Are Your Contracting Business Projects Overspending the Budget? Here’s What Might Be Wrong

Budget overrun is a frequent problem for contractors. You bid on a project, your bid is accepted, and then it’s a race to try to keep your costs down. There are several things that can make you spend more than you expected, and some of them are easier to account for than others. By planning ahead, you can minimize the likelihood that you’ll need to adjust totals over time. Here’s a few areas to focus on.

1. Don’t Skip the Details
Like guessing how many candies are in a jar, rough estimates of your project costs are bound to be wrong. Sometimes, a quick back-of-the-napkin tally can be off by hundreds or even thousands of dollars. Instead, make sure that you’re giving enough time to investigate the costs you predict for each stage and line item for the project. Confirm that prices on materials or equipment rentals haven’t gone up. Double-check that you haven’t missed a digit and made an $8,000 item look like it costs $800. The more investment you make in the original estimate, the less likely you are to make a mistake.

2. Overestimate, Don’t Underestimate
When you’re trying to establish your contracting business (or get a leg up on the competition), it’s tempting to say that you can get it done quicker and cheaper. But if this requires you to skip sleeping or force your employees to work much longer days, it’s not a realistic goal. Whenever you can, overestimate how long you think the project will take. Give yourself a margin of 10-20% on materials, in case you need more or they’re harder to get. It’s always easier to show a client that it cost you less than to ask for more money.

3. Budget for Non-Project Business Costs
There are a lot of expenses you have to pay to run your business that do not fall within the confines of the project. If you’re not budgeting for them in your estimates, they will come out of your profit margins. You may have a variety of bills that are not related to the specific project, such as:

  • equipment maintenance and repair
  • training and certification
  • administrative expenses
  • insurance

Take the total costs you expect for these and other concerns, and divide them by the size of the project. For example, if you have a project that’s going to take about a month, you’ll divide the total by 12 and add it to your bid.

4. Plan for Bad Weather
Earthquakes. Wildfires. Landslides. Huge snow storms. California has a lot to contend with when it comes to weather. Depending on the season, you might need to budget extra time in case you lose a day due to one of these events. Check weather patterns by the month and keep close tabs on the forecast. Giving yourself a few extra days’ worth of labor costs on the project will help you come in under budget and on time.

5. Negotiate and Approve Budget Changes Early
Every now and then, even the most careful planning will fail to return the right numbers. A sudden loss in supplier could force you to find someone else at a higher price. An unpredicted weather-related disaster might set you back several weeks. As soon as these events become clear, you should act quickly to renegotiate. Waiting until the end of the project runs the risk that you’ll have to fight to collect the difference from an unwilling client. The earlier you get started, the more likely you are to get the go-ahead to continue with an adjusted budget.

Earning money with your contracting business starts with a budget that you can stick to over time. The more accurate you are from the beginning, the less you’ll lose profits because you went over by too much. To start building your career as a contractor, visit CSLS today!

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About CSLS

Contractors State License Service (CSLS) is the largest school in California devoted to the Construction professional. For over 23 years, CSLS has helped its students pass the exam to become licensed contractors in the State of California, licensing more students than any other school. From our main offices in Southern California, CSLS operates over 25 locations with full-service support and classrooms. We have grown to this extent by providing quality, professional services. In comparison, this provides 7 times the number of convenient locations than the second largest contractor school. Contractors State License Services is one of the only contractor schools in the state that is run by educators, not lawyers or people mostly interested in the bonding and insurance business. Contractors State License Services formerly operated under the oversight of the State of California's Bureau for Private Post Secondary and Vocational Education. As of January 1 2010, the new Bureau for Private Postsecondary Education (BPPE) came into existence replacing the BPPVE. CSLS now operates under the provisions of the California Private Postsecondary Education Act of 2009 (CPPEA), Article 4 Section 94874(f). Our Mission is simple; We can help you pass your California Contractors License Exam. Celebrating our 25th year, CSLS has helped over 120,000 students pass the California contractor licensing exam to become licensed contractors in the State of California. Additionally, we offer complete home study and online contractor’s license programs to help you pass your California contractors license exam. CSLS offers licensing classes for all types of contractor licenses, including General Engineering Contractor, General Building Contractor, Specialty Contractor, Insulation and Acoustical Contractor, Framing and Rough Carpentry Contractor, Cabinet, Millwork and Finish Carpentry Contractor, Concrete Contractor, Drywall Contractor, Electrical Contractor, Elevator Contractor, Landscaping Contractor, Warm-Air Heating, Ventilating and Air-Conditioning Contractor, and many others. For a complete list of contractor licenses, visit and tuned for more informative posts.