February 2, 2021

Budget Realities Versus Budget Fantasies

In this post, I want to share some tips on working within your client’s budget. This is a question I spent some time answering on a recent episode of Coffee Break Q&A. Builders and clients share a common concern: Can the project be done within the proposed budget and time frame? This is a crucial question that must be addressed at the start of a project. Otherwise, you risk losing money on a job or perhaps losing a customer.

Here are three things you can do to ensure the project’s budget will stay within the realm of reality and not veer off into fantasy land.

REALITY VERSUS FANTASY

It would be awesome if every customer that comes to you says, “Hey, I want this and this done, here’s the plans, I don’t care when you finish it, and the sky’s the limit when it comes to the budget.” that is probably not going to happen.

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In the real world budgets do matter. They matter to the customer, and they definitely matter to you as the builder. Often it will fall on you to help the client understand that their proposed budget is unrealistic. They may not grasp how much materials cost (and that prices can jump significantly like we’ve seen this year), the labor involved, permits needed, coordinating with other trades, and what a project schedule looks like.

When you begin estimating what the project will cost and how much time it will take, share that information with the customer. It's an opportunity to educate them on how much things really cost and realistically how long it takes to renovate a kitchen or bathroom. The customer may not know these things because no one else has taken the time to explain it to them. If you spend a few minutes helping them to understand the reality of the budget versus the fantasy, they will respond more positively when they realize they will have to spend more than originally hoped for.  

PRECONSTRUCTION AGREEMENTS

One way to keep it real for your customer is to provide accurate estimates (depending upon the size of the project, this may be a “range” versus an exact amount). And a preconstruction agreement with all the details spelled out in clear terms can be a life-saver. It removes any confusion from either side. But before an agreement can be signed, quality time needs to be spent creating an accurate estimate.

Something that has made my job easier is using Buildertrend—a project management program that allows me to compare past projects and thus be able to provide a more accurate estimate.

Also, be sure to ask if the customer is working with an architect or designer. Let them know you need to see the plans. When I review the plans, I compare it to past projects that are similar in scope. I can see what details might require additional labor from my team or specific trades or materials that I need to add on to the price.

All of this takes time—valuable time—so we charge a fee for our preconstruction agreement. The fee covers the time spent in dissecting the drawings or plans, studying the specifications, and putting together a line-by-line open book budget for the project. I know some builders starting out feel that they should offer free estimates, and I’m not saying that is wrong. But, when you begin to take on large-scale projects, costly projects, you realize that the time you spend on putting together an estimate is an investment worth compensation. And most customers will understand and appreciate that.

HONEST COMMUNICATION

It all starts with the initial phone call from a prospective client or an email inquiry. We try to gather as much information as possible right from the get-go. We add a detailed description of the project on our contact form. We ask for the target budget and schedule. The keyword is “target”—the client’s target budget and move-in date versus the “actual” budget that NS Builders will need to complete the job. And our schedule may not coincide with theirs—if we are booked six to eight months out and they want to move in within four months… well, it’s just not going to happen.

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This is where honest communication is essential; everyone needs to be on the same page. If I gather enough information during the initial contact, I can avoid wasting my time or the customer’s. If we can’t do the project in the time frame they are hoping for, I honestly tell them that. And if their budget is simply too low for the project scope, I explain that to them too. We want to take on viable jobs that we know we can get done on time with exceptional work. So, I’d rather say no to a project than say yes and then not deliver.

FINAL THOUGHTS…

When a customer comes to you asking for a castle but has the budget for an ice shack, help them understand why their budget fantasy is not a reality. Be honest yet tactful in your communication and always get an agreement in writing. And as a customer, rest assured that NS Builders will go the distance to get you into your new home—on budget and on time.

Have you been wondering what it would cost to build the home of your dreams? Give us a call today! We look forward to answering your questions and sharing our expertise.


—Nick Schiffer


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