If you run a farm operation near Brookings, a service business in Volga, or anything in between, you've probably noticed hiring feels different than it did in 2021. Job postings that used to sit empty for weeks now pull in real applicants. Wage offers that once needed to jump 15% to compete are settling into smaller, steadier increases. The labor market that gave employees nearly all the leverage for two years is finding a new balance, and that shift changes how you should think about payroll, retention, and cash flow going forward.
This isn't just an HR story. It's a financial planning story, and it belongs on the same table as your tax strategy and your cash flow forecast.
The employee's market is leveling out
During the hiring crunch, quit rates spiked, wages jumped fast to fill open roles, and business owners across Brookings, Kingsbury, and Moody counties made hiring decisions under pressure just to keep operations running. That environment is settling. Candidates are staying in roles longer, wage growth is moderating, and the frantic bidding-war hiring of a few years ago is giving way to something closer to normal.
Normal doesn't mean simple, though. A more balanced labor market still requires a plan. The SBA's guide to hiring and managing employees (opens in new tab) is a solid starting point for the compliance side of things, but compliance alone won't tell you what a new hire actually costs your operation once you factor in training time, benefits, and the ramp-up period before they're fully productive.
Labor costs are a financial planning problem, not just an HR problem
Payroll is usually the largest line item on a small business income statement, and for many service businesses it's the single biggest driver of profitability. Yet a lot of owners still treat labor costs as something to react to rather than something to plan for. A wage increase gets approved in a hallway conversation. A seasonal hire gets added because harvest is two weeks out. None of that is wrong, but none of it is a strategy either.
When labor costs sit inside your financial plan instead of outside it, you get real answers to questions that matter: What percentage of revenue is going to wages this quarter compared to last year? Can this operation absorb a 5% wage increase without cutting into margin? Is a full-time hire the right move, or does the seasonal spike only justify a temporary one? Those are financial questions, and they deserve the same CFO-level attention you'd give a major equipment purchase or a loan decision.
What normalized wage growth means for farm and service businesses in Brookings
Agriculture and service businesses feel wage shifts differently, and both need a plan built around their own rhythm.
For a Brookings-area farm operation, labor costs are lumpy by nature. You might run lean through winter and then need six seasonal hands for six weeks during planting or harvest. A moderating wage market means you're less likely to get outbid by a competing operation for that same labor pool, but it doesn't mean seasonal wages are dropping back to pre-2021 levels. Budgeting for that seasonal spike, and knowing exactly what it does to your cash position in April and October, matters more now that wage growth is easing rather than skyrocketing unpredictably.
For a service business, whether that's a veterinary clinic, a contractor, or a professional office, the math looks different. A steady team is often the product itself. If your bookkeeper or lead technician earns $50,000 a year and leaves, the real cost isn't just the new hire's salary. It's the weeks of reduced output while you're short-staffed, the hours spent interviewing, and the months it takes a replacement to work at full speed. Julie Underwood, CPA, works through this exact math with clients regularly: a $50,000 role that turns over can easily cost an extra $15,000 to $20,000 in lost productivity and training before the new hire is fully up to speed.
Retention costs money, but so does ignoring it
A raise feels expensive in the moment. Turnover is expensive over time, and it's often invisible on the income statement until you go looking for it. If you're comparing the cost of a $3,000 annual raise against the cost of losing that employee and starting over, the raise usually wins, and it's not close.
That's the calculation a lot of small business owners never run, because it requires pulling together payroll data, productivity estimates, and hiring costs into one picture. It's worth running once a year at minimum, and it's a natural conversation to have alongside your annual tax planning rather than waiting until a resignation letter forces the issue. Planning ahead of a problem, rather than reacting to one, is the same principle behind avoiding the December scramble on tax planning.
Building a workforce budget that holds up under pressure
A workforce budget isn't a spreadsheet you build once a year and forget. It's a living forecast that should track alongside your other financials. A few practices make it more useful:
- Track labor cost as a percentage of revenue, not just a dollar total, so you can spot drift before it becomes a margin problem.
- Build seasonal ag labor into a rolling twelve-month cash flow forecast instead of treating it as a surprise each spring and fall.
- Review wage benchmarks at least twice a year rather than once, since a market that's rebalancing can still move faster than an annual budget cycle.
- Separate true growth hires from replacement hires in your budget, because they carry different risk and different payback timelines.
None of this requires new software or a finance department. It requires current numbers you can actually trust, which is where a lot of small business owners get stuck. If your books are a month or two behind, you're budgeting on old information, and old information leads to decisions made too late.
How this fits into a full-service accounting relationship
This is exactly why TruCount CPA PC bundles bookkeeping, payroll, and year-round advice into one fixed monthly fee instead of billing piecemeal for every question. When your bookkeeping and payroll run through the same team giving you tax and cash flow advice, labor cost planning stops being a side project and becomes part of the regular conversation. Our secure online platform gives you real-time access to your numbers, so a wage decision in March doesn't wait until your CPA reviews things in July.
Julie Underwood, CPA, and the team, members of the AICPA and the South Dakota Society of CPAs, work with farmers, agribusiness operators, and service businesses across Brookings and the surrounding counties to build labor cost planning into the same financial picture as tax strategy and cash flow management. That's a different starting point than calling a CPA once a year for a tax return. It's also a good complement to tightening up other recurring costs, the same way we'd walk a client through auditing subscription creep before it quietly eats into margin.
If you're curious what a bundled relationship like this costs before you commit to anything, the pricing calculator gives you a ballpark figure in a few minutes.
Common Questions
What percentage of revenue should labor costs be for a small business? It varies by industry. Service businesses often run labor costs between 30% and 50% of revenue, while agricultural operations swing widely depending on how much work is seasonal versus year-round. The number that matters most isn't a universal benchmark, it's whether your own percentage is trending up or down compared to your prior year.
How should a farm operation budget for seasonal labor? Build seasonal hiring into a rolling cash flow forecast tied to your planting and harvest calendar, rather than treating it as a one-time spring or fall expense. Knowing the exact cash impact ahead of time keeps a six-week hiring surge from catching your operating line off guard.
Is it cheaper to give a raise or replace an employee? In most cases, retaining a trained employee with a modest raise costs less than replacing them. Turnover often costs 30% to 50% of a role's annual salary once training time and lost productivity are factored in, which usually makes a raise the better financial move.
Does a more balanced labor market mean wages will drop? Not typically. Wage growth tends to moderate rather than reverse. Expect smaller, steadier increases instead of the rapid jumps common in 2021 and 2022, but budget for continued growth rather than a rollback.
If labor costs have been a guessing game for your operation, a conversation about building them into your real financial plan is worth having sooner rather than later. Reach out through our contact page and let's look at your numbers together.
