7 Things To Include in Your Construction Budget

As you know, the most critical stage of every construction project starts with hiring skilled tradespeople and sourcing out good materials. But what many people don't realize is that planning their budget may be just as important for a successful outcome! 

Without an accurate estimate on how much something will cost beforehand, like labor or supplies, you leave your project at risk of going over budget, running out of funds, or coming in behind schedule.

Makes sense right?

With years of experience in the construction industry, we've seen project managers make budget mistakes time and time again. The ones who make quick estimates often fall short of their needs, bringing the project to a halt until they can secure more funding to continue. 

Those who budget too high may spend more than they need to. 

You can ensure you’ll have all the money you’ll need to finish your project from the beginning if you take the time to prepare a budget before you start. Doing so will also help you avoid any surprises during construction because you’ll have already planned ahead  and have everything you need on hand.

7 Things Your Construction Project Should Include

To project accurate costs, you need to look at past successful projects in the same area to make vital preparations for your budget ahead of time. 

• Research past projects in the same area that were roughly the same scale as yours
• Go over your proposed plan with stakeholders and other backers for approval
• Break the overall cost down into smaller categories to show more accurate costs

Breaking down the project’s costs helps you allocate money where it’s needed most without risk of spending too little or too much. The following categories make up every construction project.

1. Property Costs

Property costs are among the easiest costs to calculate. They are usually flat costs you pay one time so they don’t surprise you in the future. Property costs are simpler than something like labor costs, which can fluctuate throughout a project.

However, there are some additional fees that come with buying property that are often overlooked. For example, real estate fees and taxes are separate from the price of the property but still need to be calculated in your budget. You’ll also need to research if any back taxes or similar fees are owed on the property and include those costs as well.

2. Consultation Fees

The outside professionals you bring into the fold to develop your construction project can be lumped together into this category. 

Here's where you'll calculate the costs of accountants, architectural planners, surveying and permitting professionals, and other specialists who are otherwise not part of a construction crew. Though paid separately, putting their costs into one estimate gives you a quick view of how they'll impact your budget. 

When researching previous projects, you may find the names of specific professionals who helped complete them. They can save you valuable time in finding consultants right for a job.

3. Labor Costs

Labor costs are more than the wage you pay your construction workers. Taking a tally of the number of contractors assigned to the project and how long they'll take to finish is key to determining labor costs. In addition, you need to factor in vacation, sick time, and workers' compensation to ensure you don't run short of money for these situations (or run afoul of the law). 

Estimating labor costs can be difficult because, unlike fixed expenses like property costs, it's a variable that hinges on time. In addition, accidents, weather, and other factors beyond your control can slow down progress and throw your schedule into flux. 

While you can't always account for such challenges, keeping your team on task will help keep them on time and budget.

4. Tools and Equipment Costs

Much like labor costs, what you'll pay for tool and equipment costs can be hard to pin down. You don't need to factor in any equipment you already own, but anything you intend to rent or buy does. 

Buying equipment upfront can save on future projects, but only if it's something you'll regularly use. Renting equipment can be cheaper and comes with additional fees, such as delivery, upkeep, fuel costs, and insurance. However, for most budgets, renting tools will cost less money.

Regardless of whether you rent or buy, it’s good practice to set aside money to replace any equipment that might break down. 

5. Material Costs

Many of the costs associated with construction can vary from day to day, so estimates need to have some leeway for such changes. Materials, however, are considered to have a flat cost: while prices may fluctuate, there are no future costs to be paid once you've paid. Therefore, work with your consultants to determine the best materials for the job and where to find them for the best price. 

The suppliers that you choose for one project can prove to be helpful in budgeting another. Once you've formed a relationship with a supplier, you can negotiate better costs for future work. So even if you don't save much money now, it can pay off down the line.

Because material costs are very expensive (rivaling and sometimes even surpassing property costs), managers sometimes try to cut corners in this category to free up funds elsewhere. While you should budget for strictly what you need when it comes to materials, that's not an excuse to cut back for the sake of saving money. Saving money shouldn't come at the cost of workplace safety or work quality. 

6. Insurance, Taxes, and Bonds

No matter where your project is taking place, you're bound by local and federal law. You're required to have insurance to cover incidents that may occur. Local governments may require you to cover additional insurance costs and utilities. You'll most likely face taxes at both levels as well. 

Consult with an expert to make sure you've covered all these costs, especially on the local level. Should you forget a simple bond or fee, a best-case scenario is authorities will give you time to pay later with additional fees. However, in a worst-case scenario, your project could be stopped entirely with more severe punishments to follow.

7. Contingent Costs

Plan to have some money set aside to protect you against unexpected costs. No budget should be exact to the cent. Contingency plans allow you to have extra money when you need it without securing additional funds on the spot. Contingency costs include hiring more workers or replacing lost or damaged materials. 

Plan Ahead with Kolbi Pipe Marker  

Don't let your project falter because of unforeseen financial shortcomings. A carefully laid budget ensures you and your team can work efficiently without having to second guess what you'll need. But the budget, as crucial as it is, is only part of an efficient project. That's where Kolbi Pipe Marker comes in.

At Kolbi Pipe Marker, we understand that efficiency is crucial to managing your construction projects. That's why we provide you with helpful content like this article. If you subscribe to our newsletter, we’ll notify you every time we release new content like this so you won’t miss anything that can give you an edge in the industry.