First, I am not a trained economist, I know nothing about world economic markets or for that fact the price of beans in China. However, I have stayed in a Holiday Inn (gratuitous plug) so as the commercial details, I know everything there is to know about our economy and where it’s going.
Where it’s going is easy – in the crapper. No wiping, no flushing, nothing – right into the toilet.
As a small business owner this is what I know.
Energy costs continue to escalate. Rumor has it we could be looking at gas prices over $4.00 per gallon come summer. Yesterday I think oil hit $102/barrel.
Check out the below chart. Of interest is the dip in prices in the Nov – Feb time period have become less dramatic with gasoline not retreating to previous lower levels. Looking at the most recent period we see little erosion in pricing which sets the stage for, in my opinion, a summer of new highs for gasoline prices.
The impact of higher fuel costs is for my pizza customers less disposable income/cake.
Less cake, less pie.
The other factor that is impacting me as a small business owner is cost of goods.
Let’s take a look at the power of flour. A year ago a bushel sold for 4.92. In February 2008 it sold for 19.88 a bushel. What does that mean? I buy flour in 50 pound bags. A year ago a 50 lb. bag of flour cost me $13.25. Yesterday I paid $32.25.
That’s an increase of 143% in one year.
How about bread – a dozen 8″ grinder rolls that cost me $2.60 in November 2007 go up to $4.30 on March 1 – an 65% increase.
Last but not least is the cost of dairy/cheese. One year ago mozzarella cheese cost $1.69 per pound. Last week I paid $2.99 per pound an increase of 77%.
So going back to my customer with a disposable income already impacted by the cost of fuel. As a business owner some how I have to figure out how to manage growing cost of goods vs my pricing of retail products.
I don’t face this challenge alone. Every business will face these same challenges. In the end we have to increase prices to cover these increased costs. Increased pricing means inflation. Inflation means that cake don’t buy as much pie as it did, meaning that somethings need to be sacrificed
I fear things will only get tougher and tighter.
Be patient folks, we’re all in this together and for $6.50 you can stop in to Pizzeria Pompeii on 9 Norman St in West Springfield, MA and get a 12″ cheese pizza that will fill your belly and make you smile….more gratuitous plugs…