Joanna Mulgrew, Managing Director at HBXL Building Software, home to EstimatorXpress, discusses the builders who are cheating themselves out of their hard-won profit.
‘Watch out watch out there’s a thief about’, and it could be you. Builders who fail to pass on to customers all the costs are literally doing themselves out of money. For example, a builder quotes £100,000 for a decent sized extension, having included say, a relatively small £20,000 profit margin. If they haven’t used the latest, increased material prices in their estimating, the shortfall will come out of the £20K margin. By using pen and paper or a spreadsheet builders are doing themselves a major disservice.
Then there are the other costs not specifically related to the build itself. If a percentage isn’t added on for wear and tear, then you, the builder, will be funding the broken drill, the lost hammer and the hard hat that’s gone walkies – not the customer.
Quote date and start date prices
Construction cost inflation is at its highest for a generation and, due to the level of demand, many builders are booking in jobs starting in 6, 9 or 12 months’ time. Rising prices mean that even using today’s latest prices (which are a nightmare to keep on top of!), the current cost won’t be enough by the time you actually begin. So it’s especially important to factor inflation into 1) lengthy projects and 2) projects starting further into the future.
Again a good digital solution will do the complex calculations for you – providing the price now using ‘live’ prices and the actual inflated price of construction at the job start. It’s up to you how you use that knowledge to protect your profit.
Some of our software users will show the customer today’s quote, plus the anticipated inflated quote, to avoid any surprises. Others simply provide an explanation alongside the predicted price based on inflation. Savvy customers soon work out which building firms they can trust.
Overheads allowance
Is there a figure in the quotation for the customer’s share of the outgoings that keep you in business? Van leases, mobile phone, internet, a bookkeeper, annual accounts, insurance, trade organisation membership, software, office supplies and so on – they all have to be paid for – work or no work.
Not on the tools yourself? You need to include your management time. You are still a project overhead. Charge the client all the hours. And definitely put in a time allowance for subbies or supplies arranged by the customer – you’ll still be the one coordinating it all.
A decent estimating software package will absorb the overheads, wear and tear, your management time and profit into the project itself. You wouldn’t have to present the figures separately, unless you wanted to.
Efficient management
If you’re not quick to schedule and order materials your job will start hitting delays. And if you don’t have the figures in a presentable state, you’ll struggle to negotiate any savings. Plus, if you’re in and out of the builders’ merchant you’ll be robbing yourself and paying for expensive fuel.
And without an editable build programme, and auto-generated lists and schedules, reports and analysis, you won’t be able to act quickly to maximise your profitability.
Using our example, the £20K profit assigned for rainy days, marketing, a pension etc. could very easily be whittled away. Theft by stealth. No force used. Only discovered at the accountant’s end of financial year meeting. So, either keep your wits about you or let a professional, security-conscious estimating software tool protect your profit for you.
For further information on the latest construction software range from HBXL visit https://hbxl.co.uk/
