Ask a small business owner what they've rewritten more times than anything else this year and there's a fair chance it's the price rise email. Drafted, softened, put off until next month.
The costs behind it are not imaginary. A survey of 500 small business owners found their outgoings had risen by nearly 17% on average over the past year, on top of energy bills that have climbed steadily for five years. Two thirds have already put prices up more than once, pointing to suppliers, energy and staff wages, and 82 per cent expect to be doing it again before the year is out.
None of them seem to be enjoying it. More than eight in ten said they were worried about the next increase. Some fear their customers, squeezed by the same cost of living pressures, simply have nothing left to give. Others are convinced that the day the price goes up is the day the customer walks.
But the research suggests that customers are rarely lost. When the public were surveyed alongside business owners, 84% said supporting local independent businesses mattered to them, whether to keep money in the local economy, protect jobs or stop another shop going dark on the high street. And among owners who had already raised prices, around a third said customers had generally been understanding about it. Hardly surprising. Anyone who has opened their own energy bill lately does not need the concept explained.
So the picture is a strange one. Owners lie awake dreading a backlash that, for most, never arrives. The goodwill is there. What separates the businesses that come through a price rise cleanly from the ones that make a mess of it is mostly what they do with it.
Where price rises go wrong
The first mistake happens before any customer hears a word, and it's guesswork. A surprising number of businesses set prices based on what things cost two or three years ago, or on what the shop down the road charges. Costing each product or service at today's prices, including the owner's own hours, tends to turn up the same finding again and again: one part of the business quietly subsidising another. In which case the answer isn't a blanket increase, it's putting the price up where the margin has actually gone.
It's also worth squeezing costs before asking customers to cover them. An hour renegotiating a supplier contract or moving off an out-of-contract energy rate can claw back margin with no announcement needed, and means the eventual rise is smaller and easier to defend.
Then there's the announcement itself, where the instinct to apologise does real damage. A page of regret reads as guilt, and guilt is an invitation to negotiate. The businesses that handle it well tend to keep it short and unapologetic: costs have gone up, the new prices apply from this date, this is what isn't changing. Regular customers get a few weeks' notice rather than a surprise on the next invoice.
After that, the useful measure isn't the odd grumble, which is guaranteed. It's what repeat orders and bookings look like a month or two on. If the sums were done properly, losing a customer or two at the edges is already paid for by the healthier margin on everyone else.
