Fuel Prices: Don’t be the Hero!
For many businesses, fuel is more than just a line item on the profit and loss statement. It affects freight, supplier pricing, delivery costs, field service work, staff travel, and ultimately the cost of getting products into your business and out to your customers.
Or perhaps you are selling a product that will suddenly be more or less desirable than before the fuel crisis? With fuel prices increasing at a rate we haven’t seen before, now is the time to review the impacts on your business.
Risk 1: Losing margin without realising it
One of the most common mistakes we see is businesses continuing to trade at old prices while new costs creep in underneath them.
That approach can feel customer-friendly in the short term, but it often leads to an avoidable erosion of gross profit margin.
In practice, that might look like:
- selling the same product at the same price even though the replacement cost has increased
- continuing fixed quotes when fuel and freight components have shifted materially
- under-recovering delivery or service call costs
- accepting margin compression as “just part of doing business”
Too often, owners end up being the hero for their customers while quietly damaging the financial health of their own business.
Communicate early! Customers are generally more accepting of pricing changes when they are explained clearly and implemented professionally. A well-timed review is usually far better than waiting until margins have already been squeezed and a larger correction is required. Protecting your margin today helps protect the long-term stability of your business.
Risk 2: Direct impact on Sales
In some businesses, the risk will be that you are selling a product that is suddenly less desirable.
Think big trucks, bigger cars, 2 stroke mowers, etc all of which will (temporarily?) appear less attractive than electric or smaller options.
Here the issue is immediate cashflow. If short term sales drop then what other levers in your business need to be pulled to remain strong. Cashflow modelling becomes key.
Need help building a model?
Get in touch with us if you would like help building a practical model to support pricing decisions and/or cashflow modelling. Test the impact of cost increases, and make sure your business is not carrying costs it should be recovering.
We’d be happy to work with you to turn the numbers into clear, confident decisions.
– James Davis
25.03.26
| This article is compiled as a helpful guide for your private information and is subject to copyright. We suggest that you do not act solely on the basis of material contained in this article because items are of general nature only and may be liable to misinterpretation in particular circumstances. We recommend that our advice be sought before acting on any of these crucial areas. |
