Pick your target: margin dollars or margin %
Keep margin $: new price = old price + extra cost per job
Keep margin %: new price = new cost per job ÷ (1 − margin %)
Keeping margin dollars is the minimum: you earn exactly what you did before. Keeping margin percentage is slightly more, because the same percentage of a bigger price is more dollars. It keeps your business as profitable relative to its size as it was.
Worked example
A job sells for $200 and costs $140 to deliver: a $60 profit and a 30% margin. Materials and fuel push the cost up 10%, to $154.
| Target | Calculation | New price | Increase |
|---|---|---|---|
| Do nothing | - | $200 | 0% (profit falls to $46) |
| Keep $60 profit | $200 + $14 | $214 | +7.0% |
| Keep 30% margin | $154 ÷ 0.70 | $220 | +10.0% |
Doing nothing cuts profit per job by 23% ($60 → $46), even though costs only rose 10%. That's why small cost shocks hurt so much: they come straight out of a thin margin.
It works for any cost
| Cost that rose | Extra cost per job |
|---|---|
| Fuel | (new − old price per gallon) × gallons per month ÷ jobs per month |
| Materials / supplies | (new − old unit cost) × units per job |
| Insurance | (new − old monthly premium) ÷ jobs per month |
| Wages | (new − old hourly rate) × labor hours per job |
| Tariffs on inputs | Tariff amount per unit × units per job |
Will customers accept it?
- Explain the reason in one sentence and the amount in one number.
- Keep it to the cost increase. Customers can tell when a cost story covers a bigger hike.
- Give notice before it hits an invoice, especially for recurring customers.
- Track who accepts, negotiates, or leaves. That tells you how much pricing power you really have next time.
Track the response
MarginShock's free account records how customers respond to each adjustment, so your next price change is based on what actually happened, not guesswork.
Create a free account →