When costs rise, a price increase across the board is rarely the best first move. Five places to look, in order, before your margin quietly slips.
By Patrick Artese, Founder, Arthouse Advisory
The short answer: find out where the margin is actually going before you change anything. When costs rise, a general price increase is rarely the right first move. Look at margin by customer, product and job. Fix the work that's under-priced or costs too much to deliver. Then change prices where the value supports it, rather than everywhere at once.
You're not imagining it
Cost pressure is broad. In KPMG's 2025 pulse check of mid-market business leaders, 65% named cost and margin pressures as their biggest concern (KPMG Australia, May 2025). A CommBank survey the same month found 89% of small and medium businesses had seen costs rise over the previous 12 months, by an average of 10% (CommBank / YouGov, n=511, May 2025).
Those are averages, though. What matters is where the increase lands in your business, and it rarely lands evenly.
Five places to look, in order
1. Margin by customer and by job, not just in total. A healthy overall margin can hide customers or jobs that lose money once all the time is counted. Rising costs widen the gap.
2. Cost to deliver, including the hours. Supplier prices are easy to see. Extra site visits, rework, small orders and rush jobs are harder to see, and they add up.
3. Leakage. Work done but never invoiced, variations not charged, discounts that became permanent, and price rises that never reached older customers.
4. Mix. Some products or services hold their margin better than others. Where you can, point sales effort and capacity towards them.
5. Price, last and on purpose. Once you know where margin is thin and why, change prices where the value supports it, with a reason customers will understand.
A quick test you can run this week
Take your ten largest customers or jobs from last quarter. For each one, write down the revenue, the direct cost and a rough count of the hours, then rank them by margin after hours. A spreadsheet is fine.
Here's an illustration, with made-up numbers. Two customers each bring in $50,000 a year. One needs a few calls and pays on time. The other needs weekly site visits, rushed deliveries and constant chasing. In the totals they look the same, but one may earn twice as much as the other. (Illustrative numbers only.)
What not to do
- Don't cut costs that customers value just to protect this quarter.
- Don't put prices up across the board without knowing which customers you might lose.
- Don't wait for the annual accounts. By then the margin has already gone.
Frequently asked questions
Should I raise prices when costs go up?
Sometimes, but not first and not everywhere. Find out which customers, products and jobs are losing margin and why, fix what you can, then raise prices where the value supports it.
How do I work out margin by customer?
For each customer, take what you billed and subtract the direct costs and the time spent serving them. Even a rough version for your top ten customers will show you where to look.
What's the most common place margin goes missing?
Usually not one place. It tends to be under-priced work, unbilled extras and a few customers who cost far more to serve than they pay.
Where to go next
See how we look at costs and margins, or read Busy isn't the same as profitable. Start with the free Self-check or talk to Patrick.
Sources: KPMG Australia, Australian mid-market business review, 5 May 2025 (pulse check of mid-market business directors and decision-makers; sample size not published). CommBank, "SMEs resilient in the face of rising costs", 26 June 2025 (YouGov, n=511, fieldwork 23–27 May 2025).
About the author: Patrick Artese is the founder of Arthouse Advisory, a business adviser with 15+ years of experience across 10+ industries. Read Patrick's story
