Part Three: Fuel Costs Burning Your Business?

Forty percent — 27 out of the 66 business owners that responded to Gas Costs Fuel Worries — of you are absorbing rising fuel costs and hoping for a break soon.

Here are a few reasons given for not raising prices yet:

· "It's hard to raise prices when no one is calling, and when gas hit $3.00 a gallon, our phone all but quit ringing!" writes the owner of an air-duct-cleaning service in Pennsylvania.

· "They all say the same, ‘Raise [your] price, and we will move the product to China,’" writes a small wire manufacturer in Illinois.

· "I cannot raise my prices because most of my customers are older and on fixed incomes… I would feel too guilty. We'll see how long I last," writes the owner of a sprinkler business in Kansas.

· "When gas is on the rise like it is now, our business all but stops. People are worried about feeding their families and staying cool, and the new sofa can wait," writes the owner of a furniture business in Arkansas.

The biggest worry for those who haven't raised prices is the obvious one – "I hate to admit it, but I've been afraid of losing business by raising prices," writes the owner of a medical equipment and supply firm in Tennessee.

It turns out that he's not that far off the mark.

Of the small business owners who wrote me that they had raised prices or imposed surcharges and mileage fees, six mentioned that they had seen their business drop off with a decrease in revenue. One who owns a land-clearing business said he had lost 5 to 7 percent of his business so far; another who is in the limousine business has lost 14.3 percent in revenue; a stamp dealer who now tries to get his customers to use mail order rather than driving to stamp shows estimates that his sales are down about 20 percent.

I was reminded over and over again of the sympathy that many small business owners have toward the people they sell to. They see or talk with their customers regularly, and they find it difficult to ask them to pay more money for services if they can tell that customers aren't doing well, either. In contrast, executives at big businesses can make these same pricing decisions as a pure business and financial decision. Rarely do they meet the customers who will have to pay the increased prices.

Many wrote not just about the hardship higher fuel costs creates for them and their businesses, but also for their customers and employees. Many of the e-mails showed an empathy that comes from having walked a mile in another’s shoes:

· “I am willing to take some less profit to keep my employees working and keep work in America,” writes the owner of a machine shop in Missouri.

· “Our foreclosure department has overtaken our business in the last 3-4 years with no end in sight. On one hand that is good but on the flip side, all those empty houses have heartbreaking stories and displaced families who once lived there,” writes the owner of a real estate brokerage in Michigan.

· "Dairy farmers are suffering the lowest milk prices since the late 1970s, and higher fuel and electricity rates like everyone else, and frankly I feel guilty about adding to that burden right now," writes the owner of a dairy equipment business in New England.

· “For the past year, we have been absorbing the additional cost of fuel. Our customers are small businesses also, and it has been difficult to pass the additional cost onto them,” writes another business owner.

· “We have had to raise our prices solely for fuel-cost reasons,” writes the owner of two window-cleaning companies in the Mid-Atlantic region. “But it’s not really the clients that we worry about. It’s the employees. Most of our people travel about 35 to 40 miles (one way) to get to our offices. This is causing tremendous hardships for them. We are trying to combat this by giving the drivers a daily allotment for fuel. And then we charge the passengers a small daily amount since they are not using their cars. It seems to be working out."

To me, it seems that the rising cost of energy has put many small businesses owners much closer to the edge – witness this note from one small lumber company owner: "The cost of fuel is killing me. I have implemented a $25 delivery fee, but the catch is that the contractors that use me are long-time customers, and I can't rightly charge them out of appreciation for their long-time patronage – and they expect not to pay…. I can't afford to lose contractors, so I have to eat the extra cost. This has resulted in me missing three paychecks in the last two months. It's tough when you are raising a child on your own. I hope this fuel issue is resolved soon. I don't know how long I can keep my head above water."

Although the small business owners who responded aren’t looking for government help, one of them who owns a lawn-service business in Michigan wrote this: “Everyone knows that higher gas means higher prices across the board … except maybe our president.”

Two small business owners suggest a partial solution to the problem – increasing the tax deduction for mileage.

The owner of an instrument repair business who travels to his clients in North Carolina writes: “My business accounts for travel using the IRS business mileage allowance. Last year that was increased to 48 cents per mile but gas, on average, is higher this year than it was last year. In January, the IRS lowered the allowance to 44 cents per mile. The allowance needs to be increased this year to about 50 cents per mile to be fair to small business and to accurately reflect the increase in fuel cost.”

This owner of a marketing firm in Wisconsin writes: "I find it interesting that even while our government has done little or nothing on curbing the prices, they have done just as little on the tax deduction allowed for business travel. At 42 cents per gallon it was tolerable…a gallon of gas was closer to $1.50 [then]. Now it’s closing in on $3.50 a gallon and the allowance still remains close to where it was some time ago. Building in this cost is nearly impossible. Clients do not want our services to cost them more, period.

"At least give us the deduction to match these ridiculous price increases. It may be easy for those in Washington to ignore the small business owner, but when many start to disappear, they will have a new agenda to deal with. You can’t place the barometer of the economy solely on companies like Wal-Mart, Target, and Sears.

"Smaller profits mean fewer raises, slower growth, expansion plans get put on hold. Surely our government can do better than this."

Yes, our government can do better than this. I think these two business owners have suggested an excellent place to start.

Here's a link that gives the names and addresses of the members of the House Small Business Committee. If you agree, write and encourage them to increase the tax deduction for business travel.

Susan C. Walker writes a personal finance and economics column for as well as this small business column. She works for Elliott Wave International, a market forecasting and technical analysis company, and has been an associate editor with Inc. magazine, a newspaper business editor, an investor relations executive for a real estate investment trust and a speechwriter for the president of the Federal Reserve Bank of Atlanta. She graduated from Stanford University.

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