Inflation Is a Discount

If you are a buyer, then inflation is an automatic discount.

You sign the contract and every year, thanks to inflation, the price you pay is in - real terms (and that’s the one that counts) - reduced.

If you are a seller, it’s the exact opposite. Every year your price – in real terms – is reduced. What’s worse is that what’s a minor reduction (in real terms) in overall price is a much larger reduction (in real terms) of your margin.

And since bringing in margin is the whole point of business, that’s a big deal.

If you are a seller, how do you protect yourself? The obvious answer is to include indexation in your contract but that, on its own, doesn’t usually work. You have to prepare the field.

Preparing the field is the Sales-Side Set Up. The SSSU means making it clear in your proposal that your pricing is not just nominal, but expressed in real terms. Your proposal should state that your pricing will not change – in real terms – throughout the life of the contract which, in turn, means allowing it to be adjusted in line with inflation.

If you are dealing with a Procurement Department, they are not going to like that. They have a fondness for the automatic discount (who doesn’t?), but stating your position clearly, upfront, is going to put you in a strong position.

7th October 2025