Rise in material costs impacts builder’s profits
Thursday, March 05th, 2015
With the economy continuing to improve, builders are being advised to keep a keen eye on their margins or risk making a loss.
It follows a marked increase in the cost of materials as demand outstrips supply across the build sector, with building contractors in particular seeing cost inflation eroding profits.
Latest figures show that the cost of bricks are up by 13 percent, concrete lintels up by 10 percent, engineering bricks up a massive 30 percent and blocks up 13 percent.
The erosion of profit margins has been magnified by the fact that many builders quoted for jobs months in advance of starting on site, and with materials increasing in price during that time, has meant a squeeze on profits.
This has been heightened further by the fact that many use out-of-date price lists to quote for jobs in the first place so that potential profits are eroded even more.
However, those which have in place robust systems that cater for daily price increases are much better placed to provide a better service than unscrupulous builders that quote low prices initially and then try to make back money on the job by charging extras for work.
It’s a practice endorsed by the Better Business Group which says that discerning customers on average are prepared to pay 10-15 percent more for a hassle-free experience and are inclined to pay more for their goods and services from reliable and trustworthy companies.
The group also claims that most builders charge around 15% less than they should for the quality of work they are producing which again will impact on the bottom line.
Joanna Mulgrew from HBXL also believes that by providing honest, accurate costs in the first place not only builds trust but ensures builders maximises profits from all jobs quoted for.
She said: “It’s fantastic news that the build sector, which has taken massive hits during the recession, is starting to show vast improvements in the level of activity.
“Those who have weathered the recession will no doubt have learnt that maintaining a decent profit margin was the difference between survival or potentially going bust.
“With builders now starting to increase their activity means demand on materials has also risen, so keeping an eye on costs will be imperative for a successful future.
“It’s vital builders develop a work smart mentality otherwise, having ridden the worst economic recession in living memory, all that hard work would have been for nothing.
“Using live builders merchant’s price lists via the internet means all estimates produced using EstimatorXpress are the most up-to-date prices. This ensures the best profits on any job.
“This has a big impact on margins and those builders wanting the good times to role would be well advised to make the most of technology that helps them make a decent profit.”
For builder Charles O’Kell of UK Pro-Build Ltd, using a product like EstimatorXpress has made sure his business maintains healthy margins.
He said: “As a company we had been looking for a way to make our quotes a lot more accurate as materials costs have been very much on the increase. We heard about HBXL through Professional Builder Magazine and having reviewed its website and contacted the team, challenged them to run a quote for a very complex job.
“The end result was both accurate and very in keeping with the image we’re looking to present. We have now taken delivery of the full suite of software and are confident this has been a very worthwhile investment in our company’s future.
“Because the software uses up-to-date prices means our quotes are totally accurate. It means we don’t have to go back to the customer cap in hand asking for more budget.
“This builds trust and helps us win more work.”