Marc Watters - Construction Business Blueprint

The Construction Business Blueprint #008 - The Dirty Word in Construction

• Marc Watters • Season 1 • Episode 8

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Most small construction business owners see VAT as a monster waiting at £90k.


In reality, it’s not the tax that hurts your business, it’s the fear of growing past it.


In this episode, we unpack why so many builders and trades hover below the threshold, chase cash jobs, and limit their growth to avoid registering.


Marc breaks down the myths versus mechanics of VAT: what it actually is, how it affects your invoices and margins, and why confident, compliant businesses use it as a badge of trust, not a barrier.


We dive into:

  • The real reason clients don’t care if you charge VAT
  • How to price and present proposals that project confidence
  • Competing above the threshold without racing to the bottom
  • Building clean systems for quoting, invoicing, and change control
  • The mindset shift that separates “busy tradesmen” from scalable businesses


By the end, you’ll see VAT not as a ceiling, but a milestone on your growth journey.


 Register when it aligns with your plan, stop hiding under the line, and start building a company that attracts bigger projects and better clients.


 Subscribe for more on construction business systems, estimating, cash flow, and leadership.


COMMENT below: your biggest takeaways and what you want me to create next! 

SPEAKER_00:

So, in today's episode, we're going to be talking about the dirty word in construction, and that is VAT. This one is obviously for the smaller guys. So, a lot of my clients, and most guys that come to me are well within this threshold and have been for quite some time. Those guys are sitting around 200k, right up to 10 million, some of my clients would be. But however, this conversation keeps raising its head time and time again. I obviously speak to a lot of construction business owners every single day. And this question comes to me often, you know, about being VAT registered, about going limited, and things like that. And for me, it is very, very simple. So I'm going to get into the reasons why. And by the way, just for c just for clarity, I am not an accountant or giving anybody any financial advice. I'm here to talk around the mindset around of VAT and going limited and growth in business and things like that. So just before anybody sits down with a pen and paper think they're going to get financial advice, that's not what we're here to do. Like I said, this one is for the smaller, more private clients. Guys hovering around the VAT threshold, which I believe is sitting at around 90k at the minute. Okay, so some people are trying to stay below, some people are trying to mix in cash and things to stay below it. I've even heard of people opening up separate companies that run below it, things that people do, but we'll not get into too much in this video. My point is this this if you're sitting right now toying around that threshold, thinking of different ideas or things about VAT, this should clear it up for you. This should be something that we can really talk about in a completely different you know approach to it and get you thinking differently about VAT and going limited and starting your own business and going from Soul Trader, different things, and really going for it. Most people try to avoid VAT or going limited or things like that in business because they have a very limited understanding of what it is, how it works, why it's being asked, what are the rules. You know, you've got reverse return VAT, you've got gross VAT, you have all these different things, and usually it comes down to bad advice from accountants and other people in business who maybe don't know the ins and outs of your business specifically and can't really or aren't really in a position to advise you. Most accountants, and sorry for saying this, any accountants that are listening, I actually have a client who's an accountant, but it's usually bad advice because the accountant will just do whatever is easy for them or suits them or thinking that they're working in the best interest of their clients. But most people aren't going to the accountant with the right information and the right explanation as to why they don't understand VAT or you know what they want out of their business or where they're trying to get to with their business. If you think about it, if you're shying away from doing over a certain turnover because of VAT or going limited, then you're stunting your growth. So you have to think of it that way, and you have to look at it from that perspective. So avoiding VAT actually caps your growth, and staying under it is just going to keep you down. Pretty much you'll never scale while trying to hide under a certain threshold or trying to avoid a certain thing or trying to ask clients to pay cash and things like that. Like, think how that looks to a client if you're saying you can pay me half this, half that, and all that crap. Like, that's just you know, that just makes you look unprofessional, putting things off in the wrong food. Clients are asking and wondering why. You know, it's it just leaves a lot of question marks, and they're gonna go with somebody more professional who's who's doing things the right way, presenting things the right way, and just getting on with the job and not even mentioning anything about it. Here's the price, this is the service, this is the quality, this is the result you're gonna get. Move forward or not, you know, not toying around with figures and VAT and being afraid to ask for it and being afraid, not even sure what to put on an invoice and things like that. So, this should hopefully clear that up for you. So, I've also had this thing where people do