Higher Gas Prices Pinching Many Small Business Owners

The incredible increase in gas prices over the last couple years is forcing millions of Americans to change their spending and driving habits. Small business owners certainly aren’t immune to this, especially if their business relies heavily on automobiles.

At the end of 2005, a gallon of regular was about $2.15, according to the U.S. Energy Information Administration. Fast-forward about two-and-a-half years, and that same gallon of gas is more than $4.

Small business owners across Northwest Arkansas are feeling the squeeze, and are dealing with it in different ways.

Shawn Cronk, owner of Clean Sweep Chimney Sweeping in Bentonville, said a price increase was inevitable. Not only is he paying more for fuel, but the prices of all the other products he uses have gone up as well.

“We tried to hold the line as long as we could but it got to where the price increases were eating us up,” he said. “I’ve told my customers, if gas went back down to $2.50 a gallon, I’d lower my prices.

“We can’t continue to go on and absorb those costs without a price increase.”

And the higher prices won’t translate into higher profits for Cronk, who said his basic margins wouldn’t increase.

“I don’t want to raise prices, but I’ve had no choice,” he said. Cronk is also considering diversifying into other areas such as parking lot cleaning.

Other business owners have responded differently.

“We haven’t responded,” said Mel Collier, owner of Collier Drug. “We haven’t adjusted prices at all and we don’t have a fuel surcharge. Delivery is still free.”

Collier has a fleet of seven Honda Civics that get between 24 mpg and 33 mpg.

One change that higher fuel prices have caused at Collier is that now, instead of taking out prescription deliveries as they arrive, the crew goes out four times a day at set intervals.

Collier also pays a fuel bonus to drivers that get consistently good mileage. When a driver exceeds a certain mileage rate, Collier will pay them between $0.01 and $0.04 a mile for every mile they drove that month. It’s an incentive that saves him money on gas and puts a little extra into his drivers’ pockets, he said.

There could be a point when gas prices become high enough that Collier might start charging for delivery, but he said he doesn’t know what that price would be, and the issue hasn’t been formally addressed yet.

Jeff Wright, owner of Pinnacle Limousine Services in Rogers, said higher fuel prices haven’t caused him to increase rates. But that’s because his business has seen “triple-digit” increases since he started it in September 2005.

That doesn’t mean that the higher prices aren’t having any effect. He said he has added other services to his business, such as online booking and rentals, and that higher fuel costs could be absorbed through charging for those new services.

Thomas Brinkley also owns a limo company – Brinkley’s Limousine Service, in Springdale. But limo rentals only account for 10 percent to 15 percent of his business.

In February 2007, through a company in Atlanta, Brinkley began contracting to transport Medicaid patients to their doctors and schools.

But the Atlanta firm hasn’t changed its contract in more than four years, Brinkley said. Gas and other necessities have gone up since then, and the contract hasn’t reflected those price increases. The company paid some contractors a small bonus, but it hasn’t been enough to offset fuel costs.

“The need for that transportation is huge,” he said, adding that many elderly or disabled people who need to go to the doctor don’t have any other way.