Pricing When Your Costs Move Weekly

Where the loss comes from

Not from any single job. From the gap between quoting and buying.

You price a job using today's material cost. The customer accepts three weeks later, the job starts a month after that, and you buy the materials at whatever they cost then.

In a stable period the difference is negligible. When costs move, that gap is a straightforward loss, repeated on every job, and it does not appear as a line anywhere.

Businesses notice it as margins mysteriously tightening over a season rather than as a specific problem with a specific cause.

Quote validity

The simplest fix and the one most small businesses have never used.

State how long the quote holds. Thirty days is conventional; in a volatile period seven or fourteen is defensible.

That is not aggressive. Every commercial quote carries one, and customers in trade categories expect it.

What matters is stating it plainly on the quote rather than in terms nobody reads, and then applying it consistently. A validity period you ignore is not a validity period.

Separating materials from labour

The structural change that removes most of the exposure.

Quote labour as a fixed figure, which you control, and materials at cost plus a stated margin, priced on the day of purchase.

The customer sees exactly what they are paying for and can see that your own charge is not moving at all; only the material cost is.

It is more work to administer and it moves the risk to where it belongs, which is with the thing that is actually changing.

Some customers dislike an open figure. For those, quote a materials allowance with a stated ceiling and a note that anything beyond is discussed first.

A worked example

A deck builder quoting fixed prices with no validity period, as he always had.

Timber costs rose sharply over a few months. He had eleven accepted quotes outstanding, all priced months earlier, all now unprofitable to build.

He honoured them, which cost him most of a season's margin, and then changed how he quoted.

The new quote said labour and build cost as a fixed figure, materials at cost with a fifteen percent margin, priced at purchase, and the whole quote valid for fourteen days.

He also began listing the current material cost in the quote so the customer could see the basis.

He lost two jobs to competitors quoting a flat figure. Both of those competitors later went back to their customers asking for more money.

Telling customers about an increase

The conversation that gets postponed.

Give notice rather than surprising anybody. Existing customers on a repeat arrangement deserve a few weeks, in writing, with the reason stated briefly.

Do not over-explain. One sentence about supplier costs is enough; three paragraphs of justification reads as apologising for something you are entitled to do.

And do not apologise for it. An increase is a commercial fact, and treating it as a failing invites negotiation.

Where you can, offer something alongside: honouring the old price for anything booked before a date, which is generous and produces a burst of orders.

The counter-case

Where fixed pricing remains right despite moving costs.

Where you can buy materials at quoting time and hold them. Then the cost is locked and the quote can be too, which is a genuine competitive advantage.

Where materials are a small fraction of the job. A service business whose costs are mostly labour is not exposed in the same way and should not complicate its pricing for a minor variable.

And where your customers are consumers who genuinely will not accept a variable figure. There, the answer is a shorter validity period and building in a margin, rather than a variable quote they will reject.

Building in contingency

The blunt alternative, and it has a cost.

Adding a percentage to cover expected increases works and makes you more expensive than competitors who have not, on every job, including the ones that would have been fine.

It also means you are pricing for a risk that may not materialise, and if costs stabilise you are simply overpriced.

The judgement is whether you would rather be occasionally caught out or consistently more expensive than everybody else. For most trades a short validity period is the better trade than a permanent buffer.

What to tell a customer who asks why

The question arrives eventually and a prepared answer is better than an improvised one.

The honest version is short: supplier costs have risen by a stated amount and the price reflects that. Most customers have seen the same thing in their own trade and accept it immediately.

What invites argument is vagueness. Market conditions and rising costs are phrases that sound like an excuse; naming the material and roughly how much it moved sounds like a fact.

And if you have absorbed increases for a period before passing any on, say so. That is genuinely to your credit and most customers have no idea it happened.

Reviewing prices as a routine

1. Check your main material costs monthly, not annually.
2. Recalculate your standard job prices against current costs.
3. Check your published prices match what you actually charge.
4. Note the date you last reviewed.
5. Adjust in small steps rather than one large annual jump.

The fifth is easier on customers and on you. Several small increases attract far less resistance than one substantial annual jump, and they keep pace with what is actually happening to costs.

Existing customers on old prices

The awkward category, and the one that quietly costs most.

Long-standing customers frequently sit on rates agreed years ago, unreviewed because raising it feels ungrateful.

That is understandable and it means your best customers are subsidised by your newest ones, which is the wrong way round.

The practical approach is a scheduled annual review applied to everybody, so an increase is a routine rather than a decision about a particular relationship. That removes most of the discomfort.

Announce it once, in writing, with a date it takes effect and a reasonable notice period. Most customers expect it and some are surprised it has not happened sooner.

The ones who leave over a modest increase after several years were usually the least profitable anyway, which is uncomfortable to say and generally true.

What to write on the quote

Three lines, and they do most of the work.

The validity period, stated in days with the expiry date calculated so nobody has to work it out.

What the price includes and specifically excludes.

And how materials are treated, if they are variable, with an example so the arrangement is clear before acceptance rather than at invoicing.

How to publish a price at all when it moves is the same problem as in lead times on a page that goes stale.

Frequently asked questions

West Coast Media Solutions Inc. provides web design, web development, hosting, digital marketing, and business consulting to organisations across Canada, drawing on more than twenty-five years in the field.