Tips for Small Businesses to Survive Fuel Price Hikes
Petrol now costs 82 cents more per litre since 6 June, as confirmed by the Energy Department last week. This follows the VAT increase by one percentage point to 15% that took effect from 1 April.
For small businesses in South Africa, these additional costs are crippling and extremely tight financial controls are required to survive.
“The reality is that fuel hikes have a negative impact on most businesses because every tangible product which needs to be moved from point A to B needs to be transported and therefore, incurs these extra costs. Service providers will also need to take increased transport costs into account,” says Jannie Rossouw, Head: Sanlam Business Market.
Given that the SME sector is estimated to represent almost 40% of business in South Africa and is also a key employer, the mounting financial pressure felt by business owners should be of concern to everyone. There are also certain industries that are more at risk.
“Agriculture, infrastructure and construction, manufacturing and mining, travel and tourism, retail and wholesale trade, transportation and aviation will likely be most affected,” says Rossouw.
Having a clear view on business finances and implementing conservative measures can help protect business owners from rising fuel levies. Reducing all costs by 10% as a blanket approach is worth considering and Rossouw suggests the following additional tips:
- Examine your business expenses to trim any unnecessary costs
- Review your pricing strategy (align with market or choose a niche target market which is not as price-sensitive)
- Consider doing away with any discounting
- Appoint a commission-only sales team
- Reconsider how to restructure overtime pay
- “Right size” your staff complement
- Consider how you could decrease employees’ working hours by implementing a ‘2/3 shift policy’
- Set monthly expenditure budgets and monitor these
- Decrease your debtor’s terms