How to always be on budget.

How many times have you been faced with quoting on a job when you know the budget?  One of the most ridiculous situations to be in.

You also have a scope, probably vague, you just have to make the two fit and bingo jobs yours everyone’s happy!  Then you cost it and you find you are over budget!  The sales team tear their hair out, the client gets upset and maybe says you are ripping them off, the temptation is to reduce the margin or reduce what you think the scope really is!

Then two things that pop up, shopping list and Value engineering, oh the disappointment those two things reverberate through the client and contractor and a potential starting point for confusion, mistrust or a drain of enthusiasm because the client will still have the original scope in their head and the contractor has a disjointed set of works to sort consuming more time and money to get right before they can start making some money.

IDEA
From a contractors perspective there are 2 things you have to at this point to put into perspective to move forward.
 
1-You are not over budget, you are on budget, the client is under budget!
 
2-Is this a project that your company portfolio needs.
 
Let’s take the second one first. 
 
A company should take on different sorts of projects: Profit, Vanity, Essential and Filling a gap.  and they need a balance of these to move forward and progress as a business. 
 
The key is to know what you need and why.  Loosely: profit projects are done to hit the margins and make the company money, vanity are to get the company to a new level, prestige or develop client relationships, Essential are projects that have to be done to comply with legislation or contracts and filling the gap are projects that you take on to cover the wages and keep the company going.  Balance these and you have a healthy forward-thinking company.  Get the wrong balance and the company is on a road to ruin.
 
The first point then is to understand what project you are taking on, remembering that you know what it takes to do the project so you set the budget and then you can decide how it fits into your portfolio and adjust the budget to fit.
 
SYNOPSIS
With any costing the contractor is always right!  They hold all the cards as to how to move forward.  They are always on budget, for them…..  But how do you say no or yes to a job with confidence, clarity and accountability to the rest of the company, shareholders, sales team, employees, yourself!!
 
SOLUTION
Well firstly, don’t ask for the budget, it shouldn’t matter at this stage.
 
Secondly understand your portfolio and what you need.  There are plenty of techniques to balance a portfolio and rate a project to fit.  Once implemented they give transparency and accountability and stop wasting yours and clients time and more about how in my blogs or if you want to know more just ask!
 
Then you will always be on budget!

I'd love to hear your views, experiences and comments and if you're interested in finding out more, drop me a line.

Thanks for reading
​Simon