Cheaper gas puts more money in consumers' pockets, strengthens economy
By Joyce M. Rosenberg
AP Business Writer
NEW YORK (AP) - For small business owners who deliver goods and services via car, truck or SUV, lower gas prices have brought more customers within reach and put more money in their pockets.
As gas prices fell below $3 a gallon, Kristen Harris went back to delivering her desserts to Chicago-area neighborhoods she had abandoned. Harris was able to cut her delivery charge from 70 cents a mile to 60 cents, and win back customers who had balked at the higher fee.
Her revenue during the holidays rebounded 30 percent, and she's thinking about a further expansion.
"We definitely want to saturate the Chicago market," says Harris, whose Homewood, Illinois, based Pizzazzed Plus makes cookies, cake pops and other treats
At a national average of $2.04 a gallon, regular gas is down 45 percent from its 2014 peak of $3.70, saving companies hundreds or thousands of dollars each month. Cheaper gas also puts more money in consumers' pockets and contributes to a stronger economy.
Between 2011 and 2013, gas averaged around $3.50 a gallon nationally - more in the Chicago area, where gas taxes are high. Harris, who uses a Lexus for deliveries, shrank her territory from a 35-mile radius around her company down to 10 miles by last summer, and no longer included Chicago itself. Harris, who also sells online, used FedEx for local orders beyond her delivery area. Some customers chose instead to make the trip and pick up their orders.
Now, revenue is strong enough that Harris may hire two to three workers and buy another vehicle. But she's keeping her delivery charge at 60 cents because she can't be sure gas will remain cheap.
CQC Home has seen a double benefit from the gas price plunge. The fuel bill for the Durham, North Carolina, home remodeler's 22 trucks and SUVs has dropped from $70,000 a year to under $40,000. Meanwhile, business nearly doubled last year as homeowners spent less on gas, saw the economy growing and decided to expand or update their homes, CEO Ken Combs says. Revenue rose to about $3 million from 2013's $1.6 million, and Combs is projecting $4.5 million for 2015.
"We're talking about expanding and growing our market to other areas, a little bit farther away," he says.
CQC's customers are also spending more on renovations: The average price of a project has risen to $150,000 from about $70,000. The company has hired eight employees, bringing its staff to 22, and is interviewing for three more openings.
CQC is planning optimistically, but Combs knows he may need to rethink his strategy if prices head higher again.
That caution is a good idea, says Jeffrey Berdahl, a certified public accountant with RLB Accountants in Allentown, Pennsylvania, whose clients include small businesses.
"I wouldn't manage your growth plans based on what gas prices are doing now," he says. "I would manage it more what you feel your revenue is going to grow by."
Lower fuel prices aren't the main reason more people are willing to plunk down $100,000 on a Kona Ice food truck franchise. But they help.
Tony Lamb, who owns the franchise parent company, already has deposits on 91 franchises for 2015. He sold 142 last year, giving Kona Ice a total of 400. Would-be franchisees are aware that many consumers are more confident in the economy and feel freer to spend money - such as $2 to $5 on a cup of flavored ice.
As a bonus, cheaper gas might save a truck owner about $40 a day, Lamb says.
"You always feel like you're being robbed when it's $4 a gallon. When it's $2, you feel like you're stealing it," he says.
Lisa Hennessy saves between $200 and $300 a month because it costs less to deliver her pet foods in the Chicago area. She's using that money to conduct classes on making home-cooked food for pets.
Hennessy, whose company, Your Pet Chef, has revenue between $3,000 and $4,000 a month, realized in early November she was saving a substantial amount of money on gas. She decided to invest the cash back into the business, holding a class last month that already brought her several new customers and has helped make more people aware of her products.
"When I started to spend so much less on gas, I said, let's try this," she says.
Published: Thu, Jan 29, 2015
