*Sponsored content from HBXL Estimating Service.
Joanna Mulgrew, Managing Director of HBXL Building Software and HBXL Estimating Service, looks at some of the measures building firms should take to protect their income.
Use the latest material prices
Problem: It’s difficult to keep track of prices right now. The Federation of Master Builders’ “State of the Trade Survey Q1 2022” reported that 98% of builders have experienced material cost increases. My question is - did they realise at the point of purchase or at the point of estimating? If you under quote your materials week-in, week-out, it will impact. And it’s likely to be you funding the shortfall. But who has time to keep checking the latest prices for every quote?
Solution: Someone else does it for you - someone who will check prices across the UK from multiple chains to independents. A pipedream? Not if you find an estimating service or estimating software provider who offers this service. At HBXL for instance, we double-check thousands of products in the EstimatorXpress Price Book every month. It’s a huge undertaking. But it makes a massive difference to our users.
Don’t get caught out by inflation
Problem: At the time of writing, inflation in the UK is tracking at 9.5%. So a job quoted last week using the prices on that day just won’t be accurate in nine months’ time say, when the job actually starts. What’s more, if it’s a lengthy job, the price of materials will continue to rise over the duration of the project.
Solution: Quote the customer the start-date price. Again, a decent estimating service or estimating software solution can do this. With EstimatorXpress the inflation tool gives you a second ‘start date’ customer quotation. Our estimating operation calls it the Profit Protect Service. This way you have options. You can look at the price difference and decide whether you’ll swallow the additional cost. Or you can put the ‘worst case scenario’ to the customer.
Allow for overheads, wastage, wear and tear…
Problem: Spades go walkies, wheelbarrows break, materials get wasted… and again someone must fund it all. Then you have payments for vehicles, phones, equipment, workwear, insurance, leases, accountant, memberships, website, marketing… But how do you account for all these things? Do they come out of your profit? They shouldn’t do.
Solution: Let good estimating software take the strain. Break down your annual overheads into 12 months and give the figure to the software. Sorted. And it will automatically calculate wastage, plus wear and tear.
Factor in a ‘proper’ profit margin
Problem: It’s easy to assume that money is being made when the order book is full and the working days are long. But you could work day and night and not make a penny if you haven’t allowed for a ‘proper’ profit margin. An arbitrary ‘buffer’ will quickly be whittled away by overspends and delays. No business can survive for long without profit. Watch the FMB webinar I took part in on the subject of profit protection.
Solution: A sure way to achieve a healthy bank balance is by allowing at least a 20% if not 30% profit margin on top of all the overheads. Once again your professional estimating software will do the sums. You don’t have to reveal the figure to the customer in your quote - it can be spread across the project. Profit is the reward for risk and funds a quality service. Simon Lazarus, our HBXL TEAM Business coach, always tells builders to ‘look up’ and charge their worth.
EstimatorXpress could help take some of the financial strain. Call the team on 0117 916 7898 or arrange an online demonstration via our website.
*Disclaimer: This blog post is sponsored content, which is independent of the FMB. Publication does not constitute endorsement or recommendation from the FMB.
Authors
Joanna Mulgrew
Joanna Mulgrew is the Managing Director of the HBXL Group, a company she has been with from its launch in 2000. Joanna grew up in a family immersed in the building industry and has herself renovated three properties. As well as leading the team responsible for the research and development of new software, Joanna is spearheading the company’s 2022 mission to help as many residential construction firms as possible ‘Go Digital’, in order to help solve some of the many business issues builders face today.
