Three Points of Margin Lost to the Calendar: Repricing Against Rising Costs

Your costs reprice continuously. Suppliers raise, wages drift, freight moves, a contract renews higher. None of it arrives as an event. It arrives a fraction at a time, every month, and no single increase is large enough to trigger a response.

Your prices reprice once a year, in a meeting, after a negotiation nobody enjoys.

So margin erodes for twelve months, is restored in one step, then erodes again from a lower base. The sawtooth is the shape every business has and almost nobody plots.

Watch the peaks rather than the dips. If the annual increase recovers less than the year took away, the business is in slow decline even in years where revenue grows. Three years of that is several points of gross margin, lost without one bad decision.

The fix is frequency rather than size. A smaller increase twice a year is easier to justify than a large one annually, and it halves the time you carry costs you have not passed on. In contracts, an indexation clause turns that negotiation into a mechanism.

And price the lag in at the start. If you cannot reprice for twenty-four months, the cost assumption in that quote has to carry twenty-four months of inflation.

Plot your own peaks before the next review. The slope is the argument.