Before jumping the gun and investing into a hybrid for your business, let’s analyze the impact of how an increase in fuel costs will impact you and your business.
The entire island is buzzing with talks of the 60% increase in fuel. This is common to many countries around the world where gas prices fluctuate on a very regular basis. However, for an economy like Bahrain’s where the only price increase we see is a tiny bump in CPI, a massive 60% has people choked up and at a loss for words.
But this writeup has nothing to do with the impact of this increase on individuals, but rather, I would like to shed some light on how this will affect the operations and ultimately, bottom line, of startups and small businesses.
AS A SMALL BUSINESS, THE BIGGEST IMPACT WILL BE ON YOUR CUSTOMERS’ DISCRETIONARY SPENDING.
As a small business, the biggest impact will be on your customers’ discretionary spending. Shipping and transport costs is the next biggest pain. Customers spending more on fuel means less money is allocated to other nonessentials. And for transporting your supplies, whether you buy your items locally or ship them internationally, the likelihood of your transport company spiking up their prices is almost 100%. So what are some of the ways that can help you leverage that spike?
Here are 5 tips that are easy to implement:
- Unbundle. Now that customers will most likely be more skeptical of how they spend their money, previously ‘bundled’ services you may offer may deem to be marked too steep price. Before customers ask for a breakdown, provide it and let customers ask for individual options instead of the whole basket.
- Go digital. If there are some elements to your business operations that are still paper- or delivery-based, see if you can take it online and reduce any possible costs (no matter how tiny, they add up). Instead of face-to-face meetings, see if you can hold them online. Applying digital methods to your business will only make you spend less money and be more effective.
- Analyze your shipping options. If your business depends heavily on shipping/transporting (odds are you depend highly on transport irrespective of what industry you’re in), assess your options. Opt for lighter-weight packing, go for less frequent shipping, consolidate shipments, use smarter packaging…etc. Talk to the transport company and see what grounds you can reach that will mutually benefit you.
AS HARD AS IT MAY SEEM, IMAGINING A STEADY PROFIT MARGIN IS NOT SO HARD TO ACHIEVE.
- Take less trips – goes without saying of course but a subconscious decision to take less car trips will definitely reduce your spend. Run all the errands you have at once instead of going back or forth over the span of days. Plan your week efficiently bearing in mind routes, traffic, and rush hours. The longer you wait in traffic, the more fuel you’ll spend.
- Don’t increase your prices – yet. As hard as it may seem, imagining a steady profit margin is not so hard to achieve. Rather than increasing your prices and scaring customers away, try to understand which products are working and which are not, adjust prices (both up and down) such that the offset still keeps your head above water. In such times, customers will be attracted to promotions and discounts, try to focus on items that you can afford to give discount on.
Reacting to the economy with applying a blanket price increase is not the wisest thing to do. But whatever you decide, assess it well and consider the consequences.
By: Zain Alzayani
