Don’t hire anyone else until you watch this…

Summary

• I've noticed a substantial increase in labor costs over recent years due to inflation.
• When I started hiring for my first business, $40,000 per year was competitive; now it's closer to $60,000 for the same role.
• Inflation is reported at 7.5%, which has prompted interest rate hikes to manage rising costs.
• The cost of essential items like gas and food has surged significantly.
• There is an imbalance in the job market with 11 million open jobs and only 5% unemployment, which I believe suggests that unemployment numbers might actually be lower than reported.
• I advocate for creating competitive compensation plans to attract talent, understanding that traditional salary increases may not be feasible for all businesses.
• To remain attractive as an employer, focus on pay-for-performance strategies as a way to manage fixed costs while incentivizing employees.
• Offering unique perks that don't necessarily have a high monetary cost can help differentiate your business and attract talent.
• Flexibility in the workplace, such as work-from-home options, can be more appealing to some employees than higher salaries.
• Investing in your employees' professional development can offer intellectual and career growth opportunities that are valued more than a simple salary bump.
• The current job market requires innovation in compensation and benefits to secure and retain top talent, especially if offering top market salary isn't an option.
• It's important to prepare for the possibility of further salary demands due to rising living costs and to consider creative compensation strategies now.

Video

How To Take Action

I would suggest implementing competitive compensation plans smartly if you're a small business or entrepreneur, especially because of the high labor costs nowadays. Paying $60,000 for a job that used to cost $40,000 can be tough, so it’s crucial to think outside the box to attract and keep good people.

Let's focus on pay-for-performance strategies to manage fixed costs but still reward hard work. You might offer bonuses for hitting certain goals. This way, you're not stuck with high salaries if the business slows down. Plus, people get excited to earn more when they do well.

A good way of doing more with less is offering unique perks. It's not always about more money. Sometimes, flexible work hours or letting people work from home means a lot more to someone than a slight pay raise. It's cheaper for you, too.

Investing in your employees' development is also key. It doesn't always cost a lot to give learning opportunities or to help them grow their careers. And it shows them you value them not just for their work but their potential.

Keep in mind, prices are going up, and so the demand for higher pay will too. It's smart to prepare for that now. Try offering more creative perks or training chances to keep people happy without breaking the bank. Remember, it's not just about the money, it's about feeling valued and having room to grow.

Quotes by Leila Hormozi

"If you can pay top of market, do it"

– Leila Hormozi

"Pay for performance"

– Leila Hormozi

"How can I further advance or invest in my employees in a way that is intellectual rather than financial"

– Leila Hormozi

"If you are not fully work from home, it's like how can you make that jump because the companies that have are staying competitive"

– Leila Hormozi

"It is a tough time right now to find great talent if you can't pay top of market"

