A Helpful Guide to Building Renovation Costs in 2021

May 25, 2021

The pandemic has created chaos in many different markets, from automobiles to meat. The construction industry is currently in a battle of budgets to try to keep projects on the right track financially, but spiking materials prices are fighting them every step of the way.

As a contractor, none of this is news to you. You've probably been quoted some very big numbers for some materials and maybe even found that others weren't available at any price. Keeping costs down is crucial for getting customers to accept your bid, but it is very hard to do. Fortunately, there are some strategies you can use right now to make your renovation bids more manageable for the homeowner.

Simplify Different Scenarios

A construction project includes plenty of what-ifs. What happens if we go a little cheaper on the hardwood to free up money for crown moulding? Can we free up money to upgrade to 40-year shingles? The list of situations is endless, and exploring them with the property owner can be time-consuming and frustrating.

It doesn't have to be. Using construction estimating software with your clients will let you easily explore all the scenarios with just a few clicks. It's faster and easier than all that work with the eraser and the calculator, and you can do it with the client in real time.

Understand Regional Markets

The lumber you buy at your local supplier started out as a tree somewhere, but it has come to them from a wholesaler, and possibly some other intermediaries, before landing in their shed. Costs can easily rise through all these transactions, and that makes it beneficial to cut out as much leakage as possible.

You might actually be able to purchase some lumber direct from a nearby sawmill, but a more likely scenario could be to tap into a cheaper supply chain. A different supplier may be just a short distance away but still have a better price thanks to a different source. Don't assume that everyone in the area will have the same price!

Avoid Custom Orders

When a homeowner undertakes a renovation project, one goal is probably to add some "wow" features to the home. This typically means they have spent a lot of time online searching for that perfect flourish to add. The only problem with these materials is that they must typically be custom ordered, and that process always impacts the bottom line.

Learn product lines at nearby suppliers. Find locally owned stores that may not have online resources. Identify comparable options that will provide the same look at a lower price, then use your construction estimating software to toggle between the two prices. When you can eliminate the long lead times and higher prices that come with a custom order, you can make a big impact on the total project cost.

Carefully Manage Subcontractors

Not every contractor is a turnkey company. If you're one of those who utilize trusted subcontractors to complete specialized work, it is crucial that you manage those arrangements very carefully and efficiently.

First, schedule the project realistically. If your HVAC team will be available on the 15th, get everything out of their way and ready for them by that date. Second, keep them in the loop. The initial consultations you make with the homeowner could reveal special considerations that your subcontractors will want to know about. Make sure that everyone has looked at the project together and understands what will be involved. Everyone will have an easier time staying on track for both their schedule and their materials.

Finally, it is important to have a Plan B. With years in the business, you have probably seen a lot of subcontractors whose plans fall through for one reason or another. Have another crew standing by to cover you in case those disruptions come about.

Effective cost control measures are essential to remaining competitive as a contractor. Renovation projects are notorious for holding unexpected developments that can further inflate expenses. The more you can do to contain those costs on the front end--before subcontractors are hired and before materials are ordered--the easier it is to keep a tight rein on the bottom line even as materials costs fluctuate.

 

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