Start Free Trial Book A Demo
Collaborative pricing software for construction

Category: Blog

Categories
Blog

Latest UK Construction Material Costs – January 2023

BuildPartner is aimed at making building prices throughout the UK and beyond as transparent as possible. With this aim we have regularly reported on rising material costs across the UK, the causes of volatility in the market and also how to minimize the variability and risk.

As previously reported 2022 has seen high levels of inflation across all industries and as a result material costs have risen as well. As we look back at 2022, what insights can we pull from the latest UK construction material prices reports? How did 2022 construction costs compare to previous years? And what can we expect moving forwards?

We have summarised 8 key points from the latest UK Construction material prices, released 02 February 2023 supported by BuildPartner’s live price data.

1. Construction costs rose 15% in 2022, compared to 24.5% in 2021 . To put this into perspective , on average construction costs normally rise around 3 – 5% per year. For example, in 2019 there was a 1% decrease in construction costs for that entire year, followed by a 5% increase in costs for 2020. So basically, this isn’t normal.

2. Overall, construction material costs have stabilised, but remain elevated. Since reaching it’s peak in July 2022, we have seen a small reduction in costs with it now stabilising in the last 5 months. This is largely due to a hike in interest rates to cool the level of inflation.

3. However, material costs are still above their long term average. Overall construction material costs have increased by 11.2% from this time last year (December 2021).

4. Insulation materials (thermal or acoustic) have risen the fastest out of all materials by 13% from August 2022 to September 2022. But have since stabilised at this higher rate in the last 4 months.

5. Timber and Joinery materials remain at a stable price. The only major trend can be send from Imported planed and plywood, which has decreased by roughly 25% and is now in line with other timber materials.

6. Cement based products which includes bricks, tiles, cement and concrete continue to rise at roughly 2% per month, with no signs so far of it slowing. 
Concrete reinforcing bars however continue to decline in price since peaking in April 2022, but are still elevated by approximately  20%.

7. The price of gravel has increased by roughly 30% since the start of 2022, with it stabilising in price since May 2022.

8. Besides frabricated structural steel, which has seen a continual correction in price since its peak in May, prices for metal products remain stable throughout 2022 and into 2023. 

Our thoughts on 2023 prices

 

The construction industry is facing big headwinds as we likely enter a recession and endure higher interest rates. However, these factors will be countered by the inflationary effects of labour shortages and supply chain issues. As such, we predict prices to remain relatively flat throughout 2023, however dramatic shifts caused by further geopolitical or environment shocks can’t be ruled out.

 

 

Written by,

Ken Vilaysane (Product Manager)

 

P.S Did you know Buildpartner has thousands of tasks and materials which we regularly update in response to changing market environments?

You can use these live labour and material rates in your area to create budgets and quotes for your projects.



Try it out by creating a new project here.

Or Book a Demo here.

Categories
Blog

What are builders’ day rates likely to be in 2023?

When renovating, extending or building a new house there are various different contractors that you will engage to complete your construction project. Construction costs are particularly volatile at the moment and while labour rates are generally slower to vary we have seen plenty of changes.

This breakdown of labour costs has been is based on an anlysis of our 2022 rates and estimating a small inflation increase into 2023. These averages are based on the thousands labour rates held within the BuildPartner system.

We’ve created a range for you broken down by trade and region:

 

Current trends on the BuildPartner product are showing estimates that construction prices are cooling off into the start of 2023, so we may see a small decrease in builders rates across the UK. We’ll keep you informed as ever and if you have any questions feel free to get in touch with contact@buildpartner.com.

 

 

Written by,

Ken Vilaysane
Product Manager at BuildPartner

 

 

Tip: Did you know BuildPartner allows you to save rates and also compare your costs against different types of Builders (large vs small).

Try it out free today by clicking here. No credit card required.
Or request a demo to learn more about our product.

Categories
Blog

Average Building Costs Per Sq M for 2023

Looking to build a new home in 2023? Or are you simply looking to renovate your bathroom? Here are the latest cost per m2 rates for 2023.