– Leila Hormozi

Full Transcript

is laila hormozy i'm co-seo of acquisition.com which is a portfolio of companies that is about 85 million per year in revenue and my goal with this channel is to help you get from wherever you're at with your business to between three to 10 million in revenue and today i'm talking about something really top of mind and it's something that a lot of people have been asking me about recently that is the uh rising cost of labor and the reason that's so top of mind for me is actually you know at acquisition.com one of the biggest things that we do with the companies we bring on is we help them find talent and so we assess their talent we figure out you know what it needs to look like in the next year two three years and then we help them fill the slots that they have open and the thing that i've realized is i find it funny because you know you look at like things like the cost of inflation the cost of consumer goods and all those things that are increasing i feel like what's not talked about is actually the cost of labor and the reason that i talk about that is because i myself am someone who has started four businesses in the last six and a half years the first business i started when i was hiring for somebody the role specifically that i was hiring for was about 40 000 per year that same role now i'm helping these companies hire for it's not competitive at all at 40 000 per year it's competitive at maybe 60. and so i was like this is mind-blowing and it's frustrating because you know you see the profits margins going down you see the cost of labor going up but it's understandable because the cost of goods are going up and so what i want to talk about this video is really what the is going on uh and what should you actually do about it it's really like what is going on what does this mean for you your business and your employees and so what is going on right now well inflation is at its highest in 40 years okay we can all say that it's apparently at 7.5 i would argue that's higher than 7.5 but that is what's been reported 7.5 so we're gonna go with that this then forces the federal reserve to raise rates to prevent prices from climbing any higher so i think what a lot of people are anticipating right now myself even i'm in the middle of buying a home and i don't feel like putting all my cash in my home but rates right now you can't even lock in because nobody wants to lock them in because they know they're about to raise and so that's what happens next is then all of a sudden interest rates go up it's been awesome because they've been so low and people have been taking advantage of it now people are anticipating that they're going to go up again right on top of this there's all the turmoil with ukraine and so things like gas prices are hitting record highs i mean i saw someone screenshot the other day they had like 560 a gallon in gas i don't know because i don't pay attention because we barely fill our car because it's half electric but apparently it's very high on top of that food prices are now 5.4 right they went up 5.4 last year and as interest rates rises the cost of housing also seems to be rising so if you look at it right now they're anticipating the cost of housing is going to increase 11 percent next year it is already increased 19.5 percent last year uh why cost materials demand for homes is higher piece of code and people staying home etc etc inflation um and then on top of this what's really really interesting is that there are 11 million open jobs and only five percent unemployment which is interesting that you have five percent unemployment and 11 million open jobs so what that tells me one that's what's going on right like i'm not a newscaster i'm not like an analyst i'm not in finance i don't do any of that but what i can tell you is what i've seen and heard i do think a lot of these numbers are fudged i think a lot of them are actually higher i think inflation is higher than this i think the unemployment is probably due to i don't actually think that the and this is just my anecdotal like my opinion i don't think employment is actually that uh high of unemployment i think it's actually lower i think that a lot of people have different jobs now so i think that one traditional companies are having a harder time getting people to work for them because they're not as incentivizing as doing like web point web3 investing crypto doing day trading on robinhood like there's so many options nowadays so i think that it's felt by the companies that are bigger and have the more traditional jobs but us that are more like on the ground entrepreneurial probably know that there's just a lot more opportunity out there and so that's what's going on right essentially prices are going up everywhere and so the question is why am i talking about this when i am normally talking about leadership in business well because it affects business and so this is how or this is what's possible and what like a lot of experts and people are talking about i don't know if it's going to happen i don't know if it's likely to happen things are so different right now but here's why it causes concern for employers and people that especially like specialize in hr and labor costs which is as prices increase workers demand higher wages reasonable right like the cost of their homes goes up 10 15 if you don't raise their salaries with that they can't afford to do anything so that makes sense with that as the pay increases so does the demand to buy items right which then causes it causes the prices to increase even further and then it's this vicious cycle it's like demand more pay get more pay raise prices demand more pay get more pay raise prices and so it's this vicious cycle that people call the wage price spiral now we're not in one of those right now but there are telltale signs of it it happened in the 1970s and the weirdest part and the most the part that like freaks me out the most as an employer is that actually people started demanding more pay not when prices increased but because they thought they were going to increase they expected that they were going to increase so you could say people would do that right now they're like i hear