With a national movement to raise the federal minimum wage to $15 from $7.25, and local and state governments already imposing their own hikes, small business owners can feel the pinch of labor costs. Whether small business owners like it or not, minimum wage increases are being implemented, and it’s smart to be prepared.
Here are 6 ways entrepreneurs can prep for a wage hike now:
1. Keep perspective.
Before you stress about the minimum wage being doubled, remember that your competitors face wage hikes, too.
2. Improve human resources.
Studies find that the cost to replace an employee is about one-fifth of the worker’s annual salary. Manage this expense by hiring smarter and retaining top employees. Seek out people who have track records of long histories with their previous employers, and who fit in with your company’s culture. They should come highly recommended, preferably by existing top employees.
Whenever possible, promote from within. This not only saves on recruiting costs, but also nurtures a company culture that tells employees that their work is valued and will be rewarded. Other ways to keep employees include investing in their education, mentoring, helping them express and reach their own personal and professional goals, and offering flexible work arrangements when possible. You should also research whether it makes sense to hire contractors instead of staff workers.
3. Raise prices and lower overhead.
What is your revenue versus expenses? Conduct an audit of your expenses that includes payroll, rent, vendor contracts, production costs, and debt payments. This may be a good time to raise prices and liquidate old inventory.
4. Get creative to boost revenue.
Use this impending expense increase as motivation to create new products or service offerings. Consider partnering with other brands to expand market share, or offer new customer incentives to raise the average receipt. Research cost-effective ways to leverage social media to market directly to your target customer.
5. Restructure or seek capital.
As interest rates are also poised to rise, it’s a perfect time to refinance any debt. Look into switching variable-rate loans for a fixed-rate one, or securing a new line of credit now, before rates jump.
6. Boost your credit score.
Research your business credit report [link to business credit score post], and take steps to improve your rating and resolve any errors. Pay debts and vendors on time, use less than 30 percent of your available credit, and consider creating new credit lines with your vendors. Make sure they report your timely payments, and monitor public records for actions like property liens and lawsuits. Keep those records clean.
7. Invest in tech.
Customer relationship management (CRM) software like Salesforce, Microsoft Dynamics, Infusionsoft, and NetSuite, as well as bookeeping programs like QuickBooks, FreshBooks, and Xerox, and project management tools like Asana and Basecamp can be excellent investments. Such cloud-based tools can streamline workflow, offer deep insights into your current systems, and help reduce labor costs.