Project Budgeting is crucial to ensure that you are profiting from a project before accepting the proposal. When starting a new construction project as a business owner, you must collect all the data you will need to perform this project, whether commercial or residential successfully. It will be data such as indirect and direct expenses like labor, materials, equipment, overhead costs, a contingency reserve for unexpected costs, and any other operating expenses. Setting up your budget helps you manage risks, serves as a guideline for your project, and provides a visual for profitability, allowing you to stay organized. As you continue to read, because you’ve found yourself needing the information, we will provide an in-depth explanation on why this is crucial to your business and tips on applying it.

Is there software that can help?

A simple method to begin your project budget would be to use an Excel spreadsheet. Or if you prefer old school, pen and paper for more straightforward construction projects. However, if you want software to help with commercial and residential projects, you can look into Housecall Pro, Service Titan, or Jobber.

Another great software to use for commercial projects is Knowify. It helps with progress billing, project tracking, AIA billing, and ensuring that the user understands the costs involved in bidding for a project. This software helps from the beginning to the end. If you want to bid on a job, this software will allow you to determine how much to bid based on historical numbers and goal metrics. Another feature it provides will enable you to track and compare what you thought the project would cost to how much you are spending throughout the stages of completion.

Additionally, what if I need a feature that helps with project organization and communication with the customer or subcontractors? Or what if my business entails work on semi-custom to custom home building? Well, consider Buildertrend. Buildertrend allows you to manage larger projects and remodeling by directly communicating with owners. Comparatively, Knowify could be more beneficial to small to mid-sized contractor projects. Whichever method you pick, you focus on implementing your system effectively for your business.

How to begin your Project Budget?

Then, after choosing your budgeting method, you want to follow an outline to prepare yourself. It also allows you to break down your costs, see which category utilizes most of your budget, and determine where to save. This outline can entail the following: first, project research and review; second, building your cost estimation; and last, project management and monitoring. To provide you with an illustration, the next is a list of an in-depth synopsis:

1. Project Research and Review:

• Clarify the Scope – outline what the project requires from start to finish.
• Identify specific requirements, such as:
  • Materials (lumber, concrete, metals, etc.)
  • Labor (wages, subcontractor fees, equipment operators, and other human resources)
  • Equipment (rentals and tools)
  • Systems (HVAC, electrical, plumbing, etc.)
  • Architectural elements (windows, doors, etc.)
• Assess site conditions—Assess the site for potential concerns regarding access limitations, soil conditions, or environmental concerns.
• Review documentation – any plans, drawings, or reports to identify risks or issues that may arise.
• Consider Legal and Professional fees such as permits, site surveys, design and engineering fees, insurance costs, and post-construction expenses like landscaping.

2. Build your cost estimation by category:

• Estimate cost of materials – determine the quantities needed and the cost of these materials.
• Estimate Labor costs such as hourly wages, rate of subcontractor fees, rate of equipment operators, etc.
• Estimate equipment costs, including the fuel, rental fees, and maintenance associated with that cost.
• Approximate Overhead costs include permits, insurance rate, design fees, loans, etc.
• Include a contingency reserve allocated to address potential risks and concerns.
• Include a profit margin to ensure profitability

3. Project Management and Monitoring:

• Maintain proper documentation of estimates, costs, and assumptions.
• Use a construction management software or templates to track the budget and monitor expenses, such as the ones listed previously.
• Monitor project expenses regularly, compare them to the budget, and make any necessary adjustments to account for unforeseen costs.

In the light of this synopsis, you can understand why it’s essential to follow a guideline for your project budget to set yourself up for profitability and success. Also, consider project budgeting as another way to ensure your customer is happy with the building stages of the project. Moreover, remember that you don’t have to follow the steps above precisely; you may do your due diligence to create your own processes and guidelines.

         Budgeting is worth practicing and a technique every contractor or business owner should apply. Suppose you need more help to understand where your financial metrics are, or need help with budgeting. Here at Waterford Business, because we specialize in trade services, we have much experience with project budgeting and job costing. Check out our YouTube video Budgeting for Contractors and Large Construction Jobs with James for a first-hand recap.If you need any assistance in these areas, please do not hesitate to reach out to us at 864-351-0852 or info@waterfordbusiness.com