Construction Projects Have Budgets but Does the Average Contractor?

In the construction industry there’s a rule of thumb to always be developing, monitoring, and always working to come under budget from the smallest of renovation projects to multi-million-dollar buildings.  Due to the amount of financial constraints from investment partners to bank loans to mortgage lenders, the numbers not only have to make sense they also have to stay on target.  When they go over budget the money has to come from somewhere and justified, or the project can easily go off the rails and if the contractor doesn’t look at all of the possibilities, then it not only can ruin them financially it also can easily kill their reputation.

Superintendents and lead contractors have laser sharp focus on where their numbers are at all times to avoid potential pitfalls.  Unfortunately, often it falls behind when it comes to their own company’s financial health because they’re always worrying about everyone else and not always their own company’s survival.  It’s very easy to stay focused on what you know when it comes to building and renovation, but if it’s something you don’t know well like budgeting your business and finances that’s outside of your comfort zone, speaking from experience it’s to just push it to the side.

How do I start a budget?

  • If you’ve been in business for a few years, look at what you’ve submitted to your tax preparer and go line-by-line and write it out on a spreadsheet what the total was for each item you’ve spent, i.e. advertisement, payroll, rent, utilities, auto expense, etc.
  • If your tax preparer possibly merged items together, again look at what you submitted because that’s what you used. From there, put a separate column for different years with the amount that you spent each year.  This also includes your income by types of jobs.

2017                2018                2019                2020

Remodels                    10,000             15,000             20,000             ?????

New Construction        30,000             32,000             35,000             ?????


Advertising                   5,000               6,000               7,000               ?????

Auto                             4,000               8,000               10,000             ?????

Rent                            12,000             13,000             14,000             ?????

If you have a few years’ worth of data, then you can determine what is you should be budgeting for the current year and determine where your company’s budget could and should be.  Again, when you’re working with budgets on projects for clients, you cannot forget to focus on your own business’ success.  Whether you utilize Excel or consider utilizing the QuickBooks® budgeting tool already installed in the file, it’s vital to stay on track.

Dwayne J. Briscoe

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