|
Ouch! Gas prices hurt O.C. small businesses
(Orange County Register, The (CA) (KRT) Via Acquire Media NewsEdge) Jul. 11--Jarvis Restoration in San Clemente is paying $20,000 a month for diesel for its trucks -- up from $8,000 a year ago.
The company that repairs water damage and mold abatement at homes and commercial buildings uses 2-ton Isuzu trucks that get six miles per gallon to transport massive dryers to job sites. Co-owner Skip Jarvis bought diesel trucks when that fuel's price was less than regular.
Now diesel is more expensive.
Jarvis says his customers -- insurance companies pay for repairs -- refuse to pay the fuel surcharge on his invoices.
As gas prices have increased more than $1.50 a gallon in the past year, small businesses such as Jarvis Restoration that must travel to do their work have felt the squeeze on profits. Even small-business owners who don't travel much are making changes in the way they do business.
"If I could, I'd buy a whole new fleet of trucks," Jarvis said. He's looking for vehicles that get better gas mileage, but they must be large enough to transport equipment, so he can't downsize too much.
Still, mileage savings add up, said Ron Petz, owner of Dealer Transport in Santa Ana, which picks up and delivers for car dealerships around Southern California.
Dealer Transport uses 40,000 gallons of gas annually in 14 Corollas. Petz figures he can cut usage almost in half buying hybrid-electric Priuses.
His gas bill has increased $60,000 since last year. "Every time gas goes up a dime, I pay $4,000 more a month," he says.
Because of a provision in the new federal economic stimulus package, Petz will be able to recover the cost of the mass vehicle purchase sooner. The stumbling block is the long waiting list to buy Priuses as millions of individuals and businesses rush to buy the gas savers.
Another plus for businesses is that the Internal Revenue Service increased the federal mileage deduction to 58.5 cents a mile form 50.5 cents effective July 1.
The most obvious way to cope with higher gas prices is to pass them on to customers.
Michael Macres, owner of Macres Florist in Santa Ana, claims that his dad was the first Orange County florist to charge a delivery fee of 50 cents more than 30 years ago. Today that fee is $9.75 for deliveries in Santa Ana and $10 to other cities.
He hasn't raised the fee yet in response to the most recent gas price spikes. Many business owners are reluctant to pass along higher costs because business tends to decline initially. However, when Macres does increase the delivery fee, he'll handle it the way his father did with that first delivery charge.
"We sent mailers to customers and told them we would either have to reduce the size of floral arrangements or charge for delivery," Macres said. "Nine out of 10 understood."
Jay's Catering in Garden Grove does charge $50 for delivery ($57.50 for long distances), said Chief Executive Linda Loaeza. Recently, the company has added a fuel surcharge of $7.50 for corporate meals and $10 for catered events.
"It helps that everyone is aware of gas prices, so they aren't surprised (by the surcharge)," she said.
However, many of Jay's events, such as weddings, are books and priced a year in advance, she added. "I don't want to go back to customers and ask for more money."
A wide range of companies face similar difficulties, said Dan MacLeith, president of Pacific Westline, an Anaheim manufacturer of commercial interiors.
"Many of us are having to pay these higher costs for services and products we sold-- at rates that are now months old," he said. "Some customers do not balk at rising costs due to fuel while others will hold us to our 'set' pricing structure."
Even if his customers balk at a fuel surcharge, he still has to pay it if he uses a moving company to ship products long distances. "They are applying a 'fuel surcharge' based on the mileage, and it is shown there (on the invoice) in black and white," he said.
Some big-fuel using businesses aren't obvious. Private investigator Thomas Martin, president of Martin Investigative Services in Newport Beach, said his investigators on surveillance must keep their vehicle engines running to keep sophisticated equipment and laptop computers cool.
He charges clients a mileage fee, which has been less than the cost of fuel and vehicle maintenance for a year. He hasn't yet increased that charge "but it may be necessary once prices hit the $5 to $7 range."
The issue of fuel surcharges came up at a recent staff meeting at Stary Technologies in Santa Ana, which installs custom home entertainment and security systems. Owner Steve Stary rejected the increase because "overall, we're only paying $200, $300 per month more than a year ago. We're already charging premium prices for premium services. Our plan instead is to keep the costs we can control as low as possible."
Many business owners are using Stary's cost-cutting strategy.
Petz of Dealer Transport is moving to a smaller warehouse to save money. He is also helping employees save on gas by arranging the work schedule to accommodate carpooling or allowing them to drive to assignments from home rather than come into the office first.
Rachel Owens, partner of Succession-Strategies, a Santa Ana service that helps business owners build management to replace themselves when they retire, has signed up for a service that allows her to teleconference with clients rather than drive to their offices. That change saves drive time as well as money, she said.
She has also changed the computer system to allow access to her database, records and calendar from any location. That change saves multiple trips to the office and allows her to work around rush hour traffic, she said.
Another owner who has changed his business is Thomas Orr, owner of H.T. Orr Computer Supplies in Placentia, who sells hard-to-find computer products. "I used to go to swap meets and sell my wares on weekends," he said. "Due to the price of fuel, it was no longer profitable, especially for the long-distance ones."
A few small businesses benefit in unexpected ways from high gas prices. Peter Shikli's company, Bizware Online Applications Inc. in San Clemente, develops specialized software for companies. "Because of high gas prices, we are seeing more customer interest in software that supports (working from home), like etaskboard.com," he said.
Despite the current struggles to adjust to high gas prices, Florist Macres remains philosophical about the long-term impact on his business.
"We've been in business 73 years. My father died in 1985, and I can hear him like it was yesterday. He said, 'If gas goes to a dollar a gallon, I don't know how we'll make it." We made it then, and we'll make it now."
To see more of The Orange County Register, or to subscribe to the newspaper, go to http://www.ocregister.com.
Copyright (c) 2008, The Orange County Register, Calif.
Distributed by McClatchy-Tribune Information Services.
For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
[ Back To TMCnet.com's Homepage ]
|
Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 16-18, 2008. Los Angeles, California.
