How to Adjust Your Pricing When Material Costs Rise
When material costs rise, raise your prices deliberately and fast: recalculate your markup on the new landed cost (not your old cost), update every affected line in your price book at once, and re-quote any open estimates that haven't been signed. The goal is to keep your margin percentage intact, not just add a flat dollar bump. Below is a step-by-step method built for busy trades contractors in 2026's volatile market.
Key takeaway: A price increase that only covers the extra material dollars still shrinks your margin. To hold profitability, you must re-mark up the new cost, cover the higher labor burden that rides on top of it, and move quickly before the next invoice lands at the old price.
Why 2026 Is Squeezing Trades Margins
Material inflation isn't a rumor this year, it's showing up on every supplier invoice. Input prices for nonresidential construction surged at roughly a 12.6% annualized rate in the first two months of 2026, the fastest pace since the supply-chain chaos of early 2022, according to Construction Owners citing Associated Builders and Contractors data.
Metals are the sharpest pain point. Items made mostly of steel, aluminum, or copper now carry a 50% tariff, and copper wire and cable is roughly 83.7% more expensive than it was in February 2020. The producer price index for copper and brass mill shapes climbed about 21.3% year over year as of April 2026. If you run wire, pipe, coils, or sheet metal, your material line is moving under you every quarter.
The cost of doing nothing is real: 43% of general contractors reported at least one project canceled, postponed, or scaled back in the prior six months because of higher material costs. Contractors who quote at last season's prices absorb the difference out of their own margin, one job at a time.
Step 1: Track Your Real Landed Cost, Not the List Price
Your true material cost is the landed cost: the price on the invoice plus freight, fuel surcharges, restocking, and any waste factor. Pull your last two or three invoices for your highest-volume SKUs (the copper, the condensers, the fittings you buy every week) and compare them to what's currently in your price book. The gap is what you're quietly eating.
Focus your energy where the dollars are. A 20% jump on a $4 fitting barely moves a ticket; the same 20% on a $900 coil or a spool of copper wire wrecks a job's profit. Sort your materials by spend and update the top movers first.
Step 2: Re-Mark Up the New Cost (This Is Where Most Contractors Lose Money)
Here's the mistake that quietly kills margin: a material goes from $100 to $130, so the contractor adds $30 to the price. That covers the cost, but it does not cover the markup you were earning on that $100, and it lowers your margin percentage.
If you were selling that material at a 40% margin (a 1.67 markup), the $100 item sold for $167. When your cost rises to $130, the correct price is $130 × 1.67 = $217, not $197. That extra $20 isn't gouging; it's the same margin you already decided you needed to stay in business. Markup and margin are not the same number, and confusing them is the single most common pricing error in the trades. If that distinction is fuzzy, read our explainer on markup vs. margin for contractors, then run the numbers with the margin & markup calculator.
| Approach | Old cost $100 @ 40% margin | New cost $130 | Resulting margin |
|---|---|---|---|
| Add the cost difference only | Sold at $167 | Price becomes $197 | ~34% (margin lost) |
| Re-mark up the new cost | Sold at $167 | Price becomes $217 | 40% (margin held) |
Step 3: Don't Forget the Labor Burden That Rides Along
Material isn't the only thing inflating. Wages, insurance, and fuel move too, and your labor burden (the true cost of an hour of field time) should be reviewed at the same time you touch materials. If your burden rate is stale, even a perfect material markup leaves money on the table. Revisit it using our guide to calculating your labor burden rate before you lock in new prices.
Step 4: Update the Whole Price Book at Once
Piecemeal updates are how errors and margin leaks creep in: one tech quotes the new coil price, another pulls last month's number from a saved estimate. The fix is a single master price book that every quote and every crew member draws from, updated in one place and pushed everywhere. That's the entire premise behind Pricebookr, which keeps your master price book in sync with Jobber so a cost change updates every future quote automatically. If you're still building yours, start with how to build a price book.
Set a standing cadence so you're never caught flat: review your top-spend materials quarterly, and spot-check metals monthly given how fast copper and steel are moving in 2026. A calendar reminder beats discovering the gap at year-end.
Step 5: Handle the Conversation Without Losing the Job
Raising prices and keeping customers are not opposites. Lead with value and specifics, not apologies. A homeowner rarely tracks the copper index, but "material costs on this system are up sharply this year" is honest and easy to accept. Break down what they're paying for, offer good-better-best options so there's a yes at more than one price point, and never open by discounting.
What to say: "Supply costs on the parts for this job have gone up since last year, so the price reflects today's material pricing. Here are three options so you can pick the one that fits your budget."
For the full playbook, see how to raise prices without losing customers. For larger or longer jobs, protect yourself contractually with a material escalation clause (more on that in the FAQ below).
Surcharge or Raise the Price? A Quick Rule
A temporary material surcharge is a separate, clearly labeled line item you can add or remove as costs spike, which works well for one-off volatile jobs and signals the increase is market-driven, not a permanent hike. A price increase bakes the new cost into your standard rates and is the right move when higher costs look like they're here to stay. In 2026's environment, most trades are doing both: baking in the increases that have clearly stuck, and using surcharges or escalation clauses on big jobs where metal prices could jump again mid-project.
FAQ
How often should I update my prices when material costs are rising?
Review your highest-spend materials at least quarterly, and spot-check volatile metals like copper and steel monthly in 2026. Any time a key supplier invoice jumps more than about 5%, update that line in your price book right away rather than waiting for the next scheduled review.
Should I add a material surcharge or just raise my prices?
Use a labeled surcharge for short-term, volatile spikes you may remove later; bake the increase into your standard rates when the higher cost looks permanent. Surcharges are easier to reverse and clearly signal the increase is market-driven, but permanent cost jumps belong in your base pricing.
How do I explain a price increase to a customer?
Be direct and specific: note that material or supply costs on their job have risen, break down the value they're getting, and offer good-better-best options so there's a yes at more than one price point. Avoid apologizing or leading with a discount, which undercuts the value you just described.
How much should I mark up materials?
Mark up to hit your target margin, not a flat dollar amount. If you want a 40% margin, divide your landed cost by 0.60 (a 1.67 multiplier); when the cost rises, apply that same multiplier to the new cost so your margin percentage stays intact. Use a markup calculator to avoid mixing up markup and margin.
What is a material escalation clause?
It's a contract term that lets you adjust the price if specified material costs rise beyond an agreed trigger during a project, typically tied to an objective benchmark like a published price index or your baseline invoice. On longer jobs where copper or steel could jump mid-project, an escalation clause shifts that risk off your margin and is increasingly standard in 2026.