How often should I update my material rates?

Often enough that a quote never leaves on prices you no longer pay — monthly is a reasonable default when suppliers are moving. The trigger is supplier changes, not the calendar.

Is a falling margin always a pricing problem?

No. It is often delivery — rework, delays, waiting on another trade. The two have opposite fixes, which is why guessing between them is expensive.

What margin should I be making?

It varies by trade, region and what you include in cost, and anyone quoting you a universal number is guessing. The useful comparison is your own trend and your own jobs against each other.

← Answers

Why is my margin dropping when revenue is up?

Growing revenue with falling margin almost always means your prices are lagging your costs. Material rates move faster than quotes get updated, and every job priced from an old rate file quietly loses a little. Volume then multiplies the loss rather than covering it.

Check how old the numbers in your quotes are

If your material rates were last updated months ago, every quote since has been built on prices you no longer pay. It does not show up in any single job — it shows up as a margin that drifts down while everything feels busy.

More work makes it worse, not better

This is the part owners find counterintuitive. If each job loses two points, doing more of them loses more. Growth is only a fix when the unit is profitable; otherwise it is an accelerator pointed the wrong way.

Find out whether it is pricing or delivery

The two look identical on a P&L and have opposite fixes. Pricing means you quoted too low. Delivery means the job took longer or used more than planned — rework, access problems, waiting on someone else. You cannot tell them apart from the accounts alone; you need to know what actually happened on the jobs.

Look at whole jobs, not the month

A monthly margin is an average that hides everything. Two or three specific jobs usually account for most of the drop, and they will have something in common. That is the thing to fix.

Also asked

How often should I update my material rates?: Often enough that a quote never leaves on prices you no longer pay — monthly is a reasonable default when suppliers are moving. The trigger is supplier changes, not the calendar.
Is a falling margin always a pricing problem?: No. It is often delivery — rework, delays, waiting on another trade. The two have opposite fixes, which is why guessing between them is expensive.
What margin should I be making?: It varies by trade, region and what you include in cost, and anyone quoting you a universal number is guessing. The useful comparison is your own trend and your own jobs against each other.

Written for your trade

This is the kind of thing Solomon works through with owners using their own numbers. See how it works →