07 Oct How to Budget for a Construction Project
Knowing how to budget for your construction projects is one of the most important factors in ensuring your work goes smoothly, efficiently, and economically. Although the term budget is commonly associated with cheaper products and projects, a budget is simply working within a set limit. You can budget £1,000 or £1,000,000 but either way you’ll be working within that limit/guide and so it’s incredibly important in construction work to know how to budget properly or else you’re likely to overspend and potentially leave your job incomplete.
Creating A Quantifiable Spec Sheet
One of the first major steps to take is creating a quantifiable spec sheet, a spreadsheet with every step of the project planned in sequence. For example:
Example Spec List (Bedroom Refurbishment):
- Strip out existing skirting boards, architraves, door, flooring and any damaged walls and ceiling
- Prepare walls ready for plasterboard installation
- Install plasterboard
- Install plaster finish
- Install new skirting boards, architraves and door
- Paint walls, ceiling and woodwork
- Install new carpets
This ensures that every phase of the job is undertaken in the correct order as backtracking can create serious additional costs down the line. Consider a simple example, if you laid new flooring before painting your walls, then you’d have to pay to have your floors cleaned if any paint were to stain your new flooring. These additional costs can become far more severe depending on the order of work.
The spec sheet also creates a list of jobs you can send to each contractor to get a rough estimate of their rates. Furthermore, by creating this list of jobs you then have begun the process of creating a contract to ensure that you only get the work you pay for. The contractor will then be liable for errors and mistakes and this will greatly decrease the chance of hiring a cowboy builder (for other methods see our blog post on avoiding cowboy builders).
Creating A Line Item Costed Spec Sheet
Another thing you’ll want to do is build off your spec sheet and cost Line Items. This is when you price up each piece of work as well as the cost of materials/products (baths, toilets, etc.).
Example Line Item Costed Spec List (Bedroom refurbishment):
- Strip out existing skirting boards, architraves, door, flooring and any damaged walls and ceiling – £100
- Prepare walls and ceiling ready for plasterboard installation – £250
- Install plasterboard – £300
- Install plaster finish – £600
- Install new skirting boards, architraves and door – £150
- Paint walls, ceiling and woodwork – £300
- Install new carpets – £150
These costs should not be included when you send your spec sheet to contractors but for personal use to itemize your project and have a strong estimate of the total cost. This will give you time to rethink your budget if the estimate is too high or add some additional changes if its below what you originally anticipated. Line Items costs are also a great way to arrange payments, paying your builder after each stage is complete, so you’re only paying for finished work. This way, everything remains open and transparent between yourself and the contractor.
Another good way to ensure you are budgeting correctly and getting the most for your money is to open trade accounts at places like Jewsons. The trade accounts will give you anything from small discounts to large savings on certain products, they’re free to open and available to the public so there’s no reason not to open a trade account.
How to Budget Depending on your Experience in the Industry
Managing your own projects can save you a considerable amount of money but it can also cost you a lot of money too, depending on your level of expertise. We strongly advise against managing larger projects yourself unless you have considerable experience in construction. Trying to manage a project yourself without this experience will lead to mistakes which cost a considerable amount of time and money. We have seen first-hand what these errors can cost.
Let us use a theoretical example to explain the sheer cost of mistakes made during the construction process:
Say a homeowner decided to order a staircase themselves without advice from a project manager or any other contractors. The staircase they ordered was too large yet the contractor they hired, and paid, installed the staircase anyway as per their request. This mean the first cost was for hiring a contractor and having a bespoke staircase made. However, as there was an issue they now have to pay for a second staircase to be built and for the contractor to come and fit the second staircase. This effectively doubles the cost of the work.
The homeowner also has to pay someone to come and remove the first staircase. So, in total, they had to pay 100-200% more for this work than they should have. Not to mention the fact that this pushed back many other parts of the project, delaying the completion, potentially costing them extra elsewhere, with contractors working extra days, deliveries being rescheduled etc.
Who to Hire
Another thing to consider if you’re doing a larger build, is hiring an architect. It can be tempting, just like managing your own project, to save on expenses by not hiring an architect but the benefits they bring to the build can greatly increase your efficiency, maximizing use of the space and meaning your money is being used to its full potential instead of wasted on an inefficient project. An architect means you get more for your money.
Following from the idea about managing your own projects, the cost of hiring a single company to manage most of your project can seem expensive. However, utilizing a singular company will ultimately increase efficiency on the build. It also pushes the liability of mistake to them rather than your own pocket. If you do need to find ways of cutting back costs you can consider taking on some of the final stages of the project yourself. Although we strongly recommend only taking on the parts which require little experience. This means work such as painting and decorating, employing single contractors here might save you a little bit of money.
The last thing you’ll want to do, once you have your costs and schedule all prepared, is to ensure you have everything in writing. The excess costs from cowboy traders, mistakes which you shouldn’t be liable for etc. can be astronomical. So, ensure that everything is in writing, signed and agreed before the work begins. (See JCT for contracts to ensure you’re legally covered)