And The Survey Says: Mounting Fuel Costs Force Business to Cut Back on Hires

With the mounting pressure of rising fuel costs, businesses are feeling the heat – and cutting back on new hires.
 

A recent study reports that businesses are not confident that they will be able to hire new employees in the next 12 months based on the rising cost of fuel. The survey, conducted by the International Profit Associates’ Small Business Research Board, found that businesses believe their revenue will decrease over the next twelve months and fuel costs are becoming a more critical issue.

“The Board’s measurements of confidence in the general economy, revenue growth and hiring are all pointed downward,” said Greg Steinberg, President of the International Profit Associates (www.ipa-iba.com), a management consulting firm located in Buffalo Grove, Il.

“When small business owners are impacted by cost increases over which they have no control such as rising energy prices, it is even more important that they control the costs they can control in their own business,” added Steinberg.

Small business owners and managers were asked to list the most important issues impacting their businesses. Fuel costs topped the list, followed by the cost of materials. Only 46 percent of the 358 small businesses surveyed believe their revenue will increase during the next year, compared to 59 percent in April and 67 percent at the start of 2006. Clearly, small business are concerned about how much of their earnings will be diverted into operational costs, if the cost of fuel continues to rise.

According to a recent payroll survey by SurePayroll.com (www.SurePayroll.com), 71 percent of small business owners believe the cost of oil and gas is the number one factor that will have the greatest impact on the economy over the next six months.

“This is what we are seeing as well,” said Michael Alter, president of Skokie, Illinois-based SurePayroll, Inc. “Our clients are concerned that the pool of people they can hire has narrowed because potential recruits are not willing to travel as far to a new job given the higher cost to get to work.”

Linda and Thom Dolph, the owners of Dolph-In Transfer Inc., a trucking business located in Homeland, Calif., face that problem daily, as they try to keep their 10-truck fleet on the road.

“In the eight years we’ve been in business, this is worst situation we’ve had with fuel costs. We have been charging surcharges to our customers to compensate for the cost of fuel, and we have had to come up with a strategy to get the most miles out of our trucks in order to avoid empty miles,” said Linda Dolph. “Right now, fuel expenses make up 50 percent of our operating costs.”

Currently the Dolphs are paying $250 to $400 to fuel their mid-to-large size fleet of trucks.

“We are not looking to hire more people because we simply can’t afford it. At this time, most of our drivers are sub-contractors, and that is all that we can handle right now. So we’re really feeling the higher fuel costs.”

It’s expensive to fuel the sand and gravel trucks that make up a large part of the Dolph-In Transfer company fleet. But paying more to gas up these heavy-duty trucks is preferable to a slowdown in the real estate industry. Unfortunately, Linda Dolph noted, the real estate boom in southern California has slowed considerably.

“Since it’s a big part of our business, it’s not really good news to hear that our trucks won’t be needed because home construction is slowing down,” she said.

“When costs go up sharply and you can’t do much in the short term to minimize them like replace your fleet with electric vehicles, move to hybrid cars or just stop driving,” said Alter. It just hurts your profits and people are less willing to expand their work force. So fewer firms are hiring right now.”

NOTE: This column is distributed by Real Estate Matters Syndicate, PO Box 366, Glencoe, Illinois, 60022. This column may not be resold, reprinted, resyndicated or redistributed without written permission from the publisher.