How to make a construction budget?

In the world of projects, especially construction projects, the budget is one of the fundamental bases for a correct execution. It can also be an opportunity to win a good contract in a bidding process or to make a professional impression on the client. In both cases, an attractive construction budget is necessary to generate many more contracts and to have all the structured information a buyer requires.
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Here we explain everything you need to know about construction estimates, the steps to follow to make one, what it should contain, what software to use, the advantages and some tips before making an estimate.

What is a construction budget?

This concept may seem very obvious and is something that everyone in the construction industry should know, but it is important to establish a reference. In our case, we define a construction budget as: "the total estimated cost of a construction project, and the specification of each of the elements of each cost that are part of the total estimated cost". In other words, it is the amount of money a construction company needs to complete a project, and explains the reasons for this cost.

A construction estimate can include many figures and costs, but it is also important to express all the conditions and information relevant to the payment of this project. In addition, this estimate should be signed and reflect most of the client's personal information, to demonstrate agreement with the estimate before work begins. 

construction budget

2. Steps to prepare a construction budget :

a. Analyze and study all the information about the work.

In any type of project or construction, it is necessary to have a base and previous engineering for the manufacturing and obtaining of the final product. Therefore, basic and detailed engineering are the elements that every construction company must have before thinking about launching a project or calculating a budget. In addition, there are many other requirements that are not taken into account at the beginning and that must be included in the initial budget. 

If we want to start at the beginning, we recommend that you consider the following aspects in order to start budgeting with a clear basis and foundation: 

  • The location of the site and the distance all materials must travel.
  • What type of work and dimensions are to be built?
  • What kind of requirements are needed for the position. In this case, it may be legal and technical requirements required by law.
  • What is the estimated time frame for completion of the work? 
  • Initial budget given by the client (where the client sets the maximum).

This is a simple basis for getting an idea of how to get started, but we always recommend that this short list of factors be supplemented with whatever the company deems necessary.

b. Determine all costs associated with the work. 

When you have finished studying all the relevant information about the project, it is time to start determining costs and consider each of the items you have encountered above. Normally, unit prices are used in any type of budget, i.e. the price that equals the quantity of an item. It is important to note that a unit price can be per ton, per kilogram, per gram or per unit of an item.

There are different types of costs associated with any project. However, the two main costs to be calculated are as follows

  • Direct costs: this type of costs have a great weight in the execution of the project and are the main basis for the execution of each activity related to the project.

          ▷ Examples: construction materials, labor required for the construction of the work, equipment, machinery and tools required to perform the work. 

  • Indirect costs: this type of cost is the one that is not so easy to see in the development of the work, it is generated by the activities and cannot be measured most of the time. 

          ▷ Examples: labor that does not directly affect the work (for administrative tasks, security, cleaning, etc.), office supplies or clothing required for auxiliary procedures necessary for the work, supplies required by site personnel. Basic services such as electricity, water and gas, miscellaneous expenses required monthly by the technical personnel responsible for the work. 

In other words, this is the time when no cost associated with the project can be overlooked. Moreover, this is one of the most important moments in the budget, as a small mistake here can cost the company thousands of euros. On the other hand, it is always recommended to add 10% to the total budget to deal with unforeseen unforeseen events. 

⚠️ We also recommend placing the profit the organization will receive at the end of the overall budget, as this factor is likely to change several times and should be easily found.

c. Calculate prices and budgets for materials

The total budget can only be calculated if the exact quantities of materials to be used in each section of the work and the requirements that will constitute a cost are available. In addition, it is time to look for the most advantageous suppliers and find the best possible offer. 

When we talk about materials calculation, it is possible to make a document that specifies the quantities of materials and the cost of each of these areas. This is a library of work units that can be a valuable appendix for the client, since it will allow him to readjust the budget more accurately. 

⚠️ It is important to remember that estimates are a formal agreement and any errors in their acceptance must be borne by the construction company, i.e., always double check the structure and price of the estimate.

d. Review and revise the construction budget

A construction budget is the price that the client must approve to start the construction, and it is very important that all costs are present in this document. In addition, there is no room for errors of any kind, so it is essential to make a final review and correct any errors when calculating the construction budget.