2022 has been a wild ride for construction prices. As reported in our last November construction materials report, skyrocketing inflation, rising interest rates and a looming recession have all contributed to a rise in overall construction costs throughout 2022. Increases in individual construction material prices have differed significantly with some individual items increasing by over 60% while others only increasing by roughly 10% in 2022.

 

As we move into 2023 what are the costs per m2, associated with construction projects? In this breakdown we will give you our best estimations for 2023 costs, based on latest material prices in the UK and thousands of quotes assembled in the final part of 2022.

 

Scope of works

Low benchmark
(excl. VAT)

Average cost
(excl. VAT)

High benchmark
(excl. VAT)

Building a new house

£1,500

£2,000

£3,000

Extension (Ground floor)

£2,000

£2,500

£3,000

Extension (First floor)

£1,250

£1,500

£2,000

Renovation/Remodel

£500

£1,000

£1,250

 

It is important to note that these are rough guidelines in cost. Each project will differ in cost based on a variety of factors such as:

  1. Location – In urban areas such as London where land is scarce, construction costs are typically higher due to the high cost of land. In rural areas, where land is more readily available, construction costs are generally lower.
  2. Type of finishes (specification) – The type of materials used in construction can also affect the cost per m2. For example, using high-end materials such as marble or granite can significantly increase the cost per m2, while using more affordable materials such as concrete or vinyl can lower the cost per m2. Also a building with high-end finishes such as custom cabinetry, top-of-the-line appliances, and designer fixtures will typically have a higher cost per m2 than a building with more basic finishes.
  3. Type of Builder – The choice of builder has a big impact on the cost per m2 as well. With low/small scale builders generally requiring less overhead, whilst more custom and large scale builders will come with higher overhead costs.

We’ve written some details articles on this to discuss causes in differing prices on projects, which you can check out here.

Overall, the cost per m2 for construction can vary widely depending on a number of factors. It is important for homeowners and builders to carefully consider these factors and determine a budget that works for their specific project. In general, it is a good idea to get quotes from multiple contractors and compare prices before starting a construction project.


Written by,
Ken Vilaysane
Product Manager at BuildPartner

 

Tip: Estimating software has come a long way in the last few years, and software such as BuildPartner can help you estimate your project faster and more accurately based on your chosen scope and specification. Our costs take in the latest market trends and rates within your region and breakdown your project costs in seconds. 

Try it out free today by clicking here. No credit card required.

Categories
Blog

Latest UK material construction cost trends- November 2022

BuildPartner is aimed at making building prices throughout the UK and beyond as transparent as possible. With this aim we have regularly reported on rising material costs across the UK, the causes of volatility in the market and also how to minimize the variability and risk.

 

As prices across the UK have become increasingly variable due to a variety of factors, we will now be publishing this new regular report depicting the latest changes in construction material prices across the UK. This is aimed at helping builders, architects and their clients gain an understanding of how overall material / construction costs are tracking across the UK and what they should be looking out for.

Here are the top 7 points from the latest UK Construction material prices, released 02 November 2022 supported by BuildPartner’s live price data.

1. Overall, construction material costs are starting to ease. With the average costs rising slightly by 0.7% from August to September, for all types of work. This continues the general trend of a slowdown in the overall material price inflation rate since June 2022.

2. However, material costs are still above their long term average. Overall construction material costs have increased by 16.7% from this time last year (September 2021).

3. Insulation materials (thermal or acoustic) has risen the fastest out of all materials by 13% from August 2022 to September 2022.

4. Timber and Joinery materials are on a general decline in price / generally flat, since peaking in price in the early part of 2022.

5. Cement based products have continued their steady increase in price, rising 2% per month on average.

6. Since March 2022, Gravel, sand, clays and kaolin including Aggregates levy (UK tax on the commercial exploitation of rock, sand and gravel) have increased by nearly 60% in price. However it has recently in the last few months started to stabilise.

7. Metal products increased by 1% in September. Continuing their steady monthly increase in price. Meanwhile fabricated structural steel has continued it’s decrease in price, following it’s peak in May this year.

P.S Did you know Buildpartner has thousands of tasks and materials which we regularly update in responrse to changing market environments?

You can use these live labour and material rates in your area to create budgets and quotes for your projects.