interest rates are about to go up they're going to go up to god knows what like i need to get a raise i need to get a better job because i'm expecting it to happen that was a huge part of the 1970s and so the real question is what does that mean for us what does it mean for us as business owners and what should we be doing about it well this is something that's really top of mind because especially with the companies that we have in acquisition.com we always look at putting in place a compensation plan compensation package how are you going to attract talent and it's getting harder and harder because there's a lot of other reasons people wouldn't work for you besides the fact that you're maybe not paying enough right it could be that they're getting money from the government it could be that they could just make more money trading stocks on robin hood it could be that they'd rather do something with web3 and get paid in crypto there's so many more tantalizing opportunities out there and so the question is what does this mean for you right right now compensation relative to prices is actually lower than it was in 2019 and that's because most companies actually haven't kept up with inflation the reason they haven't kept up the salaries with inflation is because the cost of goods for the companies is so high it's like you call supply shock or something like that again i'm not an expert but because of that the cost of all their goods are so high their margins already deteriorating the last thing they want to do is add in more fixed costs with labor and so that's probably why another reason that could contribute to the fact that why there's the quote unemployment of that percentage which again i don't know if i agree with it or if it's correct that's because companies aren't willing to match salaries with inflation so people are just going to places that will right and so i think a lot of the companies that report on these things probably the kind of companies that don't raise their rates because they probably have really high fixed costs because they're probably like big corporate and it's not people i'm talking to right now and so what's happening is that what you see is that really big companies are going to and what i've seen happen increase wages despite the increased cost of goods and so or with the increased cost of goods so the biggest companies are increasing wages with the cost of goods and so that that's going to do is that's going to attract more talent to those companies home prices and wages are also usually in lobster and what you're seeing right now is that the home prices have increased a ton wages haven't and so what that tells me is like and again i don't know i'm not an expert or an analyst but this is just what i'm guessing is that eventually and what the expectation's gonna be is that salaries are gonna need to be higher and i can tell you as someone who's boots on the ground interviewing i've interviewed thousands of people i do believe that salary increases are demanded right now and not necessarily demanded but what i see is that with like what you could post a year ago or two years ago for a job with salary requirements now i feel like the average for what that same job is about 20 more and that's just like my feelings about it what i think is that overall a lot of people are just choosing not to work right and so they're just like i'd rather just get paid by the government or go do something else instead but that being said that's what it kind of means for companies is that other companies are going to get more competitive with how they pay people their perks are what they're going to do to attract talent because it's kind of like looming in the background that this is going to happen and so the question is and the point of this video is what can you do and people ask this all the time they're like and especially small business owners people that are you know you're not venture backed you're bootstrapped it's your own money you're using you're like i want to pay people i know i do it's like you want to pay people fair you want to be reasonable but i know not everyone here can pay top of market and like so first off here's my first piece of advice if you can pay top of market do it i pay top of market i pay above market for some roles why because i can't i don't want to lose people and so if you can there's no reason that you shouldn't the second thing that you can do which most people can't pay top market i get it i'm just saying if you can i would just do it the second thing is that if you cannot pay top of market the best thing that you can do for your business is pay for performance so a small business someone that's self-funded it's really difficult when you have really high fixed costs it makes it very ineffective for you as a business owner and so what you want to do is you want to attract people with maybe lower base salaries but higher variable pay so maybe retention bonuses they can have quarterly bonuses they can have performance pay based on you know certain kpis that are tied to their roles that's something that i think is just a good practice for small businesses in general specifically in this market if you're trying to attract talent if they can see that they have the potential to make that amount of money that's what you can advertise for i think that that's probably the first strategy that i would take if i were like a smaller business with shorter margins trying to figure out what i can do to attract talent right now or what i can do as the cost of labor continues to rise the second thing is that perks so really interesting is that i had a couple people on my team in one of my companies that i own a percentage of and they ended up leaving because you know we reorganized the company and their roles didn't really fit and they went to other places and they i asked them like how's your new jobs what's it like all these things i always like to keep in touch especially if it's just like not a fit anymore and they're all telling me they're like layla have you seen the job market nowadays and many have heard the war for talent right it's insane what some of these big companies are offering in terms of perks for employees