Start Free Trial Book A Demo
Collaborative pricing software for construction

Category: Blog

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
Categories
Blog

Case Study, Collective Works – “We became better architects” and “increased revenue 5%” by using BuildPartner

Location: London, England
Project: Commercial Architecture and Design

Collective Works is an architectural firm based in London. They received a brief to renovate Summit House, a commercial office space, with the aim of increasing its desirability and rental income. The Collective Works team used BuildPartner as their ‘digital quantity surveyor’ to generate benchmark costs, create a detailed schedule, and collect comparable quotes. Here is an overview of how BuildPartner impacted the Summit House project, and their overall business, the headlines are:

● Created an additional revenue stream and increased practice income by about 5%
● Saved up to 8 hours per schedule created
● Enabled more freedom to pursue architectural creativity and deepen client relationships

When Khuzema Hussain, partner at Collective Works, and his team began using BuildPartner in2018, he expected it would save his firm a lot of time when it came to putting schedules together. But he was surprised to find that using the platform came with a host of unanticipated benefits as well. “The best way to illustrate BuildPartner’s impact on our business is by looking at our Summit
House project. It neatly reflects the various ways in which Collective Works has benefitted from BuildPartner: having cost information upfront, creating schedules faster, more creative freedom, and the ability to deepen relationships with clients,” Khuzema says.

1) Quick, Accurate Cost Planning

“With BuildPartner we can tell clients exactly how much ‘the best idea’ will cost, and it works. BuildPartner helps us sell these ideas to our clients.”

During the initial design phase, the discussion focused, in particular, on how to address the ceiling space. So the Collective Works team generated three ideas at three different price points:

● Option A, the high price: remove a suspended ceiling over the floorplan and take advantage of the vaulted structure of the roof
● Option B, the medium price: retain a flat ceiling
● Option C, the cost-saving option: leave the existing ceiling as is

It was obvious that Option A would be the most beautiful option. But, without concrete numbers, the client would have struggled to decide if a more expensive ceiling was worth the investment. So, using BuildPartner, the Collective Works team quickly generated precise estimates for each option so the client could compare them.

After that, the decision was simple. The client felt that it made sense to invest in the ceiling since their overall goal was to make the space more appealing to their prospective occupants. With the exact prices in hand, the client enthusiastically chose Option A.
Khuzema believes that being able to provide his clients with this kind of confidence, especially so early on in the project, enables him to be a better architect. “I can give them exactly what every client wants,” he says, “and that’s an understanding of how much their project will cost before it even begins.”

2) Quick, Accurate Scheduling

“The benefit isn’t just in how much time is saved, the quality of the schedules has also improved greatly.”

Putting a schedule together has always been a heavy lift for architects and designers. It’s a labour-intensive task that takes days to put together and, even with the best efforts, the accuracy of these documents is still variable.

This is exactly how Creative Works described their experience prior to working with BuildPartner’s scheduling platform. “It was just onerous,” says Khuzema. “It was this big, long list that took days to put together and then did nothing for us once the project was completed.”

BuildPartner provides users with a database of templates and tasks which users can select from. So Collective Works estimated that they saved at least 4-8 hours in creating the schedule for the Summit House project. This amount of time-saving has become standard for their team when they use BuildPartner. But the benefit is not just in how much time is saved, Khuzema says the quality of their schedules has also improved greatly.

Collective Works quickly realized that their ability to provide these precise estimates, and thus provide this deep confidence, was, in fact, a new line of service that they could also charge clients for. “Architects don’t usually have the confidence to produce an itemized cost plan but it's now possible with BuildPartner,” says Khuzema. “So you can now charge clients for part of the time spent on building that schedule.”

3) Increasing Client Confidence and Revenue

“If you credit BuildPartner for its ability to help us land work, it has a pretty substantial impact.”

Zooming out from the Summit House project and looking at Collective Works’ business more broadly, Khuzema says BuildPartner allowed his firm to increase its revenue by about 5%. This revenue increase happened in two ways. First, they were able to create an additional service, cost management, which now generates an additional stream of revenue. Second, they were able to dream big and design more creatively because they could put exact numbers to their unique ideas. In turn, bigger clients were more willing to choose Collective Works as their architecture firm.

With BuildPartner as part of their toolkit, Collective Works now has the accurate data they need to help sell their most creative ideas. “No one is after best quality at no cost,” Khuzema says,

4) Deepening Client Relationships

“When you look at it from the big picture, BuildPartner is not just saving us time, it’s also allowing us to do our core job better and more easily, while generating income. Now that’s a powerful tool.”

When it comes to spending money, nobody likes surprises. And yet, many homeowners are forced to start build projects knowing they have little control over how much it will ultimately cost. When architects use BuildPartner to generate precise project estimates, their clients feel confident and in control of their projects. This, in turn, allows for deeper, and better, client relationships.

Collective Works now uses BuildPartner on all of its projects. “This was a logical and important transition.” The firm’s mission is to design for the future in a beautiful and responsible way. This means working more sustainably, supporting diversity in the industry, and working collaboratively with new partners to positively impact their communities. BuildPartner has provided a stepping stone for the Collective Works team, which now has more time and more revenue, to continue to work towards their mission.