Try it out by creating a new project here.

Or Book a Demo here.

Categories
Blog

What to do to reduce price variability

 

In our previous post we discussed how Natural variability in price causes price discrepancies between each project. In this article we will be discussing how you would go about reducing price variability between your construction projects.

 

1. Plan as comprehensively as possible

The more you can understand the price implications of different decisions the better, this involves getting information from designers, builders, and other industry professionals. Frankly, it is not a simple task but the more you do the more likely you are to get the result you want. Of course you can pass on some of this responsibility to your interior designer, architect or builder or instruct a project manager. All these options are good, they will simply come with an additional cost and perhaps some particular leanings.

2. Create a complete and accurate brief

A detailed and consistent description of the work is essential for all parties to be able to work effectively together.

3. Ensure detailed specifications

Create a list with materials researched and priced and avoid unnecessary variability.

4. Research suitable companies

Good matches in terms of size and spec of project will narrow the range and increase the level of appropriate advice.

5. Ensure comparable quotes

Use an itemised Excel document to ensure like for like comparison.

6. When negotiating, think about what’s in it for them

Builders do not purposefully price high to catch people out. They price what they think is appropriate. It may be sensible for them to round up rather than down initially so you can keep an eye out for that. But even in the act of quoting you may be changing the scope so just help them out.

7. Keep clear records

During the process and even as the project progresses prices and specifications will change, clear records will ensure consistency and avoid disputes.

 

Overall

–   People aren’t out to get you, construction prices are naturally variable

–   Price has certain key components, all of which you can control

–   Negotiation is a tiny fraction of the overall variability, a clear scope is much more important

Therefore preparation is the best way to find a certain and appropriate price.

And, use BuildPartner 🙂

Categories
Blog

Why construction costs vary – Part 3 (Natural variability in price)

 

In our final post of our three part series of why construction costs vary per project, we will be discussing the final contributing factor to varying costs, “Natural variability in price”.

 

Reason 3: Natural variability in price.

Having created a relatively fixed scope, and even chosen relatively similar contractors, we know that the prices people receive can still vary. Quite simply this is because prices vary, both through time and between suppliers. We touched upon margin in the previous section, but to add some more detail, a project usually breaks down into five main sections: 

–   Building materials 15%

–   Fittings and finishes 20%

–   Labour 40%

–   Prelims 10%

–   Overheads and Profit 15%

 

Construction materials

 

These are the core building materials that go into the construction of your project. Such as steel, timber studs, tiles, insulation. Key things which impact their cost are:

–   the area of the works

–   the demand for particular materials

–   the availability of particular materials

–   the quality of the materials purchased.

Their prices can vary due to supply and demand, as indeed we’re seeing at the moment but even when they do vary dramatically, say by 10% across the board, that would only be 1.5% of the overall budget, so in our area, it is of little impact. 

 

Fittings and finishes

 

These are the items that are installed in your project that you can see. These might be anything from your timber flooring, to your cooker or bathroom taps. It can be affected by:

–   Quality

–   Scope

–   Organisation

Here we can see much more variability because there is more scope for personal choice. It is easy to spend £1,000, £10,000 or £100,000 on a kitchen as it is to make comparable price increases on tiles, plumbed and wired appliances. This is a common cause of price variability between quotes. Builders will include different allowances or sometimes none at all.

 

Labour

 

This part of the construction budget is what gets paid to the people working to build your project and is usually the most bulky part of the overall cost.

Labour costs commonly vary in price by between 5-15% and will depend on;

–   location

–   demand

–   availability

–   efficiency

–   quality

As in most markets, more experienced and qualified professionals are paid more. Therefore price variability here, which can be as much as 20-40%, is usually reflective of the standard of the building company you’re working with. Or indeed the standard of work they are used to providing.  

 

Prelims

 

Prelims or preliminary costs are the site specific overheads that your contractor will pay to set up and keep your site operational. This might be the cost for a portable toilet for the contractors to use, or skips to clear site debris.  Another item that might be included is the cost of a project manager or foreman who’s fees to oversee the works would not be covered in the labour costs of the works to be completed.

