A good price increase letter is short, early and specific: it says which prices change, from what to what, from which date, and why, in a sentence, then thanks the customer and offers a way to talk. Give wholesale customers at least 30 days' notice, or whatever your agreement with them says, and let orders placed before the date go through at the old price. The work that matters comes before the letter: knowing what each product costs now, so the new prices keep your margin without asking for more than you need. In the example below, a small taro bakery raises two of three wholesale prices and holds the third, which comes to about $45 a month, 4.5%, on one store's usual order. Below is how to work out the new prices, what to put in the letter, a sample, and a free template.
The short version
- Work out what each product costs now, before you write anything.
- Choose between passing on the cost increase and keeping your margin, product by product.
- Not every price has to rise; sometimes the fix is a lower cost.
- Give at least 30 days' notice, or what your agreement says.
- Say what changes, from what to what, from when, and why, in plain words.
- Offer orders at the old price before the date, and a way to talk.
- TaroStack shows what each product costs now, what pushed it up, and what each customer buys. More below.
Step 1: work out the new prices
Windward Roots, the made-up taro business I use in these examples, saw butter, flour and frying oil go up over the summer. Before writing to its stores, it worked out each product's cost now and two possible prices: one that passes on the cost increase in dollars, and one that keeps the margin in percent. How to keep track of what suppliers charge is in supplier price tracking template.
| Product | Cost was | Cost now | Price | Pass on the cost | Keep the margin | New price |
|---|---|---|---|---|---|---|
| Taro sweet bread, wholesale loaf | $4.91 | $5.24 | $7.25 | $7.58 | $7.74 | $7.75 |
| Taro chips, 5 oz, to a store | $2.10 | $2.27 | $4.54 | $4.71 | $4.91 | $4.75 |
| Guava jam, 8 oz, wholesale | $5.22 | $5.48 | $7.25 | $7.51 | $7.61 | $7.25 |
Pass on the cost = old price + (cost now − cost was)
Keep the margin = cost now ÷ (1 − old margin), where old margin = (old price − cost was) ÷ old price
Passing on the cost keeps your profit per unit the same in dollars, but your margin shrinks. Keeping the margin keeps the percentage, which is what you need if your other costs rise with sales. The bread goes to $7.75, the margin-keeping price rounded. The chips have a strong margin and stores compare chip prices closely, so they go to $4.75, between the two. The jam is already at what shops will pay, so it holds at $7.25 and the cost comes down instead, by making two batches in one kitchen slot, as worked through in starting a jam business. The difference between the two kinds of percentage is in markup vs margin.
Step 2: what it means for each customer
Before you send anything, work out what the change costs each customer on their usual order. It tells you who to call rather than email, and it gives the letter an honest number.
| Corner Market, a month | Quantity | Old price | New price | Old total | New total |
|---|---|---|---|---|---|
| Taro sweet bread | 40 | $7.25 | $7.75 | $290.00 | $310.00 |
| Taro chips, 5 oz | 120 | $4.54 | $4.75 | $544.80 | $570.00 |
| Guava jam, 8 oz | 24 | $7.25 | $7.25 | $174.00 | $174.00 |
| Total | $1,008.80 | $1,054.00 |
That's $45.20 a month more, 4.5%. Smaller than the bread's 6.9% on its own, because the chips rose less and the jam held.
What to put in the letter
| Part | What to say |
|---|---|
| The news, first | Prices change on a date; no preamble |
| What changes | Each product, old price and new price |
| Why, in a sentence | What went up; no long story, no apology |
| What doesn't change | The recipe, the delivery day, anything they might worry about |
| The date and the notice | At least 30 days; old prices for orders placed before then |
| What it means for them | Their usual order, in dollars, if you know it |
| A way to talk | A phone number or a reply, from a real person |
Send it from your own address, to the person who places the orders, and call your biggest customers before the letter arrives. Avoid raising prices in the same month as a delivery problem, if you can.
A sample letter
Subject: New wholesale prices from November 15
Hi Dana,
Thank you for stocking Windward Roots this past year. I'm writing to let you know that some of our wholesale prices will change on November 15.
Since the spring, what we pay for butter, flour and frying oil has gone up, and we've held our prices as long as we could. From November 15:
- Taro sweet bread, wholesale loaf: $7.25, now $7.75
- Taro chips, 5 oz: $4.54, now $4.75
- Guava jam, 8 oz: unchanged at $7.25
On your usual monthly order, that's about $45 more. Any order placed before November 15 is at today's prices.
Nothing else changes: same recipes, same ingredients, same Tuesday delivery. If you'd like to talk it through, reply to this email or call me at (808) 555-0142.
Thank you,
Kai, Windward Roots
The names, business and number are made up; swap in your own.
Get the template
Download the price increase template. The New prices sheet works out the pass-on-the-cost and keep-the-margin prices from your old and new costs, with your chosen price, its margin and its change beside them; the One customer sheet works out what the change means on a customer's usual order; and the Letter sheet has the letter above with blanks to fill in. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.
Where this stops working
The letter is only as good as the numbers behind it. If the costs come from a spreadsheet updated in the spring, the new prices might be too high, which costs you a customer, or too low, which costs you the margin you wrote the letter to get back. And if you don't know what each store buys, the letter can't say what it means for them, so the first they hear of the total is the next invoice.
How TaroStack does it
TaroStack gives you the numbers a price increase letter needs, already worked out.
What each product costs now. Ingredients and packaging are costed at what you paid, with freight spread across each delivery, in FIFO layers or moving average. Each batch is costed from the lots it used, so a dearer butter shows up in the loaf's cost the week it's used, not when someone updates the cost sheet.
What pushed it up. A price-creep report per supplier shows which ingredients have gone up, by how much and since when: the "why" sentence in the letter, with the evidence behind it, if a buyer asks.
What each customer buys, and what you make on it. Customers and their sales orders are in one place, each line with its price, and margins are reported by product and by customer on what the stock actually cost when it shipped, over the last 30, 90 or 365 days. So you can see which products have slipped below the margin you want, and what the change means on each store's usual order, before you write to them. Every list exports to CSV, including your customers with their contact details.
| The job | Spreadsheets | In TaroStack |
|---|---|---|
| What a loaf costs now | The spring cost sheet | This month's batches |
| Why prices are rising | A feeling | Price creep, per supplier |
| Which products slipped | Unknown | Margin by product, on actual cost |
| What it means per customer | Worked out by hand | Margin by customer, from their orders |
Customers, sales orders, margins by product and customer, and the price-creep report are on every plan, from $49 a month; batch costs for what you make are on Standard at $99. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.