Carillion Crisis: a timely reminder that decent profit margins matter!

January’s Carillion crisis has reignited lots of talk about profit (and loss) in the construction industry. Listening to Paul Lester, previously of John Laing Infrastructure and Balfour Beatty, talking to the BBC, he said:

“The construction industry operates on profit margins of 3%. So wafer thin margins. If you’re 10% out on your costings you’re into a loss, something that the industry needs to look at again – both government contracts and private industry.”

Now admittedly most of the users of HBXL Building Software are businesses concentrating on their own customer base of homeowners and small property developments rather than the government and large corporations, but the message is the same.

If you don’t get your sums right, you stand to make a loss. If you’re not careful, a keen quote to simply to win the job can leave you short, and enough of that type of work and the business risks going under.

So what makes our top HBXL software users so successful?

  • They’re using our EstimatorXpress software religiously, knowing that they will always get accurate figures based on up-to-date material prices and current labour rates, with not a screw or piece of plasterboard left unaccounted for
  • They also know that wastage is being factored in, along with wear and tear on equipment, plus inflation – these are all costs that when ignored will impact the bottom line 
  • They apply a realistic profit – yes on top of their labour costs! That’s a sum of money in the bag for investment in the business for marketing, new vans, improvements to the office etc. And yes, to cover the odd unexpected problem…
  • They are able to provide the customer with a detailed quote that doesn’t leave anything in doubt – so there’s no chance of customers moving the goal posts
  • They use the material schedule in the software to help negotiate a discount with the merchants
  • They use the build program to make sure they have the right people in the right place at the right time
  • They use the other 80+ reports to monitor cash flow, arrange stage payments and much more
  • Less time spent estimating thanks to the intelligent software, gives them more time to look at the reports and analyse their business and move with the times
  • They also use other software products, such as PlansXpress, Health & Safety Xpert, ContractsXpert and ProjectXpert
  • And when they’re maxed out or on holiday, they use our own Estimating Service to provide the quotes!

Are they smug? Well they’re entitled to be, but hopefully not complacent…

We work with the Better Business Group who help construction firms maximise their chances of success with an analysis of their approach to customers and on-going mentoring. Importantly, they use facts and stats to instil a belief in the business owners that they really can charge what they’re worth and still win the work. It’s a service we highly commend.

Let the Carillion disaster be a reminder to us all, that you can’t afford to spend money you don’t have and the only way you’ll gain financially from your hours, indeed years, of hard work is with professionalism, organisation, accuracy AND a decent profit margin!

Other interesting reads:

Manage your cashflow >>
The doctor will see you now >>
Latest material price rises highlight the need to stay on top of prices >>

 

 

Note: Adrian Wild is the founder and Managing Director of HBXL Building Software, and is heading up HBXL’s 2018 campaign to give more ‘Power to the Builder’ and improve the chances of small to medium sized building firms realistically being able to help meet the UK housing shortfall.

Connect via Linkedin
Email: adrian@hbxl.co.uk