Did you plan for the gas price hike?
The cost of gas has risen 16 cents per gallon in the last two weeks and is being reported to continue to rise all summer long. Have you planned for this huge price hike?
I spoke about this in a blog months ago how the price of gas continues to rise while your profit margin continues to drop. The news is reporting the average price of gas is around $3.25 per gallon, almost $1.00 more than it was a year ago. (depending on where you are located)
It is reported to possibly top out at anywhere from $3.50 to over $4.00 per gallon. Unfortunately there are gas stations in California that have already topped the four dollar mark and will continue to go up over the summer.
What does this mean to you? This summer when you fill your tank to make the trip to your events, it can cost you double the amount you were paying last summer and up to three times the amount of two summers ago.
Did your rates increase to cover this huge new expense? Probably not! That is all lost profit and a possible loss of your business.
If you didn't increase your rates six months ago, that means the events you are now performing and already have booked for the summer months will take a larger share of the profit to cover the cost of your travels.
If you raise your rates now, the bookings you get in the next few months won't actually take place until late summer, fall or winter. Who knows where the price of gas for not only your car, but home heating will be in the fall or next winter.
Let's say that you were charging for a wedding last summer $750. A tank of gas was $30.00. (estimated 1 tank per event) That left you with $720.00 to which you would then subtract the other costs of running a business.
This summer that same tank of gas will cost you $50.00 or more. Leaving you with only $700.00 or less to balance your books.
Now you also have to include that because of gas rates rising, the price of most consumer goods also went up. Food, clothing, home heating etc. etc.
The costs of bread have already doubled due to the increase in wheat pricing, because of the increase of fuel for trucking that wheat. Fruits and vegetables along with milk have jumped 30% to 50% in the last year, all due to the hike in gas prices.
Together this adds up to a huge increase in your monthly expenses at home and for the business.
Did your rates account for this huge increase?
In the airline business, a one cent raise in gas will add up to millions of dollars a day. Airlines are trying to get a grip on this before it is too late by raising their ticket price $30.00 or more per ticket or adding a fuel charge to each ticket.
If you want to stay with the ever increasing expense of life this summer and beyond, you must also adjust the rate at which you provide your DJ service. Charge a mileage fee will help to cover this and if the price of gas drops you can always stop adding this extra charge.
We are in a recession, no matter how much the President wants to deny it, the only way to not fall behind is to increase your rates just enough to cover this expenditure of raising gas prices. It is either that or cut way back on your service and expenses which is not a smart move with the industry moving more to a “Quality Personal Service”.
What ever you are charging now, I would suggest raising your rates by a minimum of $25.00 to cover your added gas increase. If you are uncomfortable with this increase, begin to charge a mileage fee of up to 40 cents per mile (what ever is the legal mount allowed in your area) to each and every event you perform for in order to help cover your added gas expense.
This recession won’t be easy, but if you plan ahead for it, you may get through it with minimal damage.
UPDATE: 3/19/08
Today I had my CPA file my taxes for the business. When we were working on the mileage portion of the paper work, I pulled out all my papers with the locations and the mileage to each event. I then added in the other mileage for the business and it came to almost 8000 miles. It didn't seem like that much during the course of the year, but when you really sit down and figure it out it can really add up.
How many miles to the gallon does your fully loaded vehicle make? How many gallons of gas would that be? Last spring we were paying about $1.00 less per gallon then today and the price is expected to continue going up.
With my vehicle and the miles per gallon it makes and the increase in the gas prices, it comes out to be approximately a 50% increase in my gas bill for this year. If the price continues to go up that fuel increase cost could become 55% to 60% or more when compared to last year by the end of this summer.
Where is that extra fuel cost money coming from? A mileage charge added to each event performed.
Jeff Richards: Party Time Productions