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Margin Squeeze on Businesses

Rising costs are creating a margin squeeze on businesses.  We have been encouraging readers and listeners alike to take preemptive action against these rising costs, and hopefully, you have.  Act quickly if you have not because material and labor costs are going up.  According to the National Association of Business Economics (NABE), twice as many businesses reported higher material costs in the first quarter of 2014 as compared to the last quarter of 2013 and 35% reported higher labor costs.  This is a tough environment in which to raise prices, but do so if you can as the pricing pressures will not be going away anytime soon. 

Labor increases, driven by health care and actual cash payroll increases, are going to be a reality for the next couple of years as a growing economy creates more demand for a relatively finite skilled labor market.  Poaching from competitors will drive up costs, as will the increase in foreign firms operating in the US.  Now is the time to beef up training programs and/or create alliances with community colleges or technical institutes if you want to get ready for the tightening labor market. The other option is to invest in system and equipment efficiencies while the cost of money is low, and you have some good years ahead in which to recoup the investment. 

Get ahead of the curve and invest in future labor and labor-saving systems.

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