Will they stay or will they go? Manitoba small businesses worry about customers reacting to price increases

Laura Gurbhoo has a problem: To make the croissants her customers crave at a price they're willing to pay, she has to use lots of flour and butter — but the price for both have gone up.

"I'm definitely stressed out about [it]" Gurbhoo said.  

Many small businesses like Gurbhoo's store, Gâto Bakeshop, are grappling with how to balance rising costs of material and the fear of losing cash-strapped customers. 

The croissant is her biggest seller but also the biggest expense. The flour she uses has climbed six percent, the butter is up by 12 percent, "and pretty much everything else that goes into it has gone up," she says.  

Everything except what customers pay.  

"I'm really on the fence about increasing my price … there's only so much we can do to make it still affordable, but also, are people going to come if your prices go up?" Gurbhoo said.  

The decision isn't easy because she doesn't have a large customer base yet and even some of her regulars were already antsy about the price. 

Gurbhoo opened her bakeshop a year ago with a strong focus on creating baked goods while keeping a low carbon footprint. One of her biggest challenges over the past year has been "trying to convey that when you eat local, there's a price tag to it."

The price of priorities 

With record inflation numbers across the country and prices projected to remain high all year, Gurbhoo says she doesn't want to choose between her company values, her product quality and affordability. 

"Making good food … with the environment too is the core of why we started this, and I wouldn't want to leave that, but at the same time I want to make sure my employees are cared for and paid right" 

The solution for now: work more and absorb the costs. 

"Really it's just me taking it, right now.  I work non-stop so nobody else, nothing else has to be cut," she said.  

Gurbhoo's day starts at five in the morning and until closing, she's baking for that day, prepping for the next day, helping at the front and even doing some social media. 

She says last year they "worked so much, it just felt like it's been one continuous day." To keep the costs down she and her partner did most of the work themselves. 

Uncertainty and lost opportunities

Thomas Duong's renovation company was booked solid for six straight months up to the end of December, but he hasn't signed up any clients for future jobs lately.  

"It's not always gonna be sunshine all the time. Right? There's gonna be rainy days," Duong said.  

Duong operates Turn Key Renovators, which offers a range of indoor and outdoor home renovation services.

While business has been good "for the most part" through the pandemic — he says people who couldn't go on vacation would spend to fix up their homes — he didn't have a single booking last year for one of the jobs he enjoys the most: decks and fences. 

The issue then was the cost of lumber. Looking at the cost of fence boards and two-by-fours today, it feels like deja vu. 

"I just don't see clients shelling out that type of money," Duong said. 

"They'd sooner wait until the numbers come down before they would before they would go ahead with that project."

The high lumber prices may fall, as they eventually did last year. Whether that will translate into deck and fence jobs for Duong this time around, time will tell. 

Feeling the pinch

Despite his positive outlook, which he says you must have as an entrepreneur, Duong has been "feeling the pinch." 

He has to walk a tightrope between wanting "to get the project done for [the client]" and knowing that he's "got bills to pay too." 

"You do kind of got to take a little bit less just because you want to… secure that project," Duong said.  

He says he's frozen his pay for the last two years, and the labour prices he charges have been the same for the last three. There's no clear date of when an increase will be possible. 

That's bad news for Duong's sole full-time employee. 

"It's a really tough, tough thing because then not only [am I] not only not getting a raise, but … if I give my helper a raise, then I'm taking a cutback," Duong said. 

Small businesses in the economy

Gurbhoo and Duong's small businesses are by far the biggest source of employment for people in Manitoba and across the country.

According to Statistics Canada, in 2021, small businesses made up 98.1% of all businesses with at least one employee in Canada. 

The added stress of inflation comes at a tough time for many of Manitoba's small businesses who went into debt during the pandemic. The average debt for the majority of small businesses in Manitoba as of February last year was $180,000 based on a report by the Canadian Federation of Independent Business (CFIB). 

Despite the uncertainty of if or when work will come in, Duong says he's continuing to just "trust the process." 

Gurbhoo says her passion is what keeps her going. 

"I love what I do. It's a labour of love. I put my soul and spirit and everything in this business and I made it what I wanted," she said. 

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