Small business owners have a lot of challenges to overcome. In the recent years, healthcare changes have thrown many small businesses for a loop, causing them to set aside more cash flow to pay for the expense. Now minimum wage increases are the next big challenge that small businesses have to overcome. While minimum wage has been increasing slowly throughout the years, certain states have seen larger hikes and employees are still pushing for a $15 minimum wage. This large of a hike could mean trouble for your small business without a doubt. However, there is a way to plan and deal with minimum wage increases and other changes that affect the economic structure of your small business.
Get Into the Nitty, Gritty Details of Your Business
The most important thing you can do to adjust for minimum wage increases is know every detail of your business finances and structure. As minimum wage increases, the cost of living will increase as well. So not only are you dealing with paying employees more, but you are also having to account for the cost of goods and services to rise across the board. These price changes can make or break your small business, especially for restaurants whose dish prices are affected by food prices and skill level of the team.
Invest some time and pull together all of your finances so you know exactly what your bottom line is. Some of the details you need to analyze include:
- Create cash flow diagrams and descriptions.
- Breakdown details of your profit margins.
- Establish your prime cost estimations.
- Draft your sales forecast.
- Update your business plan.
Change Your Pricing
With all of your details about the financial state of your business in place, it is time to take a hard look at your pricing for your goods or services. Raising your prices dramatically will turn your customer base away, but if you do not start to plan for small increases, you could see your profit margins shrinking into nonexistence. Roll out price changes slowly and start with your popular products or dishes that cost a little more.
If minimum wage increases, you can't afford to hire carelessly. You have to treat your small business like a larger corporation and create a more stringent hiring process so you ensure you only see the best talent. Since you have to pay more for your employees, it should be the absolute best talent that are going to stick around. Consider hiring like an investment that you want to pay off in the long run.