On October 1, 2017, the general minimum wage in Ontario was raised to $11.60. There has been a lot of speculation about the effects that this most recent hike will have on both mid-market and small businesses. The concern isn’t unfounded. For most companies, small businesses in particular, compensation is their most significant expense.
As with all regulatory changes, a little preparation can help you adjust to this new environment. Here’s what you can do to minimize the financial impact of the recent minimum wage hike:
Review and Revise Your Business Plan and Financial Model
The first step is to calculate the effect of the wage increase and analyze the viability of your current business model within this new structure. These early calculations will determine if minor changes or a complete overhaul will be needed to help your business adjust to the higher minimum wage.
Next, consider possible enhancements that can be made to your business processes that could increase efficiencies, such as streamlining workflows or combining tasks to reduce the amount of manpower required. Be sure to review all expense line items to determine if adjustments can be made in order to realize cost savings that would offset the increase in compensation costs.
You may also wish to consider delaying new hires, or revisit your hiring practices by utilizing part-time, contract, or seasonal labour where appropriate.
Consider Adopting Growth Strategies That Aren’t Blind Price Hikes
While it may seem like an easy answer, unjustified price hikes can very quickly drive away business. There are other growth strategies that can be employed to increase the quantity and dollar value of sales, such as increasing marketing efforts, expanding product lines, and exploring new markets.
Introducing tiered pricing (i.e. platinum-level service at a higher price point) can further increase your sales, and a push towards online sales could potentially reduce the amount of labour required by your business.
An increased minimum wage increases the importance of workforce efficiency. Enhance the productivity of your employees by ensuring that they have access to the right tools, resources, and training to get things done in an efficient manner.
For digital tasks, effective customer relations management (CRM) software and project management tools can greatly streamline administrative and managerial processes.
Within factory settings, an investment in automation can greatly reduce the need for unskilled or temporary labour.
Regardless of industry, regular workflow audits can help to gauge productivity across the organization, and identify any inefficiencies that should be addressed.
Consult with Small Business Accounting Experts
The minimum wage hikes will require careful planning by mid-market and small businesses, in particular, to restore their previous level of profitability. To ensure your business is fully prepared, contact one of our Small Business advisors today.