Fuel costs have a direct and immediate impact on small trade businesses, in particular those that require transportation to serve customers, such as plumbers or electricians, or that move equipment, such as landscapers. As fuel costs climb, the increase in operational expenses makes it tough to maintain profitability, especially for businesses that operate in competitive markets with price-sensitive customers.
In this article, we'll take a quick look at how fuel costs can affect field service businesses, along with smart strategies you can put in place to help mitigate these impacts.
How fuel costs impact trades businesses
Transportation and logistics
As fuel prices increase, so do your overall costs related to transportation and logistics. The larger your service area, the more vulnerable you are to rising fuel costs. This is especially true if you do multiple jobs in one day that require travel from one location to the next - which is the case for most small trades businesses.
Materials and supply costs
Fuel prices also influence the cost of raw materials and goods. This is particularly relevant for industries that require regular purchases of materials and consumables such as lumber, hardware, parts, or cleaning supplies. Vendors may raise their prices to account for increased fuel costs, leading to a trickle-down effect on your business as you are forced to pay more for the same goods.
Profit margins and cash flow
The fluctuating nature of fuel prices makes it difficult to predict cash flow and plan for the future, and higher fuel costs can have a direct, negative impact on profit margins. Unless you can pass fuel surcharges on to your customers, which can be difficult in competitive markets, or take other steps to mitigate the impact, your business may have less available cash to cover operating expenses, let alone reinvest in growth.
What you can do about it
There are several strategies you can employ to help reduce the impact of fuel costs on your business and maintain profitability. From embracing technology to adjusting your pricing, these tips can help you manage rising expenses more effectively.
1. Leverage the full power of ServiceM8 job management software
One of the most powerful tools available to help you manage fuel costs is ServiceM8, an all-in-one job management software designed specifically for service-based businesses. A few examples of ServiceM8 features that can streamline operations and optimize fuel consumption include:
- Route optimization: ServiceM8 includes built-in tools for route optimization, allowing you to map out the most efficient paths between job sites. This reduces unnecessary driving and helps you complete more jobs in less time with less fuel.
- Job scheduling and dispatch: ServiceM8’s scheduling feature ensures that jobs are assigned logically and efficiently, minimizing travel between locations. The platform also enables real-time job dispatching, letting you see where everyone is at and helping you adapt to last-minute changes without wasting fuel.
- Customer communication: ServiceM8's powerful real-time communication features send automated reminders about upcoming appointments and keep customers updated on job progress and arrival times, reducing the risk of missed appointments.
- Checklists: ServiceM8’s checklist functionality lets you clearly communicate the scope of a job, along with any material / form / photo requirements, so that field staff are prepared with everything they need to complete the job on the first visit. That means no more wasted fuel on a mid-job trip to the hardware store, or a return visit to get an overlooked signature on a form.
2. Adjust your pricing strategy
While increasing your prices may be a last resort, it can sometimes be necessary to protect your margins. However, there are ways to adjust your pricing strategy that allow you to remain competitive while covering rising costs. Some ideas could include:
- Location-based pricing: Determine if it would make sense to offer tiered pricing based on location. Customers who are closer to your base of operations could enjoy lower rates, while those farther away would pay more due to the increased transportation costs.
- Value-added pricing: By offering premium services or bundling additional benefits into your packages and by emphasizing the value they bring, you can justify higher prices. Customers are more likely to accept paying a little more if they have a strong understanding of the outcomes they will see in return.
TIP: Using ServiceM8 Proposals is a great way to provide an elevated quote experience and help your clients visualize the value you will bring.
3. Keep your vehicles maintained
When it comes to fuel efficiency, keeping vehicles in good condition is key. Don’t skip or postpone regularly scheduled maintenance, like oil changes, tire rotations, and engine tune-ups, which will ensure your vehicles are running as efficiently as possible.
- Create a maintenance schedule: Confirm manufacturer recommendations for maintaining your existing vehicles, taking into consideration how they're used, their age, and their mileage. Create a maintenance schedule that outlines which vehicle needs what, and at what interval.
- Assign accountability: Even in a small organization, someone has to serve as a "fleet manager." This can be a good way to give a junior team member some responsibility. Have them be responsible for monitoring the maintenance schedule and balancing vehicle maintenance needs with the week's workload.
4. Take preventative measures to stay in control
The future of fuel prices is unpredictable, but businesses that proactively prepare for continued volatility will be in a stronger position. By taking steps today to reduce fuel dependency, you can weather future price spikes more effectively.
- Plan for sustainability: Although it almost certainly isn't practical to change all of your vehicles to hybrid or electric immediately, consider making a broader shift toward renewable energy and green technologies in the future. Over time, transitioning to sustainable practices may not only save money but also appeal to environmentally-conscious customers - giving you a competitive edge (and potentially some tax breaks!).
- Negotiate for the long-term: Where possible, negotiate long-term contracts with suppliers to lock in rates and minimize the impact of fluctuating fuel prices on your supply chain.
- Research fuel cards: Depending on where you are located, fuel cards may be a good option. Certain brands offer discounts or rebates based on your fuel purchases. For example, WEX offers rebates per gallon, while Coast partners with specific gas stations to get lower prices.
Final thoughts
While fuel prices may be largely out of your control, how you respond to them is entirely up to you. By using ServiceM8 functionality to its full extent and adopting efficient practices, you can maintain profitability and potentially even enhance your competitive advantage.
The truth is, trade businesses that embrace innovation and forward-thinking solutions will always be better equipped to navigate the challenges ahead - no matter what the future may bring. So, if you're fueling the pressure, it's time to make a change.
Ready to start optimizing your processes and reducing operational costs? Try ServiceM8 for free today.
