Grounds ToolkitEstimating and Pricing
How Much Should Prices Rise This Year to Keep Pace With Cost Changes?
Enter last year's cost and price, and this year's cost. This finds the price that holds the same margin you actually achieved last year against the new cost.
How this is calculated
Last year's margin is calculated from the price and cost you enter (see Gross Margin and Markup). The recommended new price divides this year's cost by one minus that same margin, holding it steady rather than assuming a generic inflation number.
Worked example
Last year's job cost $100 and priced at $150, a 33.3% margin. This year's cost rose to $110, a 10% increase. Holding the same 33.3% margin against the new cost means pricing at $165, a $15 (10%) increase, matching the cost increase exactly in this case.
Guide: The Pricing for Recurring Work Guide, why the increase percentage always matches the cost increase percentage.
Frequently asked questions
Why not just use a general inflation rate?
A general inflation figure does not reflect your specific costs, wages and materials can rise faster or slower than the broader economy. Using your own last-year and this-year costs is more accurate for your business.
What margin does this target?
Whatever margin you actually achieved last year, calculated from the price and cost you enter. It is not a generic target, it holds steady the margin you already know works for your business.
What if my margin was already too thin last year?
This calculator preserves last year's margin, it does not improve it. If last year's margin was already too low, consider using Minimum Profitable Job Price with a higher target margin instead.
Does this apply to one job or my whole business?
It works from a representative cost and price per job. Apply the resulting percentage increase across your pricing, or run it separately for different job types if costs vary a lot between them.