Understanding your budget
In this blog post we will focus on how to really understand your project budget, to help you find the right balance between your brief and budget, helping you produce an accurate description of the works and how to pay for them.
We always suggest starting with a very loose definition of the brief: to describe the needs rather than the solutions. This will allow us to begin with first principles and challenge your assumptions on the space you know so well.
There will inevitably be a tension between brief and budget, which should be addressed early on. We recommend the first thing that needs to be defined is the project budget, as different factors will have various interpretations. For example your builders will refer to the works’ net cost (which is their part of the works), excluding VAT, finishes, fees, fittings. Consultants, including architects, will often refer to net construction cost (excluding VAT and fees.)
You will need to know the 'real' cost, so you can know how much money will be needed each month to pay for the work. We agree with clients, we always try to clarify the total costs, so there are no unexpected surprises, and always work hard to reduce the gap between brief and budget.
When setting the budget, we suggest that you think of a sum that you are comfortable investing in your project. The construction process can be stressful, and we should avoid adding additional pressure to financial restrictions. It is also helpful to keep at the back of your mind (but not too far) a 5% contingency to cover unexpected expenses.
All the costs at a glance Let’s assume we are discussing a £100k project. The builder will think you have £100k + VAT to spend on the works. On top of that, you should have at least £20k for finishes and fittings, and £18k for fees. Finally, let’s assume a 4% contingency (you decide at some stage that you want to paint an extra couple of rooms). If the project were a loft conversion and interior refurbishment work, the money leaving your bank account would be 70% more than the initial “budget”. net cost of works.
In the case of a rear extension, the difference is even starker. The builder would have quoted £100k for the construction works, but the final cost will be more like double that.
This is just a guide, all the figures can change based on the exact type of project: for example the cost of a kitchen can vary greatly, the joinery, and bathrooms will increase or reduce the divide between the contractors’ cost and the final expense. We find that the best way to determine the client’s construction budget is to start from the final sum they are comfortable spending and working backwards from there to determine the figures that builders and other consultants will understand. In case of the loft conversion, we would work our way back from the client’s budget £150,000 to the maximum we should spend on the building works is anywhere between £88k and £68k. I hope this has helped your understanding of the 'real' cost of a project, if you would like to discuss a potential project with us do get in touch, we would be happy to talk about it and we also provide an estimation service that allows us to gauge the project’s cost from the very early stages.