A debate is raging about the minimum wage and whether or not this is going to help or hurt the economy of the United States. Small business owners are shaking their heads wondering how they are going to maintain workers and maintain profits at the same time. The answer isn’t that difficult to figure out but it is sometimes hard to implement. The answer is to run more efficiently, do more with less and cut expenses.
Currently more than 20 states have minimum wage laws that exceed the current federal minimum wage. Small businesses within these states haven’t closed up their doors and moved away. Instead, these businesses have had to become stronger in order to maintain their profits. If you haven’t focused on the leanness and meanness of your business to this point it is time to get moving.
When wages are high you must increase the efficiency of each worker so that you can get by with less. In other words, more bang for your buck! Efficiency might mean changing work schedules so that not as many people are on slow shifts, it could mean rearranging your work areas to cut down on lost movements, or it might mean adjusting job responsibilities so that everyone becomes more accountable.
Even though each time you make a change in schedules and assignments it feels as though you are only saving pennies, these pennies add up. You are trying to get a few more dollars per hour out of everyone’s work ethic. This isn’t something easy to do unless you spend some time strategizing about how to motivate, rearrange and earn more from your workforce.
The other method of earning more is to hire the right talent. Take a little extra time at each interview to really assess a person’s skills and abilities. Having lazy workers or people who spend more time talking then deal with customers is likely to eat up your costs. Check their backgrounds and scrutinize their employment history. If you have to spend more than make sure you are getting more.
You may also consider using alternative products in your business. Test different products and items that cost less but may have the same quality. For example, a pizza maker may want to reduce costs by purchasing another brand of cheese. Try out each of the cheeses and find out if the lower priced one’s cost the same. One can also do this with supplies, tools and just about everything else. Be aware that reducing quality may have a negative impact on your customer’s satisfaction.
Finally one may also consider specializing their business so that higher profits are earned from each product. Let us say that you have a small grocery store but believe that if you convert your products to a higher end specialty grocery store you would earn more on each product. You will attract more clients with a nice meat market and fruit selection. Consider this option if and only if you have done your homework and know beyond a reasonable doubt that you will be successful.
The key to betting higher labor costs is to focus on profits. The more profits you make the less costly wages become. Profits can come from a variety of places such as reducing expenses, increasing sales or increasing the profit on each item sold. Keep records on the cost and profits from each section of your business so that you can better understand if changes are working or not working.