go into the VAT threshold and they feel like they're going to lose clients because they're having to add this 20% of their projects and they're thinking that's my profit margin. But in reality, if you're a business of that size and you're doing projects of that size, then those clients and your competitors are all in the same boat. So, what essentially you're doing there is you're trying to compete with people who are at a lesser, sort of lower position than you in business, and that's like a race to the bottom. You're trying to compete with people or or businesses who aren't in the same league or same level or have got to that stage that your business is at. For me personally, I think it's a great thing to be at a certain threshold and to be smashing through it and playing on. Also, those kind of clients who are going to be skeptical about VAT and skeptical about you know what an invoice says or how it looks with VAT or whatever else aren't the type of clients you want. The right type of clients you want and high-value clients aren't haggard over those things. They know what VAT is, they know what to expect, they know that the people they're asking for are professionals, they run a business, they're expecting VAT to be on there. I also hear some people giving advice saying about you know, don't mention the VAT, just put the price in, the price is the price. But at the end of the day, showing the VAT on an invoice isn't going to win or lose you the job. You know, the price is the price at the end of the day. People can put things through the business. If you're commercial, obviously, this is completely unrelated to you. This is obviously, like I said, for the smaller private clients. But in commercial, obviously, VAT is just a buy-the-bye, it's just something that we all have to deal with and something we all do, and everybody's in the same boat. But yeah, for a private client and they see VAT on things, but you think about Sainsbury's or anywhere you go into, VAT's included in everything, tax included everything, and it doesn't say it on the price tag. People just pay it without realizing they're pet just because that's just how it is. So your prices are no different. But however, I wouldn't be afraid to show it or not show it, or I wouldn't be afraid to talk about it or not talk about it. But again, what I want to talk about more than anything here is the mindset around it and the limitations you're putting on yourself by being scared of it because maybe you don't know what it is or whatever else. So again, just touching on the clans, clans haggling over VAT aren't your target clients, they're not the kind of clients you want. Those kind of clients are price-driven and not results driven or quality driven, and that's the kind of thing you want to base your business on, not trying to do things for the cheapest price. Then again, we touched on the competitors there briefly. So competing on price is a race to the bottom, and I've mentioned this several several times in other pieces of content and other videos. A race to the bottom is a race that you want to lose. So I wouldn't get concerned about what your clients are doing or what clients think. It is what it is, it's part of business. What you need to focus on is doubling down on the growth and pushing on beyond that boundary of that whatever the threshold may be, 90k. You need to be focused on doubling that 90k in the next six to 12 months and just pushing on, pushing on, growing the business, and then it doesn't have to be talked about anymore. If you think about it, it's actually a product of your success, and that's how it should be approached. That should be the mindset around it. It should be an achievement that you've hit a certain target, and now you're pushing on to bigger and better things. And like I said about those good clients, those good clients expect VAT, they expect VAT on invoices. It signals that you're professional, compliant, and also well established. And again, your job is to not explain your price for okay, yeah, asking for a breakdown or something is different, explaining how you got to your price, but explaining your makeup of tax and VAT, and if if we do it cash, can you not, you know, we're not paying VAT and things like that? Look, that just gets messy, you know. And look, so cash can't be spent anymore anyway, so it's not much use to anybody. But look, your job is not to explain VAT. You're not a financial advisor either, you're not an accountant, so that's that's irrelevant. Your job is to deliver quality, high-quality jobs on time and be confident in your pricing. So, my final message on this would be stop avoiding growth. So, if you're getting nervous around VAT, going limited, doing all those things, go and speak to your accountant, go and speak to whoever you're getting advice from, your mentor, whoever it is, and ask them and tell them what your plans are for the business and what suits the business best, what moves the business forward. Because again, that's what the goal is here. That's what we're all in business to do. We're on business here to grow and succeed and do better. So if you're near that threshold, it's a good thing. See it as a mark of success, see it as a milestone, and then smash through it. It means you're progressing. So step up, register, and start running a real business. And look, if you found this episode interesting or insightful or helpful, but you want more information, if you don't have somebody to talk to and you want more information about it and want to speak to myself, just about advice or how to put a plan in place to grow the business, then feel free to reach out to me under this video or on any of our social platforms. Also be sure to like and subscribe to this video and our channel for more information and more content like this.