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

How to manage residential construction costs during volatile times

COVID and Brexit have sent residential construction costs on a roller-coaster ride. We break down what is causing the pricing volatility and how to manage it.

How much did construction costs increase in 2021?

Over recent decades, labour, materials, and margin components have been fairly stable which made it easy to manage changes. However, in the last few years, all three of these components experienced significant shocks:

  • MATERIALS PRICES: Global supply and transport issues, which were predominantly caused by COVID, have now been compounded by UK-based supply chain issues. This has reduced supply and increased key materials prices by an average of 20-30%. 
  • LABOUR PRICES: There has been a reduction in labour supply mainly caused by Britain leaving the EU. As a result, labour prices have increased by around 2 - 5%. 
  • MARGIN: The complications with material supplies and labour have created difficulties for construction companies and reduced their actual profit margins in the short term. As a reaction against this volatility, overall margins are being increased. Both due to the increased operating costs but also as a contingency against future price increases, generally around 2 - 10%. 

If you put these price increases together the fundamental (long term) cost of carrying out a project is likely to increase in price by around 5 - 10%. If we apply this to the average project on our platform, which is £250k, this would equate to an increase of £12.5 - £25k. Though this is a significant amount, it is actually less than the current sentiment might suggest. 

This is because volatility itself creates price changes that are higher than the fundamental increases because contractors are increasing their margins further to guard against future volatility. 

This is a move that has been somewhat enabled by the higher than usual demand and limited supply. The impact is harder to calculate but anecdotally has been seen to increase margins by another 10 - 15% and therefore overall 15 - 25%. 

Will construction costs continue to rise or go down in 2022?

This is of course difficult to predict. However, we’ve spoken to a range of materials suppliers, contractors, and quantity surveyors. 

  • MATERIALS PRICES will continue to be affected by shortages for perhaps another six to twelve months, hopefully decreasing in severity over that period. 
  • LABOUR PRICES may remain higher, it is difficult to predict how much of the increase is a result of COVID versus leaving the EU but we think probably will stay for the long term. 
  • MARGIN will reduce relative to the material supply issues over the next six months and also reduce as labour supply and construction demand normalises. 

However, these are the fundamental supply-side costs, as mentioned above, psychology and demand have the potential to cause even more dramatic swings. These are harder to predict although, we would expect them to similarly reduce over time. 

How BuildPartner can help manage volatile pricing

BuildPartner creates price transparency in small construction work. To do this, it provides a pricing platform for project managers, contractors, and homeowners. The product provides benchmark costs based on a series of templates, a scheduling tool showing live average prices, and quote creation and comparison functionality.

Therefore, since it collects live price information, it is in a unique position to provide help during this volatile period.

At its heart, BuildPartner is a big database of tasks and prices which can be selected, viewed and analysed in different ways at different times. The price information for which comes from three sources: 

  • Project managers input materials and their prices.
  • Contractors input labour, materials, and margin.
  • Quantity surveyors and estimators research and check all of the above.

We monitor changes within these accounts, compare them to other market sources such as materials suppliers then aggregate those changes. Any major deviations we manually update in our average prices and suggest that builders make these changes in their accounts. 

Project cost management: What to do about it

From our point of view

Our core responsibility to clients is to provide accurate price information for budgeting. Since project lifecycles from ideation to completion range from a few months to several years, we must take at least a medium-term view. If we were to react too dramatically to short-term shifts, we would end up skewing peoples’ plans unnecessarily. 

We think labour and margin are subject to some infrastructural shifts as we have seen this reflected in our builders’ accounts. Therefore we have slightly increased the default labour rates and margins in our benchmark prices by 3-5%. However, we would recommend a 10% contingency to handle short-term changes, especially in materials prices. 

From the architects’ and contractors’ point of view 

There is no doubt this is a difficult period. For those who have a time horizon shorter than 6 months, the answer might be to grin and bear it. But for those who have a longer time horizon, consider waiting for prices to stabilize. 

However, we are seeing certain patterns being repeated which we recommend avoiding: 

  1. If you shop around and miraculously find a cheaper than expected quote, both from main contractors and subcontractors, beware, it is likely to be a mistake or an inexperienced business. 
  2. Budget additional time and therefore money for lead times on materials. Do not trust the lead times materials suppliers give you. Though it is not their fault, they cannot say with reasonable certainty what will happen. So double your lead time and assume an effect on preliminary costs and overheads as a result. 
  3. Collaborate and be open with your pricing. Homeowners and builders will have different appetites for risk so finding the right balance will result in the right price. For example, you could consider advising homeowners to accept provisional sums for certain materials. This way a margin for risk will not need to be added to the quote, but instead, advise a personal contingency of 10 - 15% which may or may not be needed. 
  4. If anyone you’re working with is looking unusually stressed, offer support. This is a difficult period for everyone.
  5. And of course, use BuildPartner. The process will be significantly easier.