SHOW LOW — Most believe in the next few weeks Congress will enact a federally mandated minimum wage of $15 per hour. This is expected to be like other federal laws in that local businesses will not be able to ignore it or “get around it.” It will be here to stay.
One of our most important functions at the Small Business Development Center hosted at Northland Pioneer College is to assist our small businesses to see the future and prepare for that future. This minimum wage increase has already been instituted in several locations such as San Francisco and Flagstaff and this article is not meant to discuss the pluses and minuses of enacting the policy. That decision is made a long way from Show Low.
This article is to point out “lessons learned” in these other locations and assist our small businesses prepare for the possible enactment and minimize any disruption.
The main question for the small business owner is “Where does the money come from?” There are four possible answers to that question and fortunately we have had small businesses go before us so we have some information we can study. The successful business will probably have to use a little of all four.
Know your business
Is there some places where you can cut staff to keep your employee expenses roughly the same? This is the time to take a hard look at the productivity of your staff. If you have an individual who is not pulling their weight this might be the time to act. This is not a new strategy and in many of the locations where the $15 minimum wage has been implemented total employment has gone down.
The business absorbs the extra cost
All of you who own a small business understand that the margins are simply not high enough for most to pay this addition amount and not pass on that least part of that expense. However, many companies who have already faced this situation have been concerned that their client flow would decrease with any increase in price thus they do not pass it on. This is a decision that the individual must make but the numbers are against you if you try to absorb the entire cost.
Creeping price rise
Companies have tried to raise prices slowly to compensate for the increased wages so that consumers slowly become accustomed to higher prices. However, many report that the first couple price increases are understood but after that the “bad guy” becomes the owner.
“Pull the Band-Aid off”
When the increase in minimum wage first comes out companies who have immediately done a price increase report that consumers are shocked and upset but the blow back is not generally at the owner because the minimum wage increase is so much in the news. It is important to start educating your customers now that if the raise is enacted you must do a price increase. Remember your customers have kids home and job concerns and may not have even considered this. Your education will help. As many small businesses are crawling out of pandemic none of us saw coming it is now time to look forward to see the challenges ahead. Let’s put our businesses on the best footing to succeed.
The Small Business Development Center (SBDC) hosted at NPC instituted the recent “Please Buy Local” campaigns and is funded to assist companies grow and prosper. Call 928-965-8679 or register for no-cost assistance at npc.edu/sbdc.