What To Do When Your Costs Go Up And Your Prices Cannot
Your supplier lifted their prices in March. You did not lift yours. Six months on, the profit has gone and you cannot point to where. Five things worth checking before you raise a price.
What To Do When Your Costs Go Up And Your Prices Cannot
Your supplier lifted their prices in March. You did not lift yours. Six months on, the profit has gone and you cannot point to where.
You are not alone in that. When the ABS surveyed Australian businesses in May, 48% said they had absorbed their cost increases. Only 11% put their prices up.
Why This Happens
Nobody decides to absorb a cost increase. It happens because the alternative requires a conversation you do not want to have.
You tell yourself the client will walk. You tell yourself it is a bad time to be asking for more. You tell yourself you will look at it once things settle down.
Then the quarter closes, the numbers are worse, and the reason is not mysterious. You have been running the business at last year's prices with this year's costs.
Here is the part most owners miss. Raising prices is one option out of five, and it is not usually the first one.
Five Things To Do Before You Touch Your Prices
1. Work out your real margin, job by job. Most owners know their revenue precisely and their margin roughly. Take your last ten jobs and calculate what each one actually left you after materials, labour and the hours nobody logged. The spread between your best and worst will tell you more than any price rise.
2. Find the costs that grew without a decision. Subscriptions, insurances, supplier rates, delivery fees, the extra hours that became normal. Each was sensible when it started. Go through twelve months of bank statements and ask which ones you would sign up for again today.
3. Check what you are quoting against what you are delivering. Scope grows quietly. If the job you are doing in 2026 includes three things that were not in the original price, you have already raised your costs without raising your price.
4. Name the clients who cost more than they pay. Every business has two or three. They take the most time, need the most hand holding, and sit at the bottom of your margin list. You do not have to sack them. You do have to stop treating their work as if it were profitable.
5. Count the work nobody pays for. Rework, chasing, fixing, redoing, quoting jobs you never win. It shows up as tired people rather than a line on the profit and loss, which is exactly why it never gets addressed.
Work through those five and most owners find their price rise is smaller than they feared, and easier to justify, because they can finally say what the work costs.
Free Resource
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Where To From Here
I started an accounting practice in my garage in 1991. Thirty five years later I am still looking at business numbers, just not my own.
In all that time I have never once found the profit leak in a single dramatic place. It is always four or five small things that made sense when the business was half its current size and were never revisited.
None of the five above costs you money. All of them cost you an afternoon, which is why they keep getting pushed behind the urgent work.
If you have been absorbing cost increases and you cannot see where the profit went, that is worth a conversation. Book a call (opens in new tab).
Stop Knowing. Start Doing.
