You are assuming this 'doubling in labor costs' is happening right away. It is a gradual increase over 3-5 years. Plenty of time for reassessing budget and cutting excess from operating expenses if needed. 

Again, I'll reiterate that investing into your employees, the humans with feelings who make the company stay a float or 'labor costs' in your language, is the best way to grow a business and still increase revenue. Some sacrifices may need to be made but it should never be your employees.

Also, this is all assuming that there won't be any other protections/incentives for small businesses which is also proposed by many of the supporters of increased min wage (IMO not needed, but worth considering). This includes things such as a state EITC and better small business loans.

Small business owners should make better use of their time by dealing with those realities they can control i.e finding ways to motivate employees to improve their performance and finding better ways to cut costs