For any business to run successfully, they need to be generating revenue. From car dealers who buy at wholesale and then receive a commission after sale, to supermarkets that add a margin onto produce, most consumer products and services have a markup that's included in the final price.
It's no different for builders. In order to pay staff, source materials and keep our business running, we must apply a builders margin. The fee covers two areas -- overheads and profit. Overheads include accounting and legal costs, insurance, vehicles, tools, training and administration, while the profit is reward for taking on risk and covers new equipment and unforeseen costs during a build.
However, this is not an excuse to gouge our clients of their hard-earned money. In fact, it's the opposite -- we make sure that what you pay is reflected in the quality of home you receive, based on the brief you provide.
What is a builders' margin?
A builders' margin is usually a percentage of the build cost, not a pre-defined dollar value. Therefore, it can be adjusted if the overall cost of the build changes. While margins may vary between builders, the smallest margin doesn't necessarily mean the best deal. In fact, it can often mean the opposite. If a builder doesn't include the necessary margin and something goes wrong, you may be incurring larger costs than first anticipated.
How do I know I'm getting a fair deal?
As with any large purchase, you must decide if what the builder is offering is value for money. This is where the idea of quality and understanding market value comes into play.
For example, while the supermarket and the local bakery may both sell bread, the quality will vary significantly. No matter how much you barter, it's very unlikely that you'll get the bakery bread at the supermarket price. It's important to consider this idea when talking to builders about their quotes.
So, what should you remember when you're looking for the best value? It can be tempting to head to your local hardware store, take note of prices of common elements like power points and paints and then compare this against the costings of a builder's quote. However, you need to consider that each price goes beyond just the material itself -- it includes the labour, the contractor's overheads and of course, their margins. For example, a plumber doesn't just supply the pipes for your kitchen, they also need to travel to site, provide labour, tools, overheads and their own margin as well.
It's also worth discussing with potential builders the insurances they hold, the regulations they adhere to and what industry bodies they are members of. This will give you an idea of the additional costs that their mark-up covers, as well as reassuring you that they are working to the industry standard.
At the end of the day, any builder worth their salt should be able to talk you through the value of a scope of works. In these discussions, you should keep in mind that a fair and reasonable margin will be applied. After all, you don't want to engage a builder that cuts corners or is on the verge of bankruptcy while building your dream home!
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Looking to build your dream home? Get in touch with the team at Westwood Family Homes to see how we can help today.