What Businesses Benefit the Most From Lower Fuel Costs?

In reality, it’s hard to find many businesses that don’t benefit from lower fuel costs. The biggest losers are oil producers, who receive less revenue for their inventories. This also depresses business activity for oil explorers and producers of alternative energy solutions, since they now have more price competition from cheaper oil and gas. But let’s not shed too many crocodile tears for Exxon and BP. Instead, let’s celebrate the winners.

And The Winners Are…

  1. Transportation Companies: Operating costs for airlines and shipping/delivery companies are much lower when oil and jet-fuel prices fall. Perhaps this will trickle down to a reduction in ticket prices and shipping charges, but somehow these prices never seem to decline. At best, we are not likely to see new fuel surcharges anytime soon.
  2. Automakers: For better or worse, Americans like big, gas-guzzling SUVs and trucks. Lower fuel costs stimulate sales of the mega vehicles, which are far and away the biggest profit-makers for the automakers, especially for the Detroit Big Three. That might also mean more tax revenues and better times for people living in Michigan and other states that produce trucks.
  3. Manufacturers: Petroleum provides a wide variety of organic compounds used to manufacture chemicals, plastics, textiles and a huge assortment of other materials. Lower prices for raw materials means fatter profit margins for manufacturers, and may increase price competition. Wouldn’t that be lovely?
  4. Utilities: Lower fuel costs are great news for fossil-fuel utilities, such as electric generation companies. But there are a couple of caveats. State overseers may require utilities to roll back prices. If that happens, consumers may use more electricity, increasing demand for generation companies and possibly increasing the possibility of brown- and black-outs this summer.
  5. Farmers: Many farming costs are tied to fuel and petroleum costs. Items like fertilizer and insecticides that use organic chemicals may fall. It will cost less to fill the gas tank of tractors and combines. The cost of getting produce to market will decrease. Special exception for corn growers — the lower cost of oil means more price competition for ethanol, so corn producers may find themselves selling corn for food instead of fuel, which may be a less lucrative trend for them. It will cost less to feed corn to livestock, which might mean lower meat prices.
  6. Travel Industry: If lower fuel costs translate into lower ticket prices, people might be more willing to fly to vacation destinations in America and around the world. Travel agencies and travel websites, as well the hospitality, restaurant and entertainment industries, will benefit from this trend. This also bodes well for car rental companies, Greyhound and Amtrak.
  7. Liquor Makers: A huge percentage of the price of your favorite bottle of bourbon stems from taxes. But the cost of production involves many processes that directly or indirectly require fuel, including acquiring grain, creating mash, distilling alcohol, bottling and distribution. Once again, liquor prices seem to be on a one-way up-escalator, but we can always dream.

It’s obvious that the American consumer is the biggest winner when fuel prices decline. Lower prices on gasoline and on products that have costs tied to petroleum mean more money in the wallet of John Q. Public. This drives demand, boosts the economy and increases the demand for investments in new plant and facilities. If your business finds that demand is outstripping your production capacity, consider a loan from IOU Financial to finance expansion. Interest rates are still low, so now is a great time to anticipate greater demand and grow your business.

Marketing on a Small Budget

You might have the best product or service in the world, but unless people learn about it, your small business is not going to get very far. Marketing is essential for every business, but it doesn’t have to be too expensive. Here are some tips for getting your message out while keeping your cash at home:

  1. Do Your Own Market Research
    Make a list of what your customers want, the questions they ask, the problems they want solved, their gender and age, etc. This will help you target your marketing efforts by addressing their concerns directly.
  2. Clarify Your Message
    Don’t spend a lot on fancy brochures without first ensuring that your message is clear and concise. If a young person can’t understand your message, then it might need simplification. Clarity above all else!
  3. Public Relations on the Cheap
    Do things to get your business’ name out there, like volunteering your offerings at charity events, running a blog and inviting guest bloggers, commenting in other persons’ blogs, and attending networking or civic events.
  4. Hire a Small Marketing Agency
    Identify a promising small marketing agency and, at least at the beginning, follow their advice. They will understand you are on a tight budget — they probably are too — but nonetheless will have innovative ideas for you. If they don’t, try another one, but give the first one a little time to prove itself.
  5. Look for Free Marketing Advice
    Articles such as this one provide useful information for free. The library is another great resource, and many marketing agencies are willing to perform a free initial consultation.
  6. Promote Word-of-Mouth Advertising
    Nothing is more effective than WoM. Excite your customers by offering loyalty programs, contests and raffles, excellent service and solutions that work. Don’t be shy — ask your satisfied customers to help get the word out. Many people just want to be asked.
  7. Create Your Own Marketing Materials
    Desktop programs are so powerful today — all you need is a little time and practice to harness that power to produce your own collateral material. Brochures, flyers, logos, company designs, websites and business cards are all fairly easy to produce. Take your own photos and incorporate them into your materials. Later on, when business is booming, you can hire professional photographers and designers for a more polished look.
  8. Treat Your Vendors Well
    A happy vendor can help your business, but a disgruntled one can be poison. Make sure you pay your vendors on time! Even better, pay them in full in advance. Make them your friends, then ask them to endorse you and offer to reciprocate.
  9. Create Joint Marketing Efforts
    Suppose you own a bakery next door to an independent coffee shop, to which you supply yummy goodies. In turn, you steer your customers next door for a nice hot cup of Joe. Go a step further and take out joint ads that tout both of your places. It’s synergistic and will save you money. Adapt this example to your own circumstances.
  10. Exploit Your Website
    You can use various tools, often at no charge, to tell you how well your website is working. How many visitors do you get, and how many of them become customers? Attract new traffic by publishing useful, authoritative articles that will help rank your site high in search engine results. Use search engine optimization techniques throughout your website — you can read up on these or hire a person to help. Don’t forget to use all the social media tools, including Facebook, Twitter and Linked-In, to broaden your marketing efforts.

