“New Year Brings Tax Increases” shouts the headline in a local city newspaper last week! No one is immune, particularly if you are self-employed, or a person owning a business. Here on Salt Spring, we have a community of small and mid-size enterprises and many micro businesses that operate with the additional challenge of high seasonality.
Since most of the tax increase will be on business payrolls, your first thought may be to reduce payroll, downsize, try to sell, or just close the business. The self-employed, such as trades people who will be doubly impacted by the CPP tax increase, will likely choose the option of increasing their prices.
Instead, lets look at some creative ways to manage the tax impact and increase the long-term financial resilience of our businesses.
Creative strategies for the non-personnel components:
- Premises; right sized or not? Options might include getting smaller, sharing with another business, diversifying business with different product or service, becoming a mobile service, using home space for storage, or more
- Recognize the needs of, and cater to changing community demographics, particularly seniors.
- Evaluate cost of goods purchased to sell, reduce slow movers, look for source options and alternatives, volume buying, but remember to manage your inventory and capital; it must turn, for you to earn!
- Examine alternatives for reducing or restructuring cost of loans and unpaid credit card debts.
- Examine shared services concepts in transportation & shipping, storage, office services, communications, consider a call centre concept or manage messages with diligence and a reliable schedule
- Minimize need to, or frequency of, travel off island, change schedule or use increased volume buying, buy local when net costs are viable or close enough. Your time is valuable.
- Negotiate lower wholesale pricing from local businesses who can deliver to your business needs. Seek and use 30-day payment terms when offered and always use early payment discounts.
- Go paperless, maximize electronic billing and launch automatic payments to your suppliers from direct debit or even better, use credit cards that offer a benefit such as “cash-back” and an additional 30 days to pay in full
- Reduce energy use, there are many options such as LED lighting, motion activation, remote control through internet, invest in solar alternatives, improved insulation, draft elimination and thermal windows
- Realize that reducing 7% PST expense is a satisfying and valuable component in many of the above strategies
Optimize personnel planning and alternatives:
- Re-examine hours of operation. Reducing hours where there is no negative impact on customer service can also lower energy costs in heat, lighting and machinery
- Small businesses are unlikely to have capacity or ability to employ large technological substitution for labour but have many smaller substitutions such as the paperless options (above). Employing an accounting program may ease the need for office assistance in basic bookkeeping, inventory management, payroll and invoicing tasks.
- Define the needs for employees and create specific employment PLAN if one does not exist. Keep it simple, specific, measurable and specify a financial budget or limits. “You can only manage what you can measure”
- In the PLAN, define 1) the needed accomplishments, 2) the specific tasks in a “daily checklist” for each/every employee or function.
- Explain the checklists to every employee and use them and review them every day
- Ensure that opportunities for multi-tasking and multi-accomplishing are specified
- Include steps for training or employee progression to a “next level” of responsibility and provide pay incentives for measurable, value – added accomplishments
- Grow the value, contributions and future of your employees. Recognize those who exceed the expectations of customers, those will be the ones who will allow you to retire someday!
- Build in feedback and communication mechanisms to ensure that all expectations may be clearly communicated, understood and later evaluated
The businesses who will fare the best through any change and challenge, will be those who face them head on, with creative strategies and the quest for long term beneficial outcomes and a renewed resilience. Planning will never let you down, create your future!
Written by: Jeremy Milsom
Originally published in The Gulf Island Driftwood