speaker-0: And that's like the first thing people say is, what's it going to cost me? Which is like a very valid question. I mean, we all want to know, okay, what, am I signing up for? What am I committing to? But it is impossible to give you an accurate estimation of cost for any, any scope of work. doesn't matter if it's a new builds or a renovation without first having a definite plan and specifically a design plan, a strategy. So. If you are dealing with a contractor or even a builder, odds are if you don't have a solidified plan all the way down to material selections, you're really just getting a good estimation. And that is exactly why people blow their renovation budgets. to Return on Design, the podcast where beauty meets strategy and interiors become assets that perform. I'm your host, Rachel Niederhofer, designer, investor. and builder of high impact spaces that deliver real results. Alongside my husband, I run both a design firm and a real estate investment company where I live at the intersection of creativity and ROI every day. Each week, I'll be unpacking what most people overlook, how strategic design decisions can grow your investment, elevate your lifestyle, and unlock the full potential of your property. You'll get real tools, proven strategies, and unfiltered conversations with industry experts who are doing it right. So if you're ready to invest with purpose and leverage design as a powerful tool, this podcast is for you. Welcome back to Return on Design. am your host, Rachel, and I'm joined today with my co-host and fantastic husband, Justin. And we are going to spend some time breaking down the truth behind why contractor bids are typically inaccurate and how to actually come up with a renovation bid that is going to help you stay on budget.

speaker-1: Yeah, today we're talking about one of the biggest misunderstandings in construction, new builds or renovations. And that's what is this going to cost me? And to be honest, you can't give a good, accurate budget of what something's going to cost until you actually understand what the design plan is going to be.

speaker-0: Yes, people come and that's like the first thing people say is, what's it going to cost me? Which is like a very valid question. I mean, we all want to know, okay, what, what am I signing up for? What am I committing to? But it is impossible to give you an accurate estimation of cost for any, any scope of work. doesn't matter if it's a new build or a renovation without first having a definite plan and specifically a design plan, a strategy. So if you're dealing with a contractor or even a builder, odds are if you don't have a solidified plan all the way down to material selections, you're really just getting a good estimation. And that is exactly why people blow their renovation budgets.

speaker-1: Yeah, and that's exactly why, like with our firm and stuff, we are just, we are set up as a design build firm. We don't separate the design from the construction and we keep them together so that the overall conception comes to fruition and we have the control over it.

speaker-0: Yes, that allows for, you know, a better allocation of the resources and any type of pivots you have to do, whether it is design or resource allocation throughout the actual execution. So let's just kind of let's break this down a little bit for our listeners. It is normal to want to understand what is something going to cost me if you were to call a contractor. and say, hey, I want to redo my kitchen. You know, what's it going to cost? They're probably going to say, OK, well, what do you want to do? And you might be unsure. You might just say, well, I know that I just want to update it like the the cabinets are old and I don't know if I want to paint it. I need some new countertops, new appliances. You kind of start going down this list of, you know, expectations maybe you have in your mind of what you want. But it doesn't really have like defined concrete clarity. Which is totally normal, by the way. You're not a designer and you're not a builder. And so you don't have to have it all figured

speaker-1: And it never starts out with the full plan of everything upfront. mean, there's always a few things that are being selected or even modified partially through the plan, but you've got to have that base plan of this is what we're wanting to do.

speaker-0: So when a contractor starts to bid you out based off of that scope of work that you're telling them, they're purely estimating. A lot of times they'll even do placeholders for what they call allowances. So they might estimate your bid based off of an allowance for counter material up to $200 a square foot as an example. really these placeholders through allowances are just estimations until you totally boil down every final selection. It is impossible to have a complete and firm quote. This is also the strategy that a lot of builders, especially on like spec homes, this is the strategy of how they sell homes pre-construction. They might show you like a concept floor plan, maybe, you know, three, options and then maybe three finish options that are within a certain price point to allow them to actually hit that budget. Why don't you just add a

speaker-1: But yeah, but when you're when you're talking like I want to renovate, I want to change it or I want to build more custom without knowing more detail, it's nearly impossible to give a great estimation of price. You know, and contractors do do a lot of this where, like you said, they they have placeholders. Well, you know, I'll allow up to, you know, five thousand dollars for countertops. But if we go over that, then, you know, hey, that changes your price. Well. But where's that number coming from? Do we know how much countertop we're actually doing? Do we know what type of material it is? Because those selections that right there changes and can significantly adjust your budget. But then also with some of it, okay, well, if we're redoing this kitchen, for example, what are we changing in here? ⁓ all new cabinetry. So are we having to modify light plans? ⁓ are we having to modify any structural walls? Are we taking something down? you know, putting something back up. Those things all again, without knowing, having any idea of a plan and a design significantly change what your budget could look like.

