FUEL SURCHARGE – YES OR NO?
Information:
– Fuel prices have increased 25-30% within the last 3 months in Ontario,
Canada
– So, should contractors start adding a fuel surcharge on their client invoice?
Before jumping into this, I would challenge you and with these questions:
1. What are your current fuel costs as a percentage of sales? (note: for
Gelderman Landscape Services its 2.9% of sales)
2. How will you determine the surcharge amount?
3. How long will you keep the surcharge in place? What thresholds will you
use?
4. How much extra revenue do you think the surcharge will capture? Will it
lower your Fuel % of Sales by 0.25% or 0.5%?
5. How will you communicate the surcharge to your client base?
6. What will be the negative impact? Will you lose business? How will a
surcharge affect your brand and sales?
Here is the reality:
We need to remember that we are not in the Trucking Industry. Our vehicles and equipment are not driving around 8-10 hours a day. Good businesses should be evaluating their budgets and making allowances for potential risks and increases like liability insurance, payroll increases and rising fuel costs.
Here is the challenge:
1. Reevaluate your 2022 budget and make the appropriate changes to your
pricing
2. Focus on making changes on things that you can control – materials, labour,
overhead, equipment etc. I can guarantee that you can save more than
0.25% or 0.5% on these areas
As you can see, I am not a fan of fuel surcharges. I believe that they will hinder your business and brand.
I believe that as contractors we sometimes get caught in the weeds and are focusing on the wrong things, things that we cannot control. Do I like high fuel costs? No! But I have learned that there are more opportunities for savings in the things that I can control, as mentioned above.
Contact Nathan at Southbrook Consulting if you would like assistance in finding more opportunities for savings in your budget.