As you can see, there are plenty of low-cost ways to market your business. You may not see results right away, but persevere and you’ll probably be delighted with the ultimate outcome.



To Yelp or Not to Yelp? That is the Question!

You may be on Yelp already. You may have heard about Yelp but aren’t on there yet. Or maybe you’ve never heard of Yelp! So let’s go over a little background just in case you need to know.

In 2004, Yelp was founded in an effort to help people find local businesses.  In the  4thquarter of 2014, Yelp had an average of approximately 135 million monthly visitors. Now that’s progress! There have been over 71 million local reviews published on Yelp. So it’s clear to see that people are on Yelp, promoting their services, writing reviews, and looking for the best businesses out there.

Yelp is a way to get the word out on your business. As mentioned there are millions of monthly visitors. When you strategize properly by doing a thorough, informative company description, coupled with pictures (if pictures add value to your service) you will be, more or less, getting free advertising, as it is free to set up a Yelp account.  It should be noted there are paid advertisements you can take part in, but that is entirely up to you.

As mentioned, Yelp is a site for company promotion and company reviews. This can be good but can also be viewed as negative. Sure, when those sparkling reviews come in, fantastic!  You can use those for promotional purposes. But like any business, there may be the occasional (hopefully just occasional) bad review.  This is what the social media world is all about – people having an opportunity to state their opinion. If you receive a negative review, you respond calmly, incorporate changes if need be and move on. If you decide to join Yelp you want to consider this.

All in all, Yelp can be a great source of promotion to showcase your company, along with potentially excellent reviews by satisfied customers. And that can certainly help you build your business.  One tip – if you have a great review on Yelp you can link back to the review on your other social media platforms such as Twitter, Facebook and LinkedIn.

So the choice of yours – which way will you go – to Yelp or not to Yelp? That is the question!


Avoid Roadblocks to Your Success

Just about every business, big or small, needs financing. You have to remember that you can have profits without having much money in your bank account. If you run short of cash, it will negatively affect the entire business, including paying for:

  • Startup costs
  • Inventory purchases
  • Payables
  • Uncollected receivables
  • Other uses for working capital
  • Capital expenditures

Funding Facts

Funding is available in the form of debt and equity. If you are a small business, you may not have a way to raise equity, and/or you may not want to be selling partial ownership to someone else. Thus, you are more likely to use debt as a means of raising funds. You use the funding to pay your bills and to grow your business. While it’s possible that you have enough cash in the bank to finance all your needs, the great majority of businesses rely on at least some outside money to start operations, undergo an expansion program and/or replenish their working capital (current assets minus current liabilities).

Roadblocks to Success

If you are a well-prepared business owner, you’ve assembled a business plan that includes your estimated cash flows. Whenever you project negative cash flows, you will need additional funding through equity or debt. In other words, it’s time to take out a loan when you are depleting your cash.

The most notorious cash flow culprit is accounts receivable (A/R). Simply stated, if you extend credit to customers, you will always run up against a few bad apples who take forever to pay their bills. If you make cash inflow estimates of $10K a month and even have sales figures that meet this target, slow collections can result in a cash shortfall. Eventually, you hope to collect at least 95 percent of your A/R, but the longer it takes, the more you will need funding.

As you are waiting for your credit customers to cough up the cash, you still must pay bills to vendors, lenders, the IRS, employees, etc. These folks are not interested in your collection problems –they want to be paid on time. That’s when timely commercial loans, such as the ones available from IOU Financial, are just the ticket to get you over the rough patches.

Startup Costs

Another common use for external funding is to pay for the costs of starting your business. To earn money, you have to spend money, and during the startup phase, you are spending aplenty but earning nary a nickel. A startup loan will allow you to purchase the equipment, space, merchandise, recruitment, insurance and dozens of the other things you need in order to open the business.

Going back to your business plan, a startup should have a pretty good idea of how much funding it will need before it can begin selling products or services. The plan will show the necessary borrowing, including a realistic assessment of the interest costs and the payback period. It’s a complete red flag if you can’t secure the funding you need to start your business — better rethink the whole thing. Perhaps you can modify your plans to make them more modest. One strategy is to start very small and then use profits to bootstrap your growth. If even a modest plan can’t scare up enough funding, you might have to abandon the whole idea. That’s how capitalism works — allocating resources where they will do the most good (i.e. bring the highest returns on investment).

The bottom line is not to be surprised that you will need financing from time to time. Even healthy established businesses need to take out working capital loans in order to continue to grow.  The solution is to identify reliable lenders, such as IOU Financial, who will have the cash ready for you when you need it. By carefully husbanding your money, you can grow your company and enjoy the fruits of your labor.