This section does not vary wildly, if it does it will usually be reflective of 

–   The builders specific standards

–   Access

–   Additional health and safety requirements

–   Surrounding areas

–   Working hours and amenities

Most important is not to miss things out. Prelims are not always itemized separately in the quotes you will receive from contractors. Sometimes they will be covered in overheads and profit, but it is important to clarify these and who will be carrying the cost for parking, site specific insurance etc. 

 

Overheads and profit  (OHP)

 

To remain a viable business every contractor will need to include an amount of money which will go towards the costs of running their business and create profit for the company.

Business overheads might be items such as insurance, office rent, their admin team.  Profits are necessary for every company to allow them to weather fluxuations in their work and to be able to invest to improve their services such as paying for training new team members and investing in new equipment or practices.

Every contractor will include overheads and profit in their quotes but this will very rarely be explicitly named. It is usually added on as a percentage to individual items of the scope of works and within the labour rates or handling charges provided for additional work.

This is the area which is tweaked according to company specific factors such as

–   the risk

–   location

–   desirability of the project. 

–   the size of the contractor

–   their interest in getting the job

It can be subject to negotiation as can all prices but is perhaps not as flexible as customers might like. Construction is a competitive business so most contractors know their position in the market and stick to a standardised system. If you want to negotiate, think about what value you can provide them that might lead to a change in price. For example if you’re not in the house things might be easier, if it’s a desirable project for their portfolio or near to their office. These things can be useful and worth reminding your contractor of.

The result is that we see a a during quote variability of 20-30%

At the point at which you have your contractors quoting on your confirmed scope of works at ‘tender’ you will still see a variability in price of between 15-30% based on the natural variability between rates and margins of the contractors. They also can be seen as provisioning different services themselves and so you are now picking one and narrowing down yet again.

 

Conclusion

 

So you can see that when your contractor prepares a price for your project there are lots of aspects to the work that they must consider.

There are several different ways in which contractors can prepare their quotes and strengths and weaknesses to each.

–   Some will use an independent estimator or quantity surveyor to value the price of materials and labour on their behalf. This will likely result in a detailed and accurate quote but is often hard to make changes to and their knowledge of the work may need to be checked.

–   Some will prepare their prices based on their own calculations and spreadsheets often using a word or excel document, these can be a bit thin on detail as builder’s time is short, they can also be hard to compare as each builder will have a different format.

–   So if you’re going to collect quotes yourself, we suggest you use your own list of tasks and specifications. Of course the risk there is that you miss things out so we suggest you use BuildPartner which will guide you through the process, giving you average prices early on, and ensuring you are asked the right questions and can compare quotes easily.

Overall, the most important thing is that your grasp of the scope of work is clear and complete. That will enable you to manage the interdependencies and possibilities.

 

P.S Did you know in Buildpartner you can compare quotes line by line between builders and benchmarks?

Simply click on the quoter page invite builders and view and compare all of their submitted quotes in one place.
Want to know how? Click here

Categories
Blog

Why construction costs vary – Part 2 (Different building companies and cost bases)

 

In our previous post we discussed the first reason why construction costs vary between projects, being different scopes and assumptions per project.

In this post we will be discussing the second reason why project costs vary per project.

 

Reason 2: Different building companies and cost bases.

 

Within construction, in particular residential construction, there are really three types of contractor and they should be viewed as providing effectively different services.

 

  1. Sole traders (1 – 3 partners)
  2. Small companies (3 – 10 team members) 
  3. Large companies (10 – 20+ team members)

 

Sole traders (1 – 3 partners)

These are informal individuals or groups of individuals who sometimes run projects and sometimes work for lead contractors. The lead(s) will usually run one or two projects at a time and often continue with a particular trade as this will not take up all his or her time.

Because of this more informal and low turnover approach these groups will often not be VAT registered or ask you to pay some team members directly to avoid going over the threshold.

This can mean a significant cost saving as VAT is usually 20%, they will also not be charging much of a margin, usually less than 10% on top of their team members work as their wages are mostly covered by their trade. But bear in mind that it means they may not take responsibility for the entire project. They will also not see management as their core function. They will have lower overheads which means a lower cost base, but as a result they will also struggle with complex or unique elements. So this type of contractor is best for low risk, low complexity projects and situations in which you’re happy to be more hands-on with the organisation.

