Small business owners and managers face increasing expense and cost of materials

Businesses face rising fuel and energy costs

Rising energy and fuel costs have gone from simply being expenses that were "passed along" to the single greatest issue impacting small businesses, according to the International Profit Associates Small Business Research Board (IPA SBRB).

The increasing cost of materials was cited by small business owners and managers as the second most significant issue affecting their businesses as indicated by the most recently completed IPA SBRB nationwide poll.

The IPA SBRB study, which tracks the confidence and views of small business owners on economic and business issues, also found that small businesses:

• Are still under-prepared for a disaster with only 26% saying they had a plan if an emergency situation occurred. That is only a 5% improvement from the 21% who said they had a plan in place in November, 2005;
• have differing opinions on whether the minimum wage should be raised, with 45% agreeing it should be increased, 27% opposed to an increase and another 27% who haven’t formed an opinion; and
• are divided about the future of the estate tax with 31% indicating it should be abolished, 22% suggesting that it be changed, 27% comfortable with it remaining as it is, and 19% with no opinion.

"Unquestionably, the most significant trends are those related to the impact of rising fuel and energy costs, regardless if the cause is from actions in the Middle East or from supplier problems at home," said Gregg Steinberg, President of International Profit Associates (IPA), the largest privately-held provider of management consulting and professional services to small and mediumsize businesses in North America.

The current IPA SBRB survey found that energy and fuel costs most significantly impact 15% of small businesses responding, while cost of materials is considered the biggest factor for 13% of the small businesses.

"As of late 2005, energy and fuel costs hadn’t appeared on any previous IPA SBRB list of most significant small business concerns," Steinberg added. "However, energy and fuel showed up for the first time at the beginning of 2006 tied with finding quality employees for second at 13% of the respondents behind the leading category— general economic conditions."

"We saw a trend during 2005 in which more small businesses in each reporting period said they were passing along the increased energy and fuel costs. In the spring of 2005, 64% of small businesses were passing on increased energy and fuel expenses. By summer 2005 the number of small businesses passing along the costs rose to 72% and by year end the number had escalated to 85%," Steinberg said.

Concurrently, the IPA SBRB Small Business Confidence Index (IPA SBCI) has decreased during this same period. The IPA SBCI, which measures expectations about revenue growth, the general economy and hiring looking forward 12 months currently stands at 39.3, declining nearly 20% from 47.3 in April and from 52 at the beginning of the year. By comparison the IPA SBCI stood at 55 at the beginning of 2005.