If you haven’t heard about the minimum wage hike in Ontario, you haven’t heard about the biggest wage hike in the province’s history. By January 1st 2018, the minimum wage is planned to go up to $14, and by Jan 1, 2019, $15. It’s at $11.40 today, which means over the next 2 years the minimum wage will increase by nearly 32%.
That’s great for employees, but what does it mean for your business? Your expenses are going to increase, and if you don’t take action, your profits are likely going to be slimmer. You should start planning for this increase now so that, when it takes effect, you’ve already put the right pieces in place to keep your business profitable.
Here are three of those potential pieces:
One way to increase your profitability is to reduce your expenses. Assuming that you can’t operate without your employees, you’ll have to look elsewhere for savings. For starters, you can talk to your employees to ensure all company resources are being used effectively. You can also work with your employees to get more out of them. Perhaps an office manager could also help with the sales team, or a bookkeeper could take on the social media responsibilities. The flip side of higher wages is lower employee turnover, lower employee absenteeism, and lower training costs. Getting the most out of employees who are getting a raise could be a great way to stretch your dollar further while keeping your costs down and your staff engaged.
Look for inefficiencies in your business. If you have old equipment that is in need of repairs and slows down production, it may be wise to upgrade now. Waiting to fix inefficiencies not only costs you money in downtime, but also can hurt your business by causing lost revenue—the money you could have made if your equipment had been working properly.
Consider Price Increases Carefully
When costs go up, it’s natural to consider raising prices. One thing to consider before you do this is that most of your competition will be doing it as well. By keeping your prices similar to their current levels, and lower than the prices of your competitors, you can make up the money you lose per purchase by making a larger number of sales.
With more productive employees, updated production equipment, and careful management, the minimum wage increase could ultimately bring more good than harm to your business.
We’ve made it our mission to ensure small businesses have access to affordable capital when they need it. If you’ve got an idea to increase your business’ profitability but need some additional financing to make it happen, take 5 minutes and apply for a Lending Loop loan today. We’d be proud if one of our loans allowed you to keep all of your employees on the payroll while maintaining a strong bottom line.