Because the VAT threshold is only around £90,000. Any group specialising in projects over £10,000 will reach this threshold quickly and so you should approach with caution anyone in this group taking on projects of that size or above. They would have to be either very creative with their accounting or inexperienced. 

 

Small companies (3 – 10 team members) 

These are usually formed when a sole trader or group of traders decides to go one step further than informal ad hoc projects and form a limited company. Usually because the project sizes have become such that the financial risk is best kept in a limited company.

Usually at least one team member will have the sole function of ‘management’ and won’t do much site work but will instruct and arrange. This means their costs and any other overheads associated with more complex projects will need to be covered in a margin. Usually 20 – 30%.

They will need to be running 2 – 4 projects at a time to finance this and therefore are likely to have developed an increased marketing presence. They will be more comfortable with appropriate insurances and contracts and therefore lend an additional degree of security to their clients.

There are few drawbacks to this kind of contractor and indeed they are seen as the traditional ‘builder’. If you can find an organised and experienced contractor managing no more than 2 – 4 projects at a time, that’s the ideal for any project between £20,000 and £250,000.

 

Large companies (10 – 20+ team members)

Large companies still have an important role to play, naturally in projects which require a varied and sizable team. But these are usually commercial or development projects. So for the moment we’ll focus on their relevance to the residential sector.

There are some residential projects around £250,000 – £1m which can’t be handled by most contractors and therefore large businesses have to be created. However, sometimes these businesses will need to or want to take on smaller projects to keep their teams busy or for particular specialisations, for example lofts or listed buildings. 

These companies will inevitably have larger overheads, offices, vans, customer support etc. which can increase their margins to 30 – 50%. However, the level of construction risk with them is lower as they will be heavily insured and usually dealing with larger projects, however they can go spectacularly bankrupt so make sure to pay after rather than before work is complete. Indeed this general principle will serve you well with all contractors.

 

P.S Did you know in Buildpartner you can actually see the costs/quotes associated by these types of builders for your project?

Simply click on the quoter page and you will be able to see the price difference between a small scale builder vs a large scale builder. Want to know how? Click here

Categories
Blog

Why construction costs vary – Part 1 (Different Scopes and Assumptions)

BuildPartner is an estimation software that helps homeowners and professionals manage pricing for construction work. Specifically by enabling users to check benchmark prices, create detailed cost plans, and collect comparable quotes.

Our platform has been built using data from thousands of projects over many decades by a large group of architects, builders, and quantity surveyors but with a particular emphasis on residential work under £1m, which is particularly useful for homeowners. So today we’re going to share with you some insights which we’ve built up and how they can help you manage your renovation costs. We’ll cover first why construction costs vary and then what to do to mitigate it:

Why construction costs vary

 

Pricing for construction is often seen as an opaque process, easily subject to abuse, and indeed it is. But that doesn’t mean it’s actually as complicated or as abused as you might expect.

Many people on our team have run building companies and pricing companies and we can promise you, it’s extremely rare that anyone is actually trying to game the system or take advantage of you. In fact we are often shocked how regularly builders take financial hits for their clients.

However, that does not mean that prices are not variable. They can vary enormously. Which leads to uncertainty. It is fair to ask, if quotes can vary by 30-50%—as they do very regularly—how can they all be right!?

Well the answer to that is actually quite simple and we will explain it. The main cause of the variability is that they are simply quoting for different things. So we will explain a little bit more about what that means and what to do about it in three a three part series:

  1. Different scopes and assumptions
  2. Different building companies and cost bases
  3. Natural variability in prices

1. Different scopes and assumptions:

 

Renovating a house is not like buying a pair of shoes. It is more like designing them, you are literally building your product. This is both part of the joy and part of the complexity.

There are millions of different products and service providers and hundreds of millions of different combinations which you are putting together in your specific way and your specific location. Exciting as it is, this is the heart of the complexity, you cannot know how much something will cost until you know what you want. However, you cannot know what you want until you know how much it will cost.

