $0.50 - $2.00 per gallon can really add up.

Increased Shipping Costs

One place the cost of fuel has had a direct impact on is the cost of shipping. This increase is passed-down directly to the consumer. This means that the price of everything is going up (i.e. price of supplies, inventory, merchandise, etc.), and the overall cost of running a small business will continue to reflect this problem.

More Reliance on E-mail and Fax

Due to the direct increase in shipping costs, small business owners are increasing their usage of e-mail and fax machines. Paying to ship large documents or contracts just costs too much these days. A lot of businesses are also turning to virtual fax machines that let you scan documents to fax out and receive faxes through one’s e-mail address.

Less Employee Candidates

Due to the high cost of commuting, people are beginning to only seek employment near their homes. This can drastically reduce the number of applicants who will apply for a position. It is especially troublesome for restaurant owners or stores that frequently hire teenagers.

Higher Wages for Employees

When you do find and hire employees, it is likely that you are going to have to pay them higher wages to compensate for the higher commute expenses. This is especially true for businesses located outside of a dense city and your employees must drive long distances to get to work.

Less Face to Face Meetings

Pretty much everyone in the country is looking to reduce his or her gas consumption and save money. This means business owners will need to adapt to more virtual means of communication that avoid the gas of driving to face-to-face meetings. Expect to conduct additional business calls, and even videoconferences. These forms of communication are less personable, thus reducing the chances that you will “win” a contract or a customer based upon your people skills.

Higher Prices for Prime Locations

The housing boom a decade away led the path to sprawl, where middle income Americans moved to the suburbs in record numbers. However, with record fuel costs, they are driving less. This means the cost of prime locations is likely to skyrocket. Consumers are no longer willing to drive long distances to get a good deal. In addition, advertising will waste money if your store is a long drive for potential customers.

Less Drive by Traffic

As consumers drive less and seek-out alternative modes of transportation, the importance of drive by traffic and advertising is going to be less and less effective. Instead, owners of brick and mortar stores are going to need to adapt to more results-driven forms of advertising.

(ArticlesBase SC #501401)

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