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What should building firms be charging for in their quotations? Everything!

Too many building firms are charging less than they should and it’s driving many of them out of business. That’s why, here at HBXL, we’re on a mission to stop building firms under-charging. To stay in business and have a long-term future, everything needs to be charged. Discounting is not an option. Guesses can’t be made. Rough calculations are a no-no. Check here to be sure that you’re not missing anything out in your estimates.

What is ‘everything’ you should be charging for?

• Materials – the latest prices
• Labour – every hour of every person – including you
• Plant hire – from the skip to the mini digger
• Wastage – tiles get smashed
• Wear and tear – tools go missing – wheelbarrows break
• Other payments specific to the job – parking, insurance etc
• Overheads – every monthly payment
• Inflation – the job might not start for six months
• Profit margin – essential for the future

And we’ll run through this in more detail below.

If you charge what you think is the going rate, if you use a rule-of-thumb, if you guess the cost of materials, you might not break even, let alone make a profit. And a profit – say 10% or less – may well be too small a margin to fund unexpected problems on site, let alone fund a pension or new kit.

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.

Misconceptions about pricing a job

Average sq ft / sq m pricing

Are you using the sq ft or sq m average for pricing jobs? Cost per square foot rates can be misleading – chances are they don’t take into consideration problem sites, architectural details that are inherently expensive to build or your quality of specification.

Also make sure that you properly understand what the actual square footage of your build is. Does the square footage rule of thumb you use take into account the gross area of the house or the internal dimensions? This is crucial as it can make 10 to 11 % difference in your guesstimate. Why settle for this when you could have 100% accurate estimates every time!

Dropping the price to win the work

You could be charging less than you need to and for all the wrong reasons.

• Deciding to price ‘your first job’ at a reduced price for a new customer could be a false economy
• Thinking that a referral means you need to charge the same (reduced price) is another false economy
• Taking jobs for the sake of keeping everyone busy is never going to end well
• Settling on a figure that you think is the ‘going rate’ is dangerous…
• Imagining what the customer will be prepared to spend – well it’s never worth making assumptions about the customer’s expectations.

Quote the full amount every time

Customers don’t necessarily want the cheapest price, and closer investigation has borne this out. Better Business Group, partners of HBXL, can prove it.  They’ve found, over years of research, that very often homeowners go with the builder quoting a realistic price, and say to the ‘too cheap’ builder they were ‘too expensive’ because it’s ‘just easier’. Get your head round that!

• Price the job accurately and fairly.
• If you win it – great – you’ll make the profit you deserve.
• If you don’t win it, then chances are you’ve avoided a problem job or customer, on to the next worthwhile job.

Accurate materials pricing and plant hire

An inaccurate estimate is inevitable if you don’t have up-to-date prices, and if the price has gone up then guess who ends up taking on the cost? After all, materials make up a good 40-45% of your job cost, so you’ll feel the impact of any under-pricing.

Buy or subscribe to any version of EstimatorXpress and we’ll track the material prices every month – it’s all included in your Support & Updates package. The HBXL team checks well over 6000 products in the EstimatorXpress Price Book. Utilising a range of data sources they scan and collate average prices, sense checking as they go. We’re not tied to one particular chain of merchants so we’re able to give users a carefully considered cross-section of prices.

And it’s worth mentioning quantities – why spend time doing take-offs, working out how many bricks, nails, sheets of board, tiles when the software will give you the total in seconds?

EstimatorXpress knows what you need even before you do. It’s assumed you’ll want a mini digger for the excavation of a trench and preparing a slab, a tipper for the removal of spoil for drains, scaffolding for the build… you get the idea. If you don’t want it, delete it. It’s quicker than adding it in.

Allowing for all other job costs

Site clearance, skips – EstimatorXpress alerts you to all of these additional costs, that could easily get overlooked. Then there’s wear and tear – EstimatorXpress gives you the option to allow a percentage on every job. That way you’re protecting your bottom line and keeping your hard-earned money in your pocket. Same for wastage – through EstimatorXpress you can add a wastage factor. The software is clever, for example – if you are using reclaimed bricks on a project, EstimatorXpress actually allows a higher wastage factor for them.

Labour

Are you accurately costing all your labour? The hours it should take? Who you need? Are you including your own time whether that’s visiting customers, estimating, site visits and so on? Your time doesn’t come out of the profit. EstimatorXpress has it all sussed. The groundworker and mate for laying the slab, the bricklayers for the walls and window openings, the joiner for the joists…  And we analyse data to establish an up-to-date and true picture of labour rates in the UK. Make sure you have a good handle on the going rates in your area too.

Overheads

Someone has to pay for the light, heat, mobile phone, van, pick-up, insurance premiums… and it shouldn’t be you. Your customers need you to be on good form, running a slick operation to do the work and stay in business. It’s part of the job cost. Again, it does not come out of the profit. EstimatorXpress factors in a percentage for each job. You just need to come up with a figure that will, over a year, cover all your costs – and remember they’re the ones you need to pay whether you’re busy or not.

Inflation

So when do you factor inflation into your costs?

1) On lengthy projects – the price of paint, say, which is used late on, could increase over the period of the build itself

2) Projects starting further into the future – say six, nine, 12 months and beyond.

Using the EstimatorXpress inflation tool means you don’t have to worry what the future holds as you’ve done the smart thing and prepared for it. Let’s look at an example of why inflation matters:

Typically prices are going up 0.7% every month as I write. So materials costing £100,000 when you quoted, will cost £4304.11 more after six months – possibly before you’ve even started the job. And £8731.07 in total a year on from when you originally quoted.

Who’s picking up the extra cost? Either do a version with inflation for your own benefit, or show the customer ‘the worse case scenario’ so they’re ready, or just go for it and make the inflated price your quote. If you do nothing, your profit will take a direct hit.

Profit margin

Every other article on this website is about profit – we can’t stress enough how important it is – see What a successful building firm looks like  for example. We’ve recorded a masterclass Price & Profit and recently made profit the topic of our podcast series Running a small building firm. Bottom line, EstimatorXpress has a field for your profit margin percentage. It can spread the figure across all the costs so you don’t reveal the figure to the customer. Profit is not a luxury, it’s what keeps your business going. And if you don’t feel confident about increasing your profit then watch this motivating episode:

So that’s what ‘everything’ is in an accurately produced quotation and what building firms should be charging.

Choose EstimatorXpress – and we’ll give you ContractsXpert free!

To help make sure you get paid on time… we’ve a very special offer for July 2023 only.

The offer applies to EstimatorXpress Plus, Premium and Enterprise. FREE ContractsXpert for 12 months when you take out an EstimatorXpress 12-month subscription (worth £249+VAT). Or FREE ContractsXpert perpetual licence when you buy an EstimatorXpress perpetual licence (worth £599+VAT). Add code FREECX at the checkout in the HBXL online shop and we’ll add ContractsXpert to your order. Or call the team on 0117 916 7898.

Cannot be used in conjunction with any other promotions. Promotion ends 31.7.23. Ts & Cs apply.

WHAT NEXT?

Call us on 0117 916 7898, have a quick demo of EstimatorXpress and ContractsXpert or download a free 14-day trial. We’re here to help you charge your worth.