Small Business as Transformation

From wage increases to impacts of potential tariffs, how do we weather change?

Journal Entry

I reached for ancestors to help me process the change of the day.

Sam Cooke sang through my headphones ‘A Change is Gonna Come’, and James Baldwin to me:

“Not everything that is faced can be changed, but nothing can be changed until it is faced.”

While these are both things I return to regularly, I am not sure they were talking about the kind of change I am processing right now.

Could they be speaking of what I think to be transformation? It seems to me that this change is happening to us.

Let’s get into some tangible thoughts.

Some local change

At the top of the year here in Seattle, the minimum wage has increased from $17.25 to $20.76. It may seem like a lot if you don’t live here but this city is expensive.

I am working on understanding the long-term impacts of this change for a small business client. It ain't great. Here’s the high level for business owners going through this. While it’s simple math, the decision making can be nuanced and specific to the business.

This change represents about a 20% increase to labor. As a business affected, some options may be:

1. Increase prices by 20%

Here you offload the expense to the customer. Let them decide whether or not they feel the increase is worth it. Some businesses chose to add an 18-25% service-like charge and explain to customers where this money is going.

2. Cut labor by 20%

This option ultimately reduces the opportunity for some employees to get to that 20% increase. Of course this will impact employees differently, but ultimately if there is no business there is no job.

3. Increase sales by 20%

Here you have the least control, unless you have marketing resources stashed away somewhere.

You can make your customers aware of these changes and ask them to show up to help lighten the load. In fact, I think you should.

I do wonder if the minimum wage increase allows for more disposable income, driving folks out to eat and shop more, ultimately increasing your sales over time.

Note: This does not account for the rise to your cost of goods sold that may be impacted by the wage increase.

It’s probably not a coincidence that the city saw a wave of underrepresented small businesses close their doors in the first week of the year. It is believed that we will see more businesses shut down as leases end and quarters close.

I hope to see less of this.

Larger than local change

The administration change this week means incoming policy around immigration, tariffs and all kinds of other stuff.

We will all feel the change to come.

A tangible example is in a space I know well as I used to co-own a coffee roastery.

Coffee is not grown in the continental US. Tariffs on goods coming from other countries means more expensive coffee. We will see some of our favorite coffee shops either increasing prices, selling less quality coffee, or going out of business completely. Other examples include lumber from Canada, tasty imported wines, olive oil, the list goes on.

Moreover, when goods go up, people have less disposable income to shop and eat and small business suffers.

Disclosure: I am not an economist or political commentator. At best I am a small business strategist with a passion for storytelling from data.

I will keep collecting what I can to add to this story as it unfolds.

For now though, I think my main idea here is this:

To prepare ourselves for change is to position ourselves for transformation.

Footnotes:

• What’s Going On Album by Marvin Gaye

Edited by

Jayden