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How Minimum Wage Bumps Affect Small Businesses

Small businesses split on their perspectives of the proposed minimum wage increase. Some view the news positively, saying it would improve living conditions and result in additional money being funneled into the economy. Others hold the opposite view. They state the jump in wages heralds the downfall of their businesses.

What Small Business Owners Have To Say About The Minimum Wage Increase

Bryan Clayton, CEO of GreenPal, for instance, provides a lawn care platform to over 500 small business owners. His clients worry they won’t be able to make payroll if the federal mandate changes.

“They feel pressured to raise their prices, but lawn mowing is ‘demand elastic,’” Clayton explains. “Lawn maintenance is only worth so much to a homeowner. If prices go up, demand will plummet, which will cause lawn care businesses to reduce staff and hours.”

Sam Boothroyd, Founder of Rymer Associates, proffers a similar position. An accountant, he sees both sides of the equation. “As a business, we choose to pay above minimum wage to 99 percent of our staff. But the bigger impact we witness is with small business clients who employ two-10 staff members.

“A 10 percent increase in the minimum wage for a small business paying $125,000 equates to an extra $12,500 to pay out! That’s a large amount of profit to lose and cash flow to find for a small business.”

Curtis Ray Bizelli of Dreams Publicity offers a differing outlook, saying that higher wages could reduce churn rates and improve employees’ work ethic. He states, “I see the minimum wage increase as one of the most profitable things we could do as a nation. When employees are paid what they’re worth, small businesses see more quality work that contributes to the bottom line.”

How Small Business Owners View Minimum Wage Bumps

The latest statistics echo all three small business owners’ sentiments. A 2015 national poll from the Small Business Majority and Manta’s 2016 study report the following.

  • Sixty percent of small businesses are in favor of gradually increasing the federal minimum wage to $12 per hour by 2020. They also support adjusting the wage annually to match costs of living. (SBM)
  • Thirty-five percent “somewhat oppose” the increase; another 20 percent “strongly oppose” it. (SBM)
  • Twenty-six percent say the minimum wage would positively impact their businesses. (Manta)
  • Forty-six percent disagree, saying they would need to increase prices, reduce staff, cut hours or limit their expansion plans to stay afloat. (Manta)


8 Ways To Stay Profitable With Minimum Wage Increases

The minimum wage increase will impact small businesses; it’s not a question of if, but when. While the increase intends to occur over a protracted time period, small business owners should take steps now to keep their businesses healthy. The eight ideas below could help with that. They not only alleviate stress about minimum wage bumps but also increase profitability short- and long-term.

  1. Evaluate Current Operational Expenses. Small business owners often monitor their companies for inefficiencies to improve the bottom line. They should continue doing so as the minimum wage increase receives further consideration at federal and state levels.
  2. Set A Stricter Work Schedule. Small business owners should examine hours worked and identify regularly recurring sluggish periods. They should then cut or limit service during those times to save money and potentially increase demand for on-hours.
  3. Downsize The Business. No one likes to talk about downsizing, but it’s a reality in the business world. Sometimes the only solution is the hard one.
  4. Look For Cost-Effective Options. Business owners can cut costs by outsourcing some work or using intuitive accounting or marketing software. They also can save money by assessing loan options. Sometimes, they can get a better deal with a cash flow lender than a financial institution.
  5. Focus On A Niche. Small businesses tend to increase profits when they focus on a niche. If a business already sells a variety of products or services, the owner should look for the ones producing the most return and dump the others.
  6. Increase Prices. Some owners increase prices in order to meet payroll and scale their businesses. They should make the changes strategically; not all customers will accept the price difference.
  7. Focus On Quality. A good way to increase prices and keep customers arises from quality. People are willing to pay more for good customer service and experiences.
  8. Get Creative. Some small businesses, including this bookstore, choose creative solutions to increase wages and profits. Sponsorships and reward programs are just two ideas small businesses should consider when thinking about the impact of a minimum wage increase on their businesses.


Raising wages is a legitimate cause for concern. However, it should be treated like any other business threat—as one with potential opportunity. It can be overcome with careful research and action plans that ensure fair wages for employees and profitability for the business.


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