A number of states throughout the U.S. are increasing their minimum wages, requiring employers to change the hourly wages they pay their employees. California has raised its minimum wage to $15 an hour, and New York has followed suit. These changes will adversely affect many small businesses, which will need to adjust to the pay increase in order to remain profitable. Below are some ways in which this can be accomplished.
Reduce Staff Size
Increasing the minimum wage drives up the cost of doing business, because each employee must be paid more, while the operating costs of the business remain the same. Therefore, one way to respond to minimum wage increases is to reduce the size of the staff. While laying off workers is never a pleasant thing to do, going out of business is even worse. Another possible solution is to require some employees who work full time to begin working part time. A number of businesses are also replacing human workers with machines and other automated systems.
A simple solution to mandatory minimum wage increases is to raise the costs of your products and services. This will make up for the funds that are lost to payroll. However, business owners must exercise caution when doing this. If prices are increased too high, too soon, customers will have less incentive to buy from you. One shrewd strategy is to keep an eye on the competition, wait for them to raise their prices, and then adjust your prices accordingly, keeping them lower than the competition but high enough to remain profitable.
Reduce Your Payroll Costs
Many business owners can find alternative, more affordable ways to do payroll. Payroll software programs are becoming extremely popular, as they automate payroll procedures. These programs can file, remit and collect all the taxes on your behalf, without the need to pay an accountant. These programs are simple to setup and use and are inexpensive.
Reduce The Complexity Of Your Business
The more complex an operation is, the more costly it is to run. Business owners who are able to reduce the complexity of their companies while remaining profitable will have a tremendous edge on the competition. The days of high overhead must come to an end if small business owners wish to survive the changing climate. They must constantly be on the lookout for new ways to do things, which are simpler and cheaper.
Relocate Your Business
If you live in a place that you feel is becoming unfavorable to small business owners, you should consider relocating to a place that is small business friendly. There are many states in the U.S. that will not raise their minimum wages, and which have a history of openness towards business owners and free enterprise. These states understand that an open and free market is the key to prosperity, and provide low taxes and many other perks to companies that relocate there. Do your research to find a location which benefits you and has a favorable long term outlook.