Like any type of business, construction companies without a proper budget will likely struggle to keep expenses in check and make accurate profit projections. Whether you own a construction company, are looking to start one, or are just curious about the topic, keep reading to learn about the general steps that can help create a strong budget.
To create a budget, construction companies can use their business plan as a helpful starting point, according to Construction Business Owner‘s Ron Roberts. However, to be truly useful, the business plan should represent the realities of the market your business serves. For example, businesses based in different areas will have different types of jobs available, different labor and material costs, and variations in the number of money clients are willing to pay.
In turn, a realistic budget will reflect the circumstances of the construction company’s market; for instance, it won’t make sense to project revenue from building offices if a market has no demand for them.
Costs and Revenue
There are many factors to keep in mind when you’re nailing down the specifics of your budget. On the expense side, you’ll want to estimate both direct and indirect costs. Direct costs come from construction projects your business takes on. Indirect costs come from areas like paying for administrative employees and office space. To learn more about the direct and indirect costs that construction companies deal with, check out this helpful Chron.com article.
When estimating your revenue, it can be helpful to be as conservative as possible. For example, if your sales and marketing people provide extremely optimistic estimates—and they likely will—take those estimates with a grain of salt. The same goes for if your construction personnel give glowing predictions about their performance.
Keep in mind that no budget is ever 100% accurate or 100% complete. Evaluate your budget at regular intervals and adjust it accordingly.
If you’re looking for more tips on the business world, look no further than the rest of the content on Impact Commercial Capital’s blog!