Raw Material Costs Went Up. How Much Should You Raise Prices?
When raw material costs rise, many business owners just add the same dollar increase to the price. But that approach quietly shrinks your margin rate: if cost goes up by $1 and you raise price by the same $1, your margin rate (margin divided by price) actually ends up lower than before, because the price you're dividing by got bigger too. To hold your margin rate exactly where it was, you need to raise the price by a slightly higher percentage than the cost increase itself. This calculator takes your current price, current cost, and raw material inflation rate, and instantly shows the new price, the dollar increase, and the percentage increase needed to keep your margin rate steady.
How you respond also depends on whether the cost increase looks temporary or structural. A short-term spike might be worth riding out at your current price, but a sustained upward trend is worth using this calculator's target price as an anchor for a phased, planned round of increases to protect your margin over time.
Frequently Asked Questions
If you add the exact dollar increase in cost to your price, your margin rate actually drops, because your price base got bigger too. To hold your margin rate steady, you need to raise price by a slightly higher percentage than the cost increase.
Checking your recent purchase invoices for the price change versus your last order is the most accurate approach. If you buy several materials, calculate a weighted average based on which ones make up the biggest share of your cost.
Many businesses phase in price increases over a few steps to limit customer pushback. This calculator shows the theoretical target needed to hold margin steady — the actual timing and size should also factor in market conditions.
※ Whether to raise prices should also weigh competitive conditions and customer reaction. This is an estimate for reference only.