How well do you protect your profit? Will the profit margin on your projects still be the same when you start the work as the figures you submitted in your original quotations? With escalating inflation, a bag of cement is unlikely to cost the same in six, nine or 12 months time when you get underway. Multiply that by a whole load of other materials and you can see how your profit margin could disappear.
HBXL is on a mission to help UK building firms quote ‘job start’ prices not the ‘day of the quote’ pre-inflated prices with the HBXL Profit Protect Start Date Service. As Joanna Mulgrew, Managing Director of HBXL explains, “The impact of inflation on your margins can be really significant. It risks neutralising your profit or worse, losing you money. That’s why an estimate that protects – by locking in your profit – is key.”
Construction cost inflation is at its highest for a generation. The Office for Budget Responsibility is forecasting an inflation peak of 9% this year. Financial experts are expecting the rise to continue for the foreseeable so the pressure is on. Rising prices mean that even using today’s very latest prices (which are a nightmare to keep on top of without HBXL’s help!), won’t be as accurate by the time you actually begin – they could be outdated in a matter of six weeks.
When to factor in inflation
1) On lengthy projects – the price of paint, say, could increase over the period of the build itself
2) Projects starting further into the future – say six, nine, 12 months and beyond.
The HBXL Estimating Service uses prices sourced in recent weeks by an experienced HBXL team. You need to decide whether you want an estimate based on those current (accurate) prices or, if you know when the job is likely to start, the appropriate inflated price of construction, calculated by our estimators using our own inflation tool.
Some of our customers like to show the customer today’s quote, plus the anticipated inflated quote, to avoid any nasty surprises. Others simply provide an explanation alongside the predicted price based on inflation. Who wouldn’t favourably consider a building firm showing totally transparency even at the highly competitive quoting stage? In fact this should prompt homeowners to challenge the other builders quoting on the work to give their future-proofed prices too.
How it works
We introduced the HBXL Profit Protect Start Date Service because of the amount of profit builders risk losing to inflation if it’s not factored in. Financial experts are expecting the rise to continue for the foreseeable so the pressure is on. And inflation calculations aren’t the easiest to work out. That’s why we use EstimatorXpress for all our estimating which has an inflation calculator built in.
You can use the HBXL Estimating Service three ways
1. Our standard service – estimating using the current prices. The charge is the standard estimate fee as calculated on a job by job basis and agreed with yourself in advance.
or
2. You can request the Profit Protect Service. At the same time as producing the standard quote, we’ll produce a second quote with the predicted start date prices. (Please note it is the quotation itself that is updated). The additional admin fee for this is £50+VAT on top of the standard estimate fee. And then you can use the two quotes as a reality check and decide whether to share with your customer, or not.
or
3. You can come back weeks or months after we produced your original estimate, for a Profit Protect re-quote using that date’s prices, or a date further into the future. The cost will be 20% of the original estimate fee or a minimum of £100+VAT.
When you request the Profit Protect Service we’ll ask if you would like us to increase the labour and plant rates, as well as the material prices.
A quick example
Materials costing £10,000 today, at the current rate of inflation are likely to cost Tom the builder £12,000 in 12 months time when he actually starts the job. So if the customer pays today’s prices that’s £2000 wiped off Tom’s profit without doing a thing… and if his profit margin was already thin, he’s in all kinds of bother. When you factor in inevitable delays, unexpected problems and so on – how much profit will Tom have by the end? He might have been better off sitting at home for two months… Just saying…
So this is a win-win. To find out more about the HBXL Profit Protect Start Date Service give us a call on 0117 916 7894 or drop an email to ian.clark@hbxl.co.uk