There are several items and elements in which it is very common to find errors, which could directly affect the profits of the construction company. If you do not know what they are, we will mention them below: 

  • List of materials required, quality and quantities for the entire work.
  • The benefit we will obtain from the works.
  • Measurements of the elements described in the detailed engineering. 
  • Amount of direct and indirect labour.
  • Prices discounted to the current market.
  • Terms of payment for the works and agreements on the updating of the budget.

e. Presentation of the construction budget

Are the construction budget calculations ready? If so, then it's time to prepare the final budget document with each of the requirements, and get software to submit it. There are many types of complete construction budgeting software, and many of them can be found on any computer or mobile device. Some of these applications can be word, excel, correctly, BrickControl or Procore. 

It is important that the quotation is presented in a professional manner, with all the details of the project and the client's contact information. This is the moment of truth, and the moment when the client can give an answer to initiate or reject the project. 

3. What should a construction estimate include?

There are many points that must be covered in a construction budget, so often important data may be missing or not be as detailed as required by the client or the law. In any case, it is always advisable to keep the client informed of each of the costs to generate greater confidence when starting any work or construction.

In case you are not familiar with the elements that a good construction budget should contain, here are some of them: 

Materials: There are many types of materials and qualities that can be used in a construction project. Therefore, the most relevant data on the materials to be used should be included in the budget annexes. Some of these data are : 

  • Quality
  • Quantity
  • Type or name
  • Condition of the materials (if used, the customer must sign an authorization to purchase and use them).

Organizational data: every construction estimate must include basic data about the company that developed and proposed it. In this case, some of the essential data to be included in the estimate are :

  • Name of the company
  • CIF or NIF (tax identification number)
  • Contact numbers
  • Physical address of the company
  • E-mail address

Client data: As in the organization section, only the client's basic data and any agreement expressed at the time of initiating the work will be placed here. However, we will mention the following data that you should take into account: 

  • CIF or NIF of the client (tax identification number).
  • Client's name
  • Location and condition of the property or site to be built. 
  • The agreed results that the client will receive at the end of the work.

Date and signature of the client and the company: This will validate that the client has accepted the quotation and the date it was signed. 

Deadline and final price of the work: these are the data that will make it possible to establish the final price, including VAT, and the deadline for delivery of the finished work.  

Type of billing for professional services: there are many ways to bill for work in the construction industry, so it is necessary to specify whether the work will be billed by labor, by square meters built, by surface area or by total volume of work. 

Promotions: Every customer likes to find a discount or promotion, so it is important to include offers in case they apply to the budget. 

Warranty information: All electrical or plumbing installations must have a warranty in case of installation errors. For this reason, a time period should be established and indicated in the quotation.

Means of payment: This element only indicates how the customer will pay for the services. These methods can be bank transfers, checks or cash. 

Form of payment: There are cases in which the work is somewhat extensive, so the client must advance part of the total price to acquire all the materials and labor. Therefore, we must specify how this advance payment will be used.

4.Tips for preparing a good construction budget

Doing a construction budget for the first time can be frustrating or challenging, but it can be done and without significant mistakes. Good budget presentation is essential to winning business, creating an atmosphere of professionalism and avoiding awkward situations in the future. Therefore, we recommend that you read the tips on how to prepare a good construction budget: 

  • Have a clear view of the scope of work and ask for missing information. 
  • Correctly calculate the quantity of materials from the detailed technical drawings and check the calculations. 
  • Estimate materials that may be required in case of unforeseen events or errors in the design of the work. 
  • Make a checklist of all items and make sure that no important items, such as permits or soil surveys, are missing.
  • Make sufficient profit to be able to negotiate the final price of the project without affecting the quality or quantity of materials. 
  • Avoid feeling pressured by the client and be honest at all times about the prices in the quote. 


Construction budgets can be a stressful time for any company, but it pays to have all the necessary knowledge to carry them out smoothly. If you don't have the necessary knowledge to prepare a professional estimate, we also recommend that you seek the help of a professional in this type of business to avoid headaches in the future.

It is important to remember that customers always check quotations with a magnifying glass and that there is no room for big mistakes. With this in mind, it is advisable to always check the details of quotations and all the information included in the document.

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