Fiducial's controller Darlene Siegel says that small business owners should shop around for the best prices for products and services they use on a continual basis by going online, doing cold calling, looking in the yellow pages and networking with industry contacts. They could even set up aggressive early payment terms with vendors.

"This would allow them to take a discount which is money back in their pockets," said Siegel.

Having helped turnaround the economic fortunes of a number of small businesses during her career, Siegel also advised that as prices rise people become more cost conscious but owners should be very careful of what they are shopping around for.

"Keep in mind that you get what you pay for and financial services would not be an area where you would want to skimp," she said.

Another option, Siegel says, is bringing in a consultant to assist in creating efficiencies in the organization that could reduce costs and possibly increase revenue in a long-term capacity. Problems arise, however, when companies fail to implement the very advice they paid for in the first place.

"If you are not planning to do whatever it takes then don't incur the costs," she said.

Paying attention to detail

Roger Bierman is no stranger in dealing with these issues since the franchise relations manager for Fiducial's North Central Region once operated a Texaco service station and a Dunkin Donuts shop.

Rising prices are part of the dynamics in any market and Bierman knew that in order to compete in the service station business that he would have to deal with fluctuating fuel costs. That meant going the extra mile in terms of delivering service to his customers.

"This is not the time to be sloppy," he said. "You have to do the job the correct way and a little bit more. When prices go up you better be providing service to the ultimate."

Savvy business owners advise their staff to be prepared to do that, Bierman says, but those that don't have a hand on their operation and haven't kept up with making certain periodic adjustments will see a decrease in sales.

"It makes good business sense," he said. "The good businesses have already prepared their staffs. Good businesses already have made sure that services have been provided properly."

As owner of a donuts shop, Bierman knew how important it was for his products to always look good.

"People buy by sight in the donut business so your finishers don't want to skimp or cut back on the key ingredients," he said. "When you come in for a jelly-filled donut, you don't want to have to be digging in for a dab of jelly. And you have to be careful on how you pack it. You don't want a glazed donut with chocolate icing."

Equally as important as presenting a fresh, attractive product was letting the customer know that their patronage was appreciated by saying "thank you."

Bierman says it's the same way with fast food outlets. If the counter people aren't dressed properly or the food has been sitting in the warmer too long or the trash cans haven't been emptied, it sends the wrong kind of message to customers.

"Those are all turn-offs," he said. "When prices go up these are the things management has to maximize on. That's the only way owners have of overseeing staff more cautiously."

When prices are high on the consumer side, customers are going to cut back. But he said that obstacle can be overcome by giving them the best service and best possible products because detail is so important. Especially when it hinges on knowing how your market is doing. In the gas and donut business, Bierman realized people would pay a few extra pennies each time for that special service that they couldn't get from just any company.

A double-edged sword

The other half of the equation to having an accurate picture of your company's fiscal shape, is cash flow management. Unfortunately, Bierman noted that when small businesses are asked about this topic, too many of them think cash flow management means what they have in their checkbook.

"You know if your checkbook looks awfully big there's a reason behind it," he said.

With service station owners often heavily immersed in the business, some forget about the timely reporting of sales taxes and filing 941 quarterly tax forms. Since most of their money comes from gasoline sales, station owners are required to collect and pay this tax.

The energy crisis was first felt in the U.S. in the early 1970s but with gas prices now skyrocketing, small business owners are scrambling to deal with much higher fuel costs.

"This is really an issue for small businesses who are coming out of a slow down in the economy," said Gene Fairbrother, a consultant with the National Association for Self-Employed (NASE), the nation's leading resource for the self-employed and micro-businesses (up to 10 employees). "It's the first one [slow down] in 20 years that small businesses have felt. It's not necessarily a diminishing issue because the consumer is still spending and the costs are going up. The key is that the vast majority of express and delivery in the country is made by truck. When the business owner turns up at the gas pump which was $1.19 last year and now they're paying $2.19 that has a definite effect."

This represents a double-edged sword for small business owners, Fairbrother says, because entrepreneurs were still in the mindset of looking at their financial statement and realizing that they had six months of breathing space before they had to address these rising costs. Now owners have to sit down and really analyze their financial statement to determine where their costs are going and what their profits are.

Fairbrother finds it interesting that when small business owners get down to a half or quarter of a tank of gas in their car that they will drive around to save a nickel a gallon. Yet if you asked that same owner when was the last time they did a financial statement and evaluated it, it was probably last year.

"It's like do you want to save 40 cents a tank or save $40,000?" he said. "It's a sad scenario because it's very seldom that a business can pass on directly the cost of doing business to the consumer. Otherwise, American and Delta Air Lines would still be in profits instead of losses."

The main issue, he asserts, is they've got to really evaluate and analyze what their expenses are.

"It all starts here," he said. "If you go out and ask 100 small business owners what their company made last year I think for the most part there would be a very high percentage saying ‘I don't know.' That's a disaster waiting to happen."

Back to the basics

According to Fairbrother, it's time for business owners to get back to the basics.

"You can be the best restaurant owner in the world but if you don't have a good handle on food prices, you're dead in the water," he said. "You can be a great graphic designer but if you don't know what your costs are versus your revenues, you're headed out of business. You have to be in control of your finances."

Business owners who don't have a good handle on the financial pulse of their business need to have a professional who can get them up to speed -- and quickly.

"If your costs are rising, things are moving up and you don't feel you can cover it, get a credit line and make sure your reserves are flush," he said. "Don't wait until you need it because you can't pay your bills. Do the forecasting and if you're looking at negative or slower cash flows, even if you don't use it, make sure your loans and reserves are in order because these things don't happen overnight."

Fiducial's Bierman added that many small business owners simply do not know how much it costs to open their doors.

"You have to do so many dollars today just to break even," he said.

STEPHEN PAREZO is the Media Manager for Fiducial.