Today’s short video explains how to avoid money due to inflation. You can check it out here or continue with this quick read.
If you were in the steel fabrication industry in 2020 and you didn’t have escalation negotiated into your contract you would have been…
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$#%^$%Y&^%#%^^#$&^%&#$&#%^&$#%%#@!!!!!!!!!!!!!!
The lesson to be learned is that EVERYONE needs to NEGOTIATE Escalation or Rise and Fall Clauses in EVERY SINGLE CONTRACT if it’s OVER SIX MONTHS.
An easy way to work this out is to tie it to CPI if you just have a general contracting/construction business.
OR
If you have specific industry indexes that you can tie it to then use those.
For example the London Steel Index.
MAKE SURE IT’S IN YOUR CONTRACT that you can TIE ANY PRICE CHANGES TO A SPECIFIC RATE if there is a SITUATION WHERE PRICES ESCALATE.
For context from the low point of 2019 to the high point of 2020, there was a 66% increase in the price of steel.
This was devastating to a lot of construction businesses that didn’t have a rise and fall clause.
So shortish story shorter?
NEGOTIATE ESCALATION INTO YOUR CONTRACTS.
It’s never too late to start thinking commercially and getting contractually savvy. We’re here to help.
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