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Rising Prices and How Contractors can Deal with Them ‐ Construction Costs

Inflation seems to be the running theme of 2022, and everyone is feeling the effects of it. Whether you are a consumer or a business owner, you are being impacted by rising costs in every market space in the economy. Everyone is having to adapt and adjust, and contractors are no exception. Here are a few ways that construction contractors can deal with the rising price of goods and materials.

Increase Service Rates to Increase Profit Margins

Whether or not you were ready to charge your customers more money for your services, during these economic shifts it's becoming increasingly necessary. This might not be the best option if your business is brand new because your client market might not yet trust you enough to pay more for your services. You might not yet have the reputation of more experienced and highly trusted contractors.
However, if you have a well-established client base and are a seasoned professional in your field, it might be time for you to increase your rates regardless. Don't let imposter syndrome make you feel like you aren't worth the money, especially when rising prices and inflation are forcing your hand. Keep your prices as reasonable as possible while still making sure you can do slightly better than covering your costs.

Include a Price Escalation Clause in Your Contracts

If you provide a client with an estimate, you can help protect yourself against rising prices by including a clause in your contract that estimate pricing is subject to change based on the price of materials. That way, if there's a shift in your costs in the middle of completing a contract, you can account for it on your invoice.
There are a few different methods to go about price escalation clauses, including:

 Invoice Method

This method outlines the materials subject to change. The estimate gives your client a baseline price and allows for adjustment after you purchase materials.

 Index Method

Both contractor and client agree on a pricing index to gauge price increases during the contract.

 Invoice/Index Together

Prices for materials are reviewed and agreed upon by both contractor and client, and then the actual cost of materials is compared to the original estimate.


This gives the contractor a window of material costs and when it is exceeded beyond an agreed‐upon amount, it can justify a price increase.


Knowing that prices will be continuing to steadily rise for the foreseeable future, a delay clause merits a price increase if materials have not been purchased by an agreed-upon date.

Other Options

Contractors should be mindful of their agreements with any subcontractors they work with, in addition to their client contracts. You'll want to set fixed costs with your subcontractors as soon as possible to help solidify your bid pricing, though your subcontractors may need pricing adjustments of their own.
There isn't a business or household anywhere that has not been impacted by rising prices of materials, but both consumers and business owners have been adapting as needed. As long as all pricing negotiations are communicated clearly in your contracts, you should have no issue accommodating fluctuations in your cost of materials.
With rising prices, ensuring you get your construction payments are essential. With Nationwide Notice, you can protect your receivables with a full and self‐service notice and lien company. The main goal for every client of Nationwide notice is to assist with lien laws and related documents, based on the state requirements. Want to learn more? Check out our website or see what sets us apart on this page ‐ or give us a call to see how you can get started.

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