Many states have raised, or are considering raising, minimum wage well above the federal rate of $7.25 per hour. This can be a cause of concern for many businesses, both large and small. The cost of labor is a major factor in the success of any business. Minimum wage is the baseline.
One possible solution is to automate the functions that are currently performed by human workers. But this is not feasible for many small businesses. If you own a local delivery service, drones are not currently an option, and will not be for some time to come. (FAA regulations aside, the human factor comes into play. Are we ready for delivery drones?) If you own a home-contracting business or a housecleaning service, automation is not even on the horizon.
This is not to say that technology cannot help. Of course it can! For a service business, labor hours are the major, and possibly the only, cost of sales. If you charge your customers a flat fee for services, then the cost of labor eats into your profits. Unless you keep accurate records, you will never have a handle on which jobs are profitable and which are not. The problem is compounded if your employees work in remote locations. A shop owner knows when the sales clerks report to work and when they leave. Someone whose employees work at the client’s location must rely on the employees to report when they arrive and when they depart the worksite. The business owner must do the math.
This is one place where you want to have a very sharp pencil. But only a metaphorical pencil. Timesheets kept on paper or in spreadsheets have many pitfalls. Internet tools such as Clockspot can take a simple data item (Joe reported to work at 8:00 am at Mrs. Smith’s house and left at 4:00 pm) and build on it to produce information of value in determining both a job’s profitability and an employee’s good (or bad) work habits. With GPS technology commonplace, you can even be certain that Joe was actually at Mrs. Smith’s house when he says he was.
Given that labor rates affect your bottom line, there are three ways to keep profits as high as possible:
- Pay employees less
- Teach employees to work more efficiently
- Become smarter about how you manage your workforce
The first is not an option for minimum wage workers. The second is always a good policy. The third is something that you, as a business owner, can achieve right now by using internet technology tools that are out there. If Joe takes five hours to complete a task that Fred can perform in three, that tells you something you need to know. If you can’t, by law, pay Joe less than Fred, you have a management decision to make.
Your decisions need to be based on good, solid data. As we all know, technology is great for some things, not so great for others. Controlling labor costs is one area where it can be an enormous help. If drones and robots are not an option for your small business, internet technology is. Your employees are your biggest asset. Use them wisely.