We could go round and round like this but then we would never get anything done. So we have to work with assumptions, and therefore it’s very common, if not the norm, to collect quotes without all the details of the project being confirmed. This is one of the main causes of variability.

As a result of variations in scope we see a pre – quote variability of around 80 – 100%

This is largely due to specification alteration. At the beginning of a project the scope of the works you want to carry out and the specification of those works aren’t confirmed. Therefore any estimate or quote at this early stage will have a natural variability. You may want to do the loft extension another time or you may not get planning permission for the basement.

This means that the sooner you can confirm the exact scope and specification of your project the sooner you can reduce the uncertainty and variability of your project costs.

Of particular importance is that if you are aware of the scope of your work, you can more accurately pick appropriate companies to quote. Certain companies are suited to certain types of projects and the closer you can match the two the more competitive and appropriate your tender will be.

Tune in next week where we walk through the second part of why Building costs vary, “Different building companies and cost bases”.

Categories
Blog Case Study

Case Study, Zebra Property Group – “BuildPartner saved us about two days of work on this project”

Location: London, England
Project: Cipher House
Industry: Construction

Zebra Property Group is a construction team that provides high-end, bespoke residential and commercial transformations to clients based in London and Edinburgh. Using BuildPartner for the first time, they submitted a quote for the Cipher House project, a modern two-bedroom new-build in Putney, and were selected.

Three facets of their BuildPartner experience particularly impressed the Zebra team: the efficiency and accuracy of creating the initial quote, the client’s clear understanding of the value of Zebra’s services, and the strength of the client relationship as a result. Here’s what Jamie Menzies, Managing Director of Zebra Property Group, had to say about his team’s first BuildPartner experience:

Fast, Accurate Quotes

“I spent very little time actually putting the quote together which was, of course, very helpful. I’d say BuildPartner saved us about two days of work on this project. That’s a huge help for us and it was bizarrely accurate.”

Clear Understanding of Value

“I was worried its level of price transparency would mean that clients would always just go for the cheapest option. But we were the most expensive and the client chose us so, clearly not.”

Stronger Client Relationships

“I was really pleased by how much trust this client had in us. Most of the time, we experience a certain amount of hesitance and caution from clients; it’s usually just the nature of the situation when no one really knows how much the project’s final cost will be. But this wasn’t the case with the Cipher House client. I have no doubt this was because they had a clear understanding of what they were actually paying for.”

At the heart of Zebra Property Group’s work is the commitment to stay hyper-focused on providing exceptional service for their clients. Now that the Zebra team can save days of work using BuildPartner, they have more time to focus on business development and ensuring clients feel confident and comfortable throughout their projects.

Give BuildPartner a try

Join the hundreds of other UK architects who are using BuildPartner to save time on schedules, empower their clients, increase their revenue, and more.

Start your free 30-day trial of BuildPartner today!
Categories
Blog

The Partnership Overview

 

We based BuildPartner on the simple principle that we could use recent technological advances to increase information exchange in the industry, in particular with regard to pricing. Therefore we are building a collaborative product which enables users to quickly and accurately create budgets, compare prices, and track the progress of their projects.

The initial version of the product is live. However, there’s a lot more to do, in particular prioritising and testing new releases, managing the data and planning the roadmap. We think that the same technological advances in information exchange which have made this business possible can be used to improve the process of building the business itself.

It is now possible for a wide range of people to collaborate on projects at a low cost. So we are asking users if they would like to join as partners on the project. This group will become owners of the product in principle and practice. They will provide feedback as a user, direction for the business as a team member and resources as an investor.

Information on the process is below. The hope is that this will enable us to build a better product, more efficiently, together.

In Principle

The current corporate structure:

Currently, businesses are owned by team members and investors. As a result, capital and control then tend to consolidate in those groups. This is associated with certain problems. Growth in capital tends to be accompanied by growth in inequality and volatility, a slowdown in innovation and collaboration and blindness to wider social externalities.

However, now is perhaps the right time for a different approach. Recent technological advances enable information to be distributed almost instantly at a dramatically lower cost. The result is an opportunity for more decentralised yet efficient and equitable companies.

