A recent seminar hosted by the Small Business Development Center helped Bellingham businesses prepare for a hike in the minimum wage. The change will account for a 12.5 percent increase in the cost of doing business and could propose challenges for small businesses.

Effective on January 1, 2020, the minimum wage will increase across the state of Washington from $12 an hour to $13.50 an hour. Currently, the national minimum wage is $7.25. 

The increase is a part of initiative 1433 which was approved by Washington voters in the Fall of 2016. The wage increase will affect more than 700,000 employees across the state, according to workingwa.org. The initiative will also provide paid sick and safe leave for roughly one million workers in the state who do not already have it. 

The Small Business Development Center hosted a rising wages workshop on Nov. 20, sponsored by Western Washington University, to help business owners prepare for the adjustment.

The SBDC has been in operation for 38 years and offers no-cost, confidential consultation for small businesses or entrepreneurs to start, grow, buy or sell a business. The specific curriculum for this workshop was developed by Asche Rider, business advisor for the Small Business Development Center.

“Change is coming and it is something we will all have to adjust to,” Rider said. “I thought it was pretty telling that there was a wide range of business sectors present because I think that really shows that this minimum wage increase is impacting just about every industry.” 

The workshop offered guidance and open forum discussion on topics such as if and when to increase product prices, tips for distributing raises, how to control labor costs and talking with employees and customers about the change. 

One of the attendees at the workshop was Lin Nelson, a customer relations officer for SixSigmaTV.net. Nelson offers services to improve the efficiency of operations through Lean, Six Sigma and other methodologies, which inspired him to attend the workshop. 

I think what we heard is that a lot of small business owners are concerned about the additional cost of raising wages and they are trying to figure out how to deal with that by reducing expenses and growing sales, Nelson said. 

There are several things a business can do to help prepare for the wage increase, Rider said. They can look at efficiencies and make sure operations are as streamlined as possible. They can look at job and position descriptions to ensure that all work is necessary and that it fills the time available. 

A business can consider cross-training to maximize talent. They can also re-think labor-intensive processes or look for ways to execute the operation without as much labor.

“From my perspective, it’s always going to provide an opportunity for growth through the business,” director of the Small Business Development Center, CJ Seitz said. “We had some clients recently do a lot of good work on fine-tuning their business so that they can remain as profitable as possible and that was really spurred on by this wage increase.” 

The workshop offered wage ladder examples for increasing employee pay, how to calculate contribution margins on a per unit basis and how to calculate changes in sales needed to break-even. 

For example, one full-time equivalent employee who worked 2,080 hours in one year, the $1.50 increase will account for an estimated cost difference of $3,432. For a small business operation with 10 employees, this estimated cost difference jumps to $34,320. Both examples include an estimated 10 percent employer portion of payroll taxes.

While most businesses will be impacted either directly or indirectly by the wage increase, some small business owners may be impacted more than others. Lee Ann Kelly, a small business owner, attended the workshop for insight on how to navigate the coming change.

Kelly owns two dog grooming salons in town, City Dog Grooming and High Tone Pet Spa. She says she is still working out the details for transitioning her businesses gracefully in the coming year.

“I really support this and the progress we’re making to a stable wage for everybody but I think there are some challenges that come with it,” Kelly said. 

Providing paid training for employees in an industry where it is difficult to find trained groomers has been tough, Kelly said. “It just gets really tricky as the minimum wage keeps going up, it makes it harder for me to train people and grow my business,” Kelly added. 

The wage increase has Kelly re-considering key aspects of her business model. Working with supported employment to hire disabled employees is an important part of my business philosophy but it is becoming increasingly hard to justify from a business standpoint, Kelly said. 

The only thing I have not been able to account for is how this will affect the other small businesses in Washington that I rely on, Kelly added. 

“I think small business owners are amazingly resilient and creative otherwise they would not survive,” Kelly said. “Theres an opportunity here for us to all pivot.”