Why Staying on Budget Is More Important (and Harder) than Ever

 

Budgeting for your projects is a talent, and one that you have to constantly develop. You want to give your client an accurate number and you want to still be profitable. It's an emotional process for you AND for your client! After all, this is a big investment for them and it brings up a lot of personal baggage, even for clients who are wealthy. But today, it's SO much more important to get that budget right. And it is harder than ever. Can I hear an Amen!?! Here's a look at what the issues are and how you can work around them.

Pricing Is a Moving Target

As designers, we're definitely caught between a rock and a hard place. The manufacturers are adding price increases every week. And clients are pushing back against paying for those higher prices. There are two ways for you to deal with this moving target. First, include wording in your contract that prices may change at any time and that you will pass those increases on to the client. Or that you'll "eat" the costs up to a certain point. However you want to handle those increases is up to you - but just be sure the language is in your contract. The second thing you need to do is communicate! As soon as you receive notice of an increase, you need to let your clients know. In fact, that may spur them to order before the increase takes effect. But always tell them the truth.

Cost of Goods Is Insane

Finally we have word that the price of lumber is coming down, but prices overall are still going up. There are very very few products that have not been impacted by supply issues, so that means everything costs more. Prepare your clients for that by - again - communicating with them. At the beginning of the project, let them know that there are still delays and that their budgets may need to be higher than they think. No, that isn't a pleasant conversation. But they'll appreciate your honesty far more than they'll appreciate a surprise later on. And I know it's hard for you to plan a budget when the costs are all over the place. So this is an important time for you to be sure you're talking to your subs about what changes they see in costs of goods before you present your budget to your client. Research is KEY.

Finding Subs Isn't Easy

And then let's talk about those subs! Because there is so much interest in working on interiors and homes right now, subcontractors are super-busy, too. And that means they can raise their pricing to meet demand. This is when it pays off to have great relationships in the business. It isn't that you can make a sub drop another client for you, but you can get a more honest sense of what they will charge you AND when they will be available. Do not create your budget for a client until you've had a good conversation with every single person you'll have working for you on the project.

Clients Are More Price Conscious

Don't be surprised if you get more pushback than usual, even from luxe or super-wealthy clients. People are more price conscious than ever before, mostly because they're seeing sticker shock in grocery stores, at the gas pump, and in their own businesses. And that scary "I" word (inflation) is rearing its ugly head. They may even be anticipating an interest rate hike. That creates a lot of angst and nervousness about where and how they spend their money. So if you're a designer who doesn't like to address money talks head on, you need to learn how to do that ASAP. Frank and open conversations are the only way you're going to get the client to buy into your budget today.

To help you create a budget that's as on target as possible, download my FREE Design Budget Worksheet. It will help you hit that middle ground between a budget that works for your client and a budget that's profitable for YOU.

xoxo,

Kathleen

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