How do I best pass on price rises at my small bakery? Dave Fishwick replies

I operate a small bakery business in a mid-sized town. I have built up a loyal customer base over the last five years.

A big part of my sales is takeaway coffee, loaves of bread and sweet treats, like cookies and muffins.

However, the cost of all of my raw materials has risen substantially. I’ve recently given my two employees – who do alternate days – a slight hourly pay rise because of the cost of living pressures.

I’m now at a point where I need to pass on these extra costs in the form of higher prices to my customers with my profit margins squeezed.

I’m worried that by doing so, some customers may shy away, given they’re also probably struggling and I’m a ‘non-essential’ purchase.

Do you have any tips on how to make these price point changes and communicate them with my customers in a gentle way that keeps them on board? It’s giving me sleepless nights. I’ve worked hard to where I’m at now, with positive reviews and hundreds of repeat customers. Via email.

Dave Fishwick, This is Money business doctor, replies: Many businesses are seeing rising costs right now and there are no signs of it slowing. 

Prices have increased in most shops, wholesalers and supermarkets. The pressure to raise prices comes on several fronts. 

Stock and raw materials, as you know, have soared. Indirect costs are up too, some by massive amounts; just look at the vast fuel prices, for example. 

Add to that increasing staff costs, and rising utility bills, up by around 50 per cent for most, and you have what’s becoming a perfect storm of rising prices.

Inflation is affecting everybody in every walk of life, and your customers will probably be expecting a price increase.

It will definitely not come as a shock. The secret is communicating this price increase in the best way possible.

My advice would be to write a post addressed directly to your customers on your Facebook, Twitter, and across your social media platforms. 

For the customers who don’t have social media, I like the idea of handwriting a personal letter onto a blackboard or noticeboard in your shop, explaining all the reasons for the increases. 

The best way is to be open and honest and chat with as many customers as possible. My most important advice here is: ‘Long after the price is forgotten, the service and quality of the product or produce will be remembered.’

You cannot consistently beat your large competitors on price. However, you can beat everyone with your service, so always play to your strengths and give the best, most friendly service possible. 

Always remember, a smile and a chat with your customers cost nothing but are worth a fortune.

I absolutely agree with your instinct to look after your loyal customers. 

Bear in mind that it isn’t sustainable to operate at a loss or with such a low-profit margin. 

You will not be able to earn a wage or pay the bills. 

However, some of your regular customers might really feel an increase in your prices, which may affect their choices, whereas others won’t mind, and some may not even notice.

You could use a loyalty card scheme for regular customers to offset the increases, especially for price-sensitive customers.

You could also load more of the increases onto the products which are less price sensitive. Customers may notice the price of a loaf more than the price of a latte or americano.

Sweet items may be less price-sensitive, too, they may not be essential, but they are life’s little luxuries, which people will still want even in tough economic times. It’s the delicious-looking treats that tempt us, not always the price.

A trick I have seen used by the big retailers is to shrink portion sizes slightly to avoid raising the price on the shelf. 

Maybe an option of marginally smaller sweet treats could still hit the sweet spot. I have noticed a big coffee chain sells bite-size brownies, which might appeal to those watching their wallets and their waistline.

Make efficiencies where you can, but you’re right not to include your staff. To give them a raise was precisely the right thing to do. We will get through this much better if we stick together and help each other.

Finally, you mentioned worrying and not sleeping; my advice is: ‘Try to deal with good and bad, just like you deal with day and night; there will always be boom and bust with inflation; you just need to be comfortable with both, just like you are comfortable with day and night. Do as well as you can and just keep going!’

Best of luck.

Is it wrong to use a job offer to angle for a better wage?

I’ve worked for the same company for over a decade, and my boss has been good to me. However, earlier in the year, I interviewed for a job at a rival firm after it approached me.

They offered me the job, which is a slightly more senior position, but significantly more money.

I’d happily stay in my current role at my employer, even without a more senior title, but how do I ask it to match the salary offer – or even enhance it – without sounding like it’s just all about the money?

Dave replies: In the current climate of high inflation and rising prices, it isn’t wrong to ask for a pay rise; in fact, any rise less than inflation is a pay cut in terms of what your pay packet can buy. 

That said, it’s worth bearing in mind that your company will likely be coping with higher costs across the board and might struggle to afford a significant wage increase. 

Both employers and employees are weathering the economic storm in these unprecedented times.

I recommend you first approach your employer to ask for a pay rise without mentioning the other job offer. It might be an easier sell if you explain that you’re struggling with your current wage. 

This is something your employer will understand, and I am sure they will be expecting it. 

You then always have the opportunity to go back and mention the other job offer at a second meeting if the first request for a pay rise is unsuccessful.

A slight word of caution, some employment contracts prohibit moves to a rival company within a given period to protect sensitive information, so do check your employment paperwork carefully before you do anything.

Sit down with your current employer and ask about your career progression; show lots of enthusiasm and passion, and if they know that you’re ambitious and willing to stick with them for the long term, they might try much harder to help you. 

When negotiating, try to look at things from their side, too. You are worth more to them if you can increase your productivity or bring in more business. 

What extra could you bring to the party? Perhaps, you could help set some new goals for you to work towards, with a target bonus attached, that would be a win for both sides.

Ultimately, you are in the best position to decide as to whether your current employer deserves your loyalty or not. 

However, there are more things to consider than just the salary. Your working environment and relationships with your colleagues are an essential part of your quality of life.

Remember, the grass is not always greener on the other side. So if you do decide to leave, my advice is to go on excellent terms, work all of your notice, and offer to help with any problems that may occur after you have left, keep in touch and stay friends, because you may want to return at some point in the future.

I have had members of staff that have left and then returned 12 months later, and I was happy to have them back, as they went on excellent terms, and we shook hands when they left and also again when they returned. 

One lad, in particular, we called Boomerang John. He always wanted to try different things and live in other locations. He always returned in the end, that’s how he got the name Boomerang John (always came back), and we were glad to have him back.

My advice is, ‘Take a deep breath, say the words and ask for a rise!’ remember, they’re only words! Good luck!