you know one of them it was about fifteen thousand dollars per year towards fitness health i mean like and it's not like doctor health like it's not like benefits this is like ancillary like nice to have health like go take a pilates class or like buy a peloton like that's what that money was going towards that's insane it's because the amount of open jobs is so high and the amount of people that are able to fill those jobs or want to fill those jobs are so low that people are getting really competitive and so if you can if you're a smaller business how can you combat this what you could do is you can come up with your own kind of purpose so like if you're a company you're an online business that like you say uh are e-learning or any kind of you know digital goods i'll say that right why not give free digital goods to the people that work for you why not make affiliations with other companies who have digital goods and say i'll give your employees my training for free if you give them your training for free there's so many things you can do that are perks that can help invest in your employees it takes effort from you it's just not monetary effort so you're paying with either effort money time in this one you would pay with you know effort and so that's one thing that you can do another piece is flexibility that you can provide a lot of people still value the flexibility over the money so that's something that if you can't provide top of market pay you can at least be flexible in terms of the hours you allow people to work so maybe that means that you can go pick your kids up before and after school you can take a lunch break you can take half days on these days you can work night shifts if you want to work them you can work later you can not start meetings till 10. there's all sorts of flexibility that you can build in especially if you're an online or remote business that will allow people more flexibility that is probably more incentivizing than some of these big corps that are offering more pay and along with that is the work from home so i feel like and okay i'll tell you i was in the work from home before it was a thing when we started doing work from home six and a half years ago people would be like what's wrong with you you don't have an office i remember there was an hr software that literally wouldn't take us on as a client because i could take a picture of my physical employee files and i was like i don't have physical files i have them in the computer they wouldn't take us on and so people used to tell me that we were crazy for doing work from home they're like how would you have how do you have a company of over 100 people with work from home well now it's the norm and so something else is that if you're not work from home and you're requiring companies to even be in the office for like a couple days a week i'm hearing people left and right quitting jobs because they're like i don't want to go in for one to two eight days per week it's inconvenient it's less effective i don't get as much work done i have to find a babysitter it's a huge hassle and so even if you have you're like oh it's not bad it's just one two week days per week yeah but they have to put the same amount effort in to figure out what they're gonna do with their kids that day what they're gonna do with you know their spouse who's getting dinner all that that they would for you know if you had to in general it's almost more of a nuisance because it's not normal it's like once a week and so that's another thing that you can do is if you are not fully work from home it's like how can you make that jump because the companies that have are staying competitive and then lastly is professional development kind of going hand in hand with perks i like to think of perks and professional development kind of in the same bucket which is how can i further advance or invest in my employees in a way that is intellectual rather than financial and that's like taking them to seminars allowing them to join groups that you're in buying courses for them there's a lot of things that maybe don't cost as much as paying someone an extra 10 000 a year that actually might be more meaningful to them because they wouldn't do it for themselves they wouldn't buy that course for themselves they wouldn't invest in that learning they wouldn't go to that conference or they couldn't because they'd be working for you and they're like i can't take three days ago at this conference and those things are also variable costs they're not fixed so you can do them when the business is healthy and you're able to and if the business isn't doing well then you can you can cut those things out and so all that to say my summary of all this is that it is a tough time right now to find great talent if you can't pay top of market and supply all of the benefits that everybody else is trying to do right but it's fair to say that people should and will expect to get paid more because the cost of goods is going up they're not going to be able to pay for basics let alone you know a shirt if the cost of salaries doesn't increase and so i just see it coming and i think like i would want to get ahead of that i am ahead of it i suggest if you can get ahead of it do that if not follow one of those tips either add in more performance pay add in more flexibility think about different bonuses that are not you know fixed they're variable or look at different professional development programs that you can put in place and so all that to say i hope this was of use to you i know a lot of people have been asking how is this going to affect employment how is all the turmoil and all the countries and all the inflation all this and it all just boils down to this which is the prices go up people demand more pay and so it is something to be expected to say if we're gonna go in like a wage price spiral i don't know to say if it's gonna go into a recession i don't know i don't know any of that all i know is how it affects business and i am on the front lines interviewing people on a regular basis and i see it actually happening so all that to say i hope you have a great rest of your wednesday tuesday saturday and i will catch you on the next one