Why it’s Time to Rethink Fuel Surcharges By: Steven Innerfield, MBA, CSDS
I used to hate the idea of Fuel Surcharges. We owned a shredding company and had a serious competitor who seemed to add surcharges to everything, so to me the sales answer was to have surcharges on nothing. It was a great plan for getting customers, but unfortunately not such a good plan for making money. I later came to realize the problem wasn’t with the surcharges themselves, but rather, was in the way the surcharges were calculated and applied. This competitor of ours slapped a “fuel surcharge” onto every invoice, but the funny thing was that when gas prices came back down, the surcharges didn’t. Their so-called surcharges were really just a disguised price increase, and the customers didn’t like it. We took away quite a few customers, but then when diesel prices took a jump back up, we realized we had a problem. The good news was that we had all these new customers, but the bad news was that the cost of diesel was now eating all the profits. We were busier than ever, but not making any extra money. Sound familiar? In time I came to realize that a Fuel Surcharge can be a valuable defensive tool if used properly. Now, I like to think of Fuel Surcharges as a form of “profit insurance”. If diesel prices spike unexpectedly, as they have these past _________________________ 32
iG Journal 2022 Issue 2
