Material costs went up — how much do you need to raise prices to avoid a loss?
When material costs go up, many business owners respond with a "let's wait and see" approach — but that quietly erodes margin every month it drags on. The higher the material cost share of a product, the more a small material price increase hits the final margin rate, and leaving it unaddressed means revenue stays flat while the actual profit that lands in your pocket keeps shrinking.
This calculator takes your current cost, the material share of that cost, the material price increase rate, and your current selling price, and computes the new price needed to keep your existing margin rate unchanged. For example, for a product with a $10 cost and a 60% material share, a 20% material price increase raises cost by $1.20 — and if the price stays at $15, margin rate drops about 8 points. To offset that, you'd need to raise the price by roughly 8% to keep your original margin rate.
Rather than applying the full calculated increase all at once, it can also make sense to apply part of it immediately and phase in the rest, depending on competitor pricing and customer response. That said, keep in mind that margin loss accumulates for every period you delay the increase — for long-term contracts or bulk purchase agreements, it's safer to build a material price adjustment clause into the contract in advance.
Frequently Asked Questions
This is the percentage of your total product cost that comes from raw materials. Check your cost sheet or bill of materials (BOM) and divide material cost by total cost.
The calculated figure is the theoretical adjustment needed to keep your existing margin rate unchanged. You can also apply only part of it, or phase in the increase gradually, depending on market conditions and competitor pricing.
Keeping the price unchanged means your margin rate drops directly. The bigger the increase and the higher the material cost share, the larger the margin hit — which can materially affect profitability over time.