How Small Businesses Are Managing Cost Increases Created By The Iran War

Key Summary

• Shift from Growth to Resilience: Small businesses are pivoting away from aggressive expansion toward "resilience optimization," focusing on securing supply chains, renegotiating vendor contracts, and diversifying fulfillment options to mitigate the impact of global volatility.
• Proactive Financial Management: To protect cash flow and margins, successful owners are aggressively managing credit profiles to unlock working capital, auditing recurring expenses for discounts, and transitioning from quarterly to bi-weekly budgeting cycles.
• Customer-Centric Pricing and Operations: Because small businesses often lack the leverage to pass fuel surcharges onto customers, they are prioritizing price transparency and operational efficiency to maintain client trust while simultaneously narrowing their focus to high-performing product lines.

As the economic shockwaves from the Iran war spread through global markets, small businesses are once again being forced into survival mode. Rising fuel prices, tightening credit conditions, and supply chain volatility are rapidly reshaping how companies manage cash flow, pricing, logistics, and customer retention.

For many owners, the challenge is not simply rising costs, but the speed and unpredictability with which those costs are changing. Businesses that once reviewed budgets quarterly are now reassessing them weekly, or even daily, as energy prices and shipping costs fluctuate.

Small Price Hikes; Big Impact

Minor increases in logistics, materials, or marketing costs can have a major impact on already thin margins. According to Ali Zane, CEO of IMAX Credit Repair Firm, the businesses best positioned to survive the current environment are those moving aggressively to protect cash flow before conditions worsen.

“The ones waiting out the storm are losing between 8% and 14% of their margins, whereas the small business owners who have moved quickly within the last month are keeping all their options open in terms of pricing power and banking opportunities,” he says.

Credit management has become another priority as lenders tighten underwriting standards for businesses exposed to energy-sensitive supply chains. Many small business owners are actively reviewing business credit reports, consolidating high-interest debt and improving credit scores to unlock additional working capital.

“My clients have been quite aggressive in the past 90 days in correcting reporting mistakes, consolidating debt with high interest rates, and raising their scores on average by 64 points to release up to $280,000 in aggregate working capital for their companies,” says Zane.

Negotiating Contract Discounts

Small businesses are also auditing recurring expenses and vendor contracts far more carefully than before. Zane recommends negotiating discounts on large recurring contracts, securing longer-term pricing agreements on oil-linked services, and using cashback business credit cards strategically to preserve liquidity.

“Combined, this approach will bring in $8,000 to $30,000 annually for a small business, without requiring any expenses apart from several phone calls,” he adds.

Knock-on Effect Of Rising Oil Prices

The impact of rising energy prices is also becoming increasingly visible at the operational level. As crude oil prices rise and tensions around the Strait of Hormuz continue, transportation and servicing costs are filtering into everyday business activity.

“Large companies like Amazon can add a fuel surcharge,” says Johanna Chen Lee, cofounder of Ink Removal. “Most small businesses can’t. We see this directly with the clinic partners in our network. When fuel costs spike, so do supply delivery fees and equipment servicing costs, and clinics absorb those before they ever show up in a client-facing price.”

For customer-facing businesses, pricing transparency is becoming increasingly important as consumers grow more cautious with discretionary spending.

“Clinics in our network that kept pricing predictable and visible held onto more clients through the first quarter than those that delayed adjustments and raised prices all at once,” says Chen Lee. “Consumers still spend during tough periods. They spend where they trust the numbers.”

Focus on Resilience Optimization

Across multiple industries, small business owners are now shifting away from aggressive growth strategies and focusing instead on operational resilience.

“To cope with rising costs, small business owners are making pragmatic changes to their operations; renegotiating contracts with suppliers, shortening delivery radius, optimizing deliveries, and increasing minimum order quantity requirements,” says Kirill Meshyk, head of AI data collection at Unidata.

“In addition, they are considering local sourcing despite higher unit costs, as delivery logistics has become less predictable than the pricing on products,” he adds. ‘The biggest change in strategy I see is moving from price optimization to resilience optimization.”

That shift is increasingly visible across e-commerce and retail businesses as well. Many smaller companies are shortening inventory cycles, reducing the number of SKUs they carry, implementing shipping surcharges for heavier products and focusing more aggressively on protecting margins.

The pressure point for small businesses is not just about cost volatility but the speed at which consumers will abandon businesses due to increased costs.

Meshyk adds: “The most successful small businesses in this situation are those that operate flexible logistics networks, maintain strong relationships with regional suppliers, and diversify their fulfillment processes. Those that depend heavily on global long-range shipping face the highest exposure to risks.”

Competing for Consumer Attention

For many owners, budgeting itself is becoming a constant process rather than a fixed quarterly exercise. Rising logistics and fuel costs are driving operational expenses significantly higher at the same time consumer demand is softening.

For jewelry company Icecartel, the pressure has been felt not only through shipping costs but through increased competition for consumer attention. Founder Joosep Seitam says the company saw sharp volatility in both international shipping rates and paid advertising costs as brands competed for a smaller and more cautious customer base.

He responded by reducing margins selectively at the SKU level while reallocating more marketing budget toward products producing stronger returns. “The result was a reduction of about 15% in the wasted budget on advertising,” he says.

One operational change proved particularly important during the period of volatility.

“A specific measure we used to mitigate the problem was a shortened budget revision cycle from quarterly to bi-weekly during the period of high volatility,” says Seitam. “This way, we reacted faster to the rising prices in fuel and logistics while minimizing the risk of over allocating inventory when the demand indicators were getting weaker.”

Ongoing Budgeting Is Key

For many small businesses, predictability has now become one of the most valuable assets.

“Costs tend to spike in shipping and energy-related goods,” adds Seitam. “What helps is keeping additional cash reserves, shorter budget forecast cycles, and ruthless elimination of low-margin operations before they drain liquidity from companies. Companies that stay competitive today are those that consider budgeting an ongoing process rather than a static decision.”

While the geopolitical outlook remains uncertain, one trend is already becoming clear: small businesses are adapting faster, reviewing costs more aggressively, and prioritizing resilience over expansion.

And for many owners, surviving the current period of volatility is no longer about chasing growth. It is about preserving flexibility long enough to withstand whatever economic shock comes next.

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This article was written by Alison Coleman from Forbes and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.