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Small Business Feeling the Pinch at the Pump

The key, says Kane, is to be upfront and clear about how and why prices are being raised. Rather than jacking up rates across the board, he suggests adding a fuel cost surcharge.

"It shows that all we're trying to do is recoup the difference in pricing," he says. Companies need to calculate what percentage fuel makes up of total costs, then structure the surcharge accordingly. Creating a separate charge makes clear that the money is being used to cover this specific expense, rather than high fuel prices making a convenient cover for an owner to make more profit.

"You have to have an open conversation with your clients, and a clear agreement," says Kane. "People in general have been very understanding. They get it, because they're paying the same high prices when they fill up their cars."

For his business, Kane ties the fuel surcharge to the Department of Energy's weekly report of gas prices across the country, which is announced every Monday. Because the surcharge is tied to a specific, objective price report, Kane can also assure customers that the rate will go down should gas prices ease.

The limousine business, like almost every small business, is on some level a people business: Clients hire a car, they chat with the driver and if they have a good experience they'll stay loyal. Customers might not be thrilled to see a new surcharge on their invoices, but if it's explained clearly and openly, they'll understand.

No business can absorb double-digit price increases for one of their supplies. Painful as it might be to tell customers you're adding a surcharge, it would be even more painful not to.

Elizabeth Blackwell is a freelance writer based in Chicago. She is the author of Frommer's Chicago guidebook, and writes for the Wall Street Journal, Chicago, and other national magazines.
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