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Our costs are rising faster than our prices — what should we do?

If input costs move and realised price does not, margin is a decision you are currently making by inaction.

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The short answer

Cost inflation is only a problem if you cannot pass it through or change mix. The useful work is: which costs actually moved, which customers can take a price change, and which work should stop because it no longer contributes. A blanket freeze on hiring while continuing to sell the unprofitable mix is how the P&L gets worse more slowly.

How to tell this is actually your problem

The move that usually makes it worse: An across-the-board cost cut that hits the work that still contributes, because that is where the people are.

When Percision is the wrong tool

Percision is the wrong tool if you already know the answer and only need execution capacity, or if the business is pre-revenue — then the constraint is evidence about the market, not analysis of your own figures.

If it is your problem and you want the analysis on your numbers, the live page is https://percision.app/our-costs-are-rising-faster-than-our-prices. The engine routes this question to Cost & Margin Improvement. Metrics that decide it: input cost pass-through · price realisation.

Industry variants: Professional services · Banks & financial services · Healthcare providers · Healthtech / digital health · Logistics & supply chain · E-commerce & DTC · Manufacturing · Construction & trades · Retail · Real estate & property · Fintech

Strategy School lesson: margin-leaking

Questions people ask

Should we raise prices in line with costs?

On the customers and products where value still supports it. Uniform pass-through loses the price-sensitive work and still undercharges the rest.

When is Percision the wrong tool?

Percision is the wrong tool if you already know the answer and only need execution capacity, or if the business is pre-revenue — then the constraint is evidence about the market, not analysis of your own figures.

Is this the same as shrinking margins?

It is one of the three causes of shrinking margins. If mix and cost-to-serve are stable and inputs moved, this is the page. If they are not, start at margins-are-shrinking.

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