Navigating Client Budgets

An Article for Programa by Andrew Mitchell

(Founder of The Design Coach and director at MR. MITCHELL Interiors)

"If a budget is unreasonable, and the clients are inflexible about what they hope to achieve, designers should be cautious about proceeding with the project."

Andrew Mitchell (Founder, The Design Coach)

One of the most challenging aspects of working in the design industry is managing expectations around project budgets. Whilst we’re all aware that the design outcomes on a project should be of paramount importance, it’s common for designers and architects to sidestep the sometimes-challenging conversations about costs due to lack of confidence talking about money.

All too often relationships sour midway through the project, when quotes don’t align with the clients’ hopes and expectations. In many instances, this can be avoided by taking a more proactive role in helping the clients to establish realistic expectations about likely costs at the start of the project, and then helping them to manage these expectations throughout by providing regular updates. Such services require solid processes and reliable tools for estimation.

With current cost volatility in the construction industry, clients and professionals alike are hyper-focused on budget blow-outs, causing a reluctance to have honest and open discussions about the reality of the current market costs. Proving to potential clients that you place just as much care in managing their money as you do in formulating and communicating the design intent will help win their trust and increase the likelihood of securing the business.

This article addresses why managing a budget is necessary (not optional) and provides some tips to implement into your business immediately to help provide this important service to your clients.

Image by Thought Catalog, Unsplash

Why is managing a budget important?

Even before getting started, the budget should be an integral part of the onboarding process. If a budget is unreasonable, and the clients are inflexible about what they hope to achieve, designers should be cautious about proceeding with the project.

Furthermore, a budget should be used as a guide to the extent of the scope of work, and the associated fees. Ignoring a conversation about the budget at the proposal stage risks presenting fees that are not aligned with the customers’ expectations.

One of the most important things we can do as design professionals is to listen. Listen to how our clients want to live/work in a space, feel in a space and share their space. Taking a detailed brief that understands the clients’ preferences requires high level listening skills, and will set us up to deliver successful outcomes, especially from a functional and aesthetic perspective.

However, the greatest skill lies in extracting, and interpreting things that are unsaid, including comfort levels around costs. Reading between the lines about what’s missing from the conversation can make or break a project’s success. Realistic considerations around the budget are usually missing from conversations between design professionals and their clients. Making these conversations comfortable is what makes good designers and architects so incredibly valuable.

How much a client is willing to spend should influence how we approach the design. Delivering a beautiful, functional design can vary immeasurably in cost, depending on the level a client wants us to specify at and the level of detail and customisation. Part of the design journey should include real conversations about the budget, so expectations can be managed.

Quite often, clients’ aspirations don’t align with what they’re prepared to spend. It’s not our job to make magic happen and deliver this mismatched expectation. We do have a responsibility to analyse the viability of a clients’ budget and make recommendations when we identify that they need to either spend more money, reduce the scope, or lower the level of specification (or a combination of all three).

Toorak Project by MR. MITCHELL Interiors. Photograph by Nicole England.

Why can getting a budget be so difficult?

Whether they are upfront about it or not, almost all clients care about how much the project is likely to cost. However, they’re frequently cautious about sharing their budget, due to a range of reasons, mainly linked to trust.

Firstly, the design industry isn’t renowned for handling budgets effectively, with many stories of cost blow-outs circulating throughout the community. This causes clients to either provide conservative/low-ball figures, assuming our intention is to spend more than they are comfortable doing so, or to withhold information completely, for fear of having this figure completely disregarded.

In addition, many clients have no idea how much things cost, so are reluctant to share figures for fear of sounding unrealistic or uninformed. They would much prefer to avoid the conversation all together, even though it’s a major source of concern for them.

If they haven’t worked with design professionals previously, clients don’t know the protocols and processes for discussing the budget, so will take the lead from us. If we, as the professionals, are uncomfortable or lacking in confidence when talking about project finances, chances are that the clients will follow suit.

In all cases, we have the responsibility to open a conversation about money from the early stages of the project, before any contracts are signed, or design concepts are commenced.

Image by Kelly Sikkema, Unsplash

TIPS FOR MANAGING A CLIENT BUDGET

1. Get comfortable talking about money.

• Nobody wins when conversations about money are uncomfortable! Incorporate processes that help make these conversations easier.

• Adopt tools and templates that can help make it simple to analyse and manage project budgets effectively (access proven systems, tools and templates through our Managing Project Finances online course).

• If you’re uncomfortable asking the question directly to the client, consider incorporating a Questionnaire into your onboarding process with a section on the project budget.

2. Make it a habit to get a budget at the start.

• Avoiding the conversation about money doesn’t manage expectations and will most likely cause a breakdown further down the project path.

• If the clients seem nervous talking finances, use language they might feel more comfortable with, rather than formal terms like “Project Budget”.

• Try asking “What are you hoping to spend?” or “What do you feel comfortable investing in this project?”

• Reassure the clients that you need to know this figure in order to help manage their expectations from the beginning to the end of the project.

3. Have the hard conversations upfront and avoid even harder conversations down the track.

• Assess whether the budget is viable before taking on the project.

• Be honest if you believe the budget isn’t aligned with the size of the project, or the level of specification they are hoping to achieve.

• Don’t commit to a set figure prior to starting the project, but do have open discussions about a reasonable price range, refencing past projects (see Point 5)

• Reconsider taking on the project if the client isn’t realistic about potential costs.

Image by Northfolk, Unsplash

4. Establish process to help review, assess, and manage the budget throughout the project.

• Create a streamlined Design Process that ensures that you have touchpoints to review and manage the budget throughout the project (consider our Online Courses to learn solid processes).

• Use tools to review the budget (access our Budget Forecast via our Managing Project Finances online course).

• Create templated projects through Programa to provide indicative project costs.

5. Reference past projects when asked by clients about likely budgets.

• Create a spreadsheet of past projects as a reference tool for talking about project costs. Include details such as date, location, scope overview, level of specification and project costs (break down these further into categories such as Base Construction, Joinery, FF&E for advanced cost referencing).

• Allow for contingencies in this period of rising costs.

• If you’re new to the industry talk to experienced colleagues/trades about likely construction costs for different sized projects.

• Know your limits! We’re not Quantity Surveyors, and you shouldn’t feel compelled to offer on-the-spot quotes. Explain to the clients that the figures you’re referencing are from other projects and are a guide only.

6. Use your process for managing the budget as a selling tool when meeting potential clients.

• Get confident in your abilities by adopting sound processes for managing project finances.

• Build trust by showing potential clients your process for managing the project finances.

• Create systems that update the clients regularly on any variations to the budget.

• Sell the services you can offer, beyond your design talent!

7. Get educated.

• Get educated about likely costs. Research product pricing and create references for past project costs (see point 4).

• Don’t stick your head in the sand. If you’re unsure about how to approach project finances, consider working with a coach or seeking the assistance of a more experienced mentor in the industry.

• Upskill on all areas of business through our Online Courses to access tools, templates and processes to streamline your business and make conversations about money easier and more effective.

Developing healthy habits for seeking and managing clients’ financial expectations not only fosters trust and transparency but also encourages long-term relationships and referrals. Embracing a proactive and disciplined approach to budget management empowers us to make informed decisions, prioritize key elements, and adapt to unforeseen challenges, all while staying true to the project's vision.

Additionally, maintaining a careful eye on project finances enhances our ability to foresee potential cost blow-outs and enables us to seek cost-effective solutions without necessarily compromising on the overall design vision. Ultimately, by mastering the art of talking about money comfortably, design professionals can ensure the realization of exceptional projects that meet both artistic and financial aspirations.

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