As you will be aware minimum wage increased on the 1st of April 2022 to $21.20, and the living wage has risen to $23.65. We have had consistent pay increases over the past three years, putting more pressure on business owners. However, if you manage this correctly, it will lessen the blow to your bottom line and also reduce some drama in the workplace.
First of all, if you have team members on minimum wage, let's see what that is going to cost you:
Five full-time staff on minimum wage, 40 hours a week, $1.20 extra per hour x 5 = an increase in your wage bill of $240 per week - $12,480 per year (excluding holiday pay, KiwiSaver). So that is $12,480 off the bottom line if you don't take small steps to rectify it.
Current inflation is 6%, and the minimum wage has gone up 6% as well- for a simple way of how to counterbalance the increased costs is to go through all your products and put 6% on top…. E.g burger $20 X 1.06 = $21.20. Once this is done, you can then go through your products and choose what you want to increase, some you will be able to increase higher than 6%, and some you may not want to increase. Knowing your higher selling items and better margin items is helpful for you to balance out the increases. Happy to discuss this further with you if you like.
I would challenge you to even look at doing examples with 10% or 15%. Increasing pricing is a mindset - as long as you:
- Know your market
- Have 100% faith in your product
- Have 100% faith in your customer service
If you know these 3 things really well, customers will see the value in choosing you and will continue to do so. It's also a good opportunity to look at your service and how you are adding more value than anyone else so that customers choose you over others.
I come across it time and time again where owners and the team and always hesitant about putting up pricing. However in reality is that it is only a tiny % of people complain about pricing, and the question is - do you want penny-pinches as customers?
This is not the only increase. There is the knock-on effect for the rest of the team, for anyone paid around this amount will now consider their value to you.
What do I mean? Well, those team members who are on $22 (was $2 above minimum wage) now feel a bit hard done by as they are not on much more than minimum wage. This is where we hear more and more about people wanting to be on a living wage. I strongly recommend "jumping the gun" and chatting with these team members, have a chat about how your business is placed fpr the increasing costs, how you value them, if viable increase their pay to avoid any conflict with pay within the team. If you cant afford a pay rise, have a think about how else you add value to your team, staff meal, flexi hours, 3 day weekends just to name a few…
Most team members don't know anything about how a business runs, and some just believe that money grows on trees. Having an open and honest conversation about what is happening within the business can give them an understanding instead of them creating their own stories in their head. Doing this can resolve a bunch of potential conflicts and help you stay ahead of the game in multiple ways.
- It will boost morale and help your team feel appreciated and more apart of the business
- Reduce conflict
- Increase productivity wanting the business to succeed.
- Retain team members
- Save you time from dealing with conflict
- And generally, be an excellent place to work.
Continuously looking at your costs and ensuring that your margins are correct is more important than ever. With all the increasing costs we are facing, its essential to have your finger on the pulse. Money vanishes if you do not have tight control over these costs. There are many different ways to monitor these costs, Loaded reports, your POS systems or even in-house spreadsheets. Doesn't matter what programs you are using, just as long as you are doing it! Flick me an email and let me know how you manage this.
RICHIE WALSHE
THE GROWTH COACH - HELPING HOSPO OWNERS TO MAKE MORE MONEY AND WORK LESS.
