If current national trends are any indication, hourly workers will likely see pay increases over the next few years. As employees are looking forward to the change, many small business owners view it with dread.
What can small businesses do to adjust to the change without losing profits or being otherwise negatively impacted?
"Beyond the obvious of altering business hours, raising prices, and increasing employee output expectations, there are several tips that any small business can begin to adapt to higher minimum wages and the calamity of COVID," says Baron Christopher Hansen, business consultant and owner of Red Baron USA.
Optimize Your Business Plan
Small businesses need to implement a greater rate-of-investment (ROI) into each hour they are open. Hansen encourages businesses to "search for a new location that may have the same or better customer traffic yet with less overhead or utility costs."
Businesses may want to reconsider offering once-free services and now charge a small fee for these things. Also, some businesses may want to recruit family members and volunteers.
"Passive owners or family may now become more active employees or volunteers, taking on extra shifts or performing critical side work each week themselves," says Hansen. Business owners must have every aspect of their business plan or model optimized.
Stay Close to Your Accountant
To adjust to the rate hike, David Scott Peters, restaurant consultant, and coach, encourages small businesses to have an open and communicative relationship with their bookkeeper and/or accountant. It is crucial to have reports delivered on a timely basis each month, so businesses have a big picture of financials.
Peters adds, "There should be no surprises at payroll time or the end of the week. Have a plan for your cash flow and have a budget."
Offer Better Services and Products
Business owners must show a willingness to offer both standard and higher value, higher-priced options to keep up with wage hikes. Rebekah Goldman, hospitality consultant, encourages businesses to demonstrate value by making sure team members can confidently explain and sell products to customers.
Her advice is to "find ways to add value to products and provide a good experience because that's what customers will expect."
Hire Employees Worthy of a Wage Hike
In the current business climate, there is a "tidal wave of out-of-work workers in need of a fresh start or a new opportunity," says Hansen. Small business owners may need to let go of minimum output or unproductive employees to survive. This move will allow the hiring or rehiring of talented employees to work at the new minimum wage level.
According to Hansen, "It's not about cutting hours or pushing current minimum wage employees to do more; it's about re-engineering your business model to accomplish more per hour."
Communicate to New and Existing Customers
Being transparent with customers is in the best interest of any small business. It is important to explain to new and existing customers that the business will offer new products and services, increased prices, and potentially different hours of operation to serve them better.
Hansen says to make it clear the "minimum wage hike, increased prices and new business model is not the small business's fault," but a way to plan to thrive in the future strategically.