The Partnership Model:

The partnership model makes it possible, even the default, for a wide range of customers, team members and suppliers to become shareholders in the business. This is done by making it easy, even the norm, to invest their spare time, resources and connections at any point in the business.

Benefits:

To the partners:

  • Passive capital creation resulting in equity growth and long term reward
  • A more efficient business which will increase revenue streams and lower costs
  • Governance rights on the key strategic decisions enabling greater control

To the business:

  • More efficient practices resulting in lower costs and higher revenues
  • Lower capital requirements resulting in a more stable, efficient company
  • An increasingly innovative and socially-minded business

To society at large:

  • More efficient, less volatile, more socially conscious businesses

How it works

The partnership approach involves customers in the development of the business. To that end, we are enabling users to invest their spare time, resources and imagination and repaying them with share capital. Examples of which include:

  • Product design and feedback (hourly or daily rates)
  • Sales and marketing introductions (commission)
  • Governance and management (retainer)
Payment:

Any time spent advising, marketing or governing the business will be valued at a quarterly valuation. These payments, for feedback, commission and advisory time can be invested in the company according to the Partner Scheme terms.

Governance:

As a shareholder you will have rights to business information. However, on top of your codified rights we emphasise the spirit of total transparency and equality. As a shareholder, you will be able to take up the right to information and vote at any point.

Reporting and tracking:

Business reporting will be consistent and transparent. Every quarter, metrics will be sent out, results analysed and valuation tracked.

An example

  1. Monthly advisory payments paid at a per hour rate – £100
  2. Commission on an introduction of 10% first year revenue – £2,600
Over 12 months: Net equity – £3,800
Company valuations

The last investment round closed at a valuation of £3.2m in April. Partners can invest at any time at the previous valuation or quarterly benchmark.

Tax relief

Tax relief is available to personal investors. Therefore we recommend that investments are made personally rather than by companies or partnerships due to the tax relief available:

EIS relief offsets 30% of your investment against tax. So £5,000 of invested time would result in a rebate of £1,500. And up to 45% again if there is no return on your investment. So a maximum of £1,925 is at risk.

There is also no capital gains tax on any profit if the shares have been held for three years.

Possible scenarios

With early-stage investments the range of possible outcomes is wide. So investments should only be made out of free time, margin or cash, ideally subject to tax.

Here are some examples, ranging across, zero, poor, medium, good, and excellent outcomes based on a £5,000 equity stake at a £1.4m valuation:

The level of uncertainty is high but you can help bring it down. That is the point of the scheme. If they work, early-stage tech investments tend to return large multiples. If they don’t, don’t expect much back. But tax relief ensures you only lose 25%. 

FAQs

In the case that I take the shares, would they be in my name specifically? Do you issue some monthly statements to this effect?

Yes, ideally shares are in your name as that has tax advantages, however companies can own shares as well, the amounts are totalled and valued quarterly.

How do the shares that accrue from advice work with tax? Do I need to ‘invoice’ you for my time and then you ‘pay’ via shares such that I can demonstrate to HMRC that I have income which went towards an EIS investment?

Yes, for example we would pay you £100 which you reinvest in the company.

When would be the starting point for my advice accrual? Would we go all the way back to the beginning?

Yes, all time to date is included. 

Would you see the time spent on introducing architects as captured by commission or amalgamated into this new advice-for-equity arrangement

Sales time doesn’t count as it’s commission-based but you can invest the commission at the market value. If the intensity of the sales work increases we can do what’s called a ‘drawdown’ which is paid upfront in advance of the commission.

How do I track how much time has been done

We track the time for you and provide a portal for you to check the progress.

How is the company valued?

Either by external investors or in the interim periods by a valuation committee. 

How can I sell my shares?

The natural point is a buyout, but to avoid reliance on that we will cultivate secondary markets to match buyers and sellers.

Do I have any ongoing responsibilities as a shareholder?

Other than filing your tax return when the investment is made, no, there are no other responsibilities. You will have opportunities to vote, and buy or sell shares, which you can take up as you please.

 

Any questions are more than welcome, we’re extremely grateful for your support and very excited about the coming years.

All the very best,

Hugo and The BuildPartner Team