By Neal Glatt
This week, the new Biden administration is working towards a pandemic relief package that will include a $15 minimum wage. Unless you hit it big with Gamestop, you may be wondering how your business can survive when labor costs significantly increase over the next five years. Here’s what to do now to ensure you don’t go out of business later.
Regular readers of this blog may remember that I predicted this move a full 18 months ago. And while it may not have been as central to the election as the COVID response, we are seeing that a minimum wage increase is one of the key economic levers Congress intends to utilize to achieve their goals. So if you didn’t start preparing early, you have limited time to come up with a plan for what is looking more and more certain to happen now.
This is a problem because most landscape companies I know are already paying their front-line employees double the minimum wage in their state (and triple minimum wage for crew leaders). Can your business afford to pay crew leaders $45/hour?
Some businesses will become obsessed with efficiency to make up the difference. It is possible that increases in equipment efficiency, new technology, reduced overtime, or restructuring operations may add to the bottom line. But it’s also very likely that it won’t be enough to bridge the gap - doubling labor cost will not be overcome by even a 10% gain in productivity.
The reality is that companies will need to increase their pricing quickly. I believe that the market demand growth experienced in 2020 will continue in 2021 and that it is a prime opportunity to increase pricing. But while there are successful strategies to raise prices, there are many pitfalls as well.
Great salespeople are needed to navigate the change without alienating customers. When a customer has little to no relationship with the company, a renewal letter including a price increase will result in shopping around. And there will still be plenty of low-ball competitors to receive those customers as new businesses start every day in a poor job market.
A real conversation with customers by a skilled salesperson will discuss the value the company brings and allow for a conversation about the customer’s budget. Despite resistance, most customers who truly are in the target market for your service will agree to a 3%-5% increase without shopping around. Great salespeople may even be able to increase the cost by 10% in select cases.
By successfully adjusting prices only three times over the next five years, businesses can cover the additional cost of labor and then some, even if they were to be paying their employees above-average labor rates.
If you’re not sure that you have the skills to successfully increase customer pricing, we’re here to help. I’ll teach you exactly how to sell on value in our Sales Bootcamp from Feb 15-26. But you need to hurry because space is limited and registration closes soon. Sign up here to get your whole team trained for only $89.
Sales Bootcamp is sponsored by FBinsure, SiteRecon, ArborGold, and Caterpillar. All four can have big impacts for your business and add to your bottom line.
Tags: Sales , Business , Prices , Wages ,