Many states have already raised their minimum wages and others are in the process of considering it. For now, the federal minimum wage is $7.25 per hour, but legislators have repeatedly tried to raise it. For example, the Raise the Wage act, introduced in 2015 by Senator Patrick Murray and Representative Bobby Scott and supported by President Obama, aimed to see the federal minimum wage go up to $12 per hour by 2020.* 

To make a long story short, no matter where you live in the U.S., there's a good chance you'll have to start paying a higher minimum wage in the foreseeable future.

Regardless of politics – whether you're for or against an increased minimum wage – it could be on your near horizon, and as a business owner, it's best to be prepared for it. Payroll is likely one of your biggest expenses, if not the biggest. So, what can you do?

Step one is to look for ways to save money. Ideally, you don't want to cut down on your workforce. Chances are, you need the staff you have, and nobody wants to go through painful layoffs. Unless you have positions that are no longer necessary, this doesn't have to be your first course of action.

Hours

To begin with, you might want to look at your current hours of operation and determine if they can be adjusted or optimized to better take advantage of your current financial situation. Can you get by with opening later or closing earlier? Are you currently open on one day of the week where you get very little business? Consider closing on that day.

While certainly not the most favorable option, there's also the possibility of cutting down hours for some staff. It's probably not going to go over particularly well with the employees, but it's favorable compared to a layoff. If you do go this route, just be prepared for the potential that you will lose staff as they opt to find other jobs offering more hours.

Prices

Another option is to look at your prices and consider if they're where they need to be. Are they so low that they're not bringing in enough profit? If they’re too high, you might move a lot more volume and bring in more profit if you lowered them.

Are your prices fair? Not just to your customers, but to you? Are you getting what your products and services are truly worth? If you do have to raise prices, you're going to have to come up with a good reason why, so your customers don't flee. If it's legitimate and honest, you might be surprised by your customers' loyalty.

Productivity

Now more than ever, you need to make sure productivity is at a maximum. Are your employees focused on the right tasks? Are there any tasks currently being handled by a human that can be handled by software, freeing up that person's time to do something more worthwhile? 

Go through all employees' workloads task-by-task and do an evaluation. Figure out what can be done more efficiently and make sure you have the right people handling the right things.

Ultimately, if your business is impacted by a minimum wage increase, you'll have to find ways to bring in more money. Cutting costs is one thing, but it's not a sustainable business model. Besides, as a business, your goal is to keep growing. Are there any new areas you've been considering getting into? New products or services you've considered selling? Now might be the time to take the necessary steps to make it happen.

Click here for an article on re-thinking your business model.

And, even if a wage hike doesn’t occur, taking the steps outlined above will help your bottom line and give you a leg up on the competition.

*[1] https://www.whitehouse.gov/raise-the-wage

 


The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A.