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How expensive is a delayed cost escalator?

Quantify the gross-profit loss while input inflation runs ahead of contract repricing.

Example scenario

Editable demonstration inputs, not verified industry benchmarks. Enable JavaScript to calculate your own scenario.

Annual contract revenue
$3,000,000
Affected cost as share of revenue
45 %
Annual input-cost increase
12 %
Months until repricing
6 months
Cost increase recovered after repricing
80 %
First-year gross-profit erosion$97,200

Example result only, not a forecast or promise.

Cost shock before recovery
$162,000
Loss during pricing lag
$81,000
Unrecovered after repricing
$16,200

What to do with this result

Align escalation frequency and index choice with actual cost exposure; model the billing lag separately from eventual recovery.

Know what is inside the model.

Planning model, not personalized financial advice. Your inputs remain in your browser.

Calculation method

Annual unrecovered increase = affected cost × inflation × [lag / 12 + (1 − lag / 12) × (1 − recovery)].

Assumptions and limitations

  • Example inputs are editable scenarios, not Aryo results or independently verified industry benchmarks.
  • Contribution excludes fixed overhead, tax and financing; validate demand response before changing prices.

Turn the number into a decision.

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