speaker-0: Yeah, and I want to dial that in too, because one thing designers do that, you know, other other professionals are not trained to do is we tend to pick all the finished selections before we ever start executing any type of construction. So let's say you are working with a contractor and they have somewhat of an in-house design process. Maybe they're going to help you formulate a plan for that kitchen remodel. and they're gonna be able to outsource a render so that you get a good visual of what your kitchen's gonna look like. But they probably are not going to select all the finished materials for you. That is something designers do. So what I mean by that is, let's say we've designed your kitchen and now we have to pick out, okay, what's the backsplash gonna be? What is the flooring gonna be? What is the countertop gonna be? We're already selecting these finishes for you and we have a price point. There are some variations to that. like a countertop, as an example, you really can't get the full final price until all your counters or all your cabinets are finished, as an example. But we get really fine tuned, accurate on our budget estimations because we have a design plan in place already. And we already know the finished selection materials of what we're going for. And that is how you not only get an accurate estimation, but it also helps you stay on budget so you don't get overflow. Because the reality is too, allowances, okay? It might sound really good at first to be like, ⁓ yeah, it's gonna cost, you know, $50,000. And that's gonna include an allowance of $125 a square foot for your countertops. Well, now you... You get to the point where you get to actually pick your countertop and you see with your own eyes what $125 a square foot will get you. And you really want Taj Mahal. Well, your price point now is totally off and you are setting yourself up to overrun that budget.

speaker-1: Yeah, your $125 allowance just became $275 a square foot. now what just happened to your wallet?

speaker-0: And now you've got these scope creeps. So this is just one example of how people fall into this trap of, you know, not having enough initially, enough strategy initially to be able to really understand the cost of how that works. But let's move into talking point two, because I also, I want to help the listeners understand, you know, how you actually break this down through the design process and then what we do. as a design build firm. But you've already mentioned like, you know, structural changes and how design decisions actually move the needle when it comes to budget. Let's move on to our next talking point about how the actual design and the decisions around design are what really affect your budget and what that really looks like in real life. So I have somebody that I'm helping, you know, she's an upcoming design student and working on her first renovation for a bathroom. And some of the things that we're specifically addressing is how her design layout is going to affect, of course, livability, functional, the things that designers focus on, but also cost. And this is an example of how our listeners can think through the process of making sure they're being realistic about the expectations of something like this, like a renovation and just how the process works. So you've already mentioned plumbing infrastructure, but let's.

speaker-1: Yeah, I mean, every decision that we make in the design can affect the costs. how that works is when you have to look at what the space currently kind of looks like, in this case, the bathroom, where is the plumbing currently at? And how are you wanting to modify it? Because the more modification you have, obviously the higher cost because of material and labor. If we can make small changes that can lead to you know, allow us to just set our new aesthetic back in, then we've reduced some of that labor and time to get it done.

speaker-0: Yeah. So in this case, we were looking at, you know, they wanted a freestanding tub and a full walk-in shower. And one of her questions was, does it make sense to have them on opposite sides of the room or do they need to be next to each other? And we were going through the reality of from a design perspective, it doesn't really matter, but you do have to consider that there's a lot of cost implications. Typically, yes, you're going to see your bathtub close to your shower. close to the water source because all of that matters to your point. And if you don't know that initially, if you just come in and say, want to redo my bathroom, I want to upgrade it. And you're fully getting it and moving shower locations and moving tub or changing the location of anything, really. All of that is going to impact costs that you have to have a clear scope to understand.

speaker-1: Yeah, moving it is a bigger expense than removing something. You know, I mean, look back, I think back to some of the projects we worked on where, you know, ⁓ that tub never worked. had a leaking issue. We just want to get we want to take it out. OK, plumber comes in, caps the line. It's plugged off. It's gone now. He didn't have to move anything. Yeah. But when we have to start moving things around, that's where the time and the and the budget can creep, especially if you're having to do a lot of move.

speaker-0: Yeah. And that is why, you know, so many people get frustrated halfway through their builds because their, their budget is now, you know, totally different than what they originally agreed to. It's because they haven't defined like actual design first. And yeah, we just, it's important that you do. So that leads us into our next talking point. If you know why these renovation budget. blow up. mean, we've already been talking about it, trying to give our listeners a conceptual idea of, if you know, decisions that are made around design and building or renovation. But let's break down how the process actually kind of looks like whenever they're experiencing frustration, like what is this process that maybe they're going through?

speaker-1: Yeah, a lot of times you get that rough estimation. Maybe 50,000. And then you start making your decisions on design layout afterwards. Well, as we've talked about, every decision that we make there affects that budget. Can bring it down, but it can also make it go up. And then... You know, each decision also can add and change the complexities. You know, how is that tile being laid? How is that finished material going to be there? Timelines of getting things, you know, so on and so on. As you start to add these on later, all you're doing is adding time and expense into the project. by trying to make as many decisions upfront and say, this is the layout that we want. These are the finishes and this is. you know, how we're gonna go through it, you're able to sit down and say, oh, okay, instead of, oh, 50,000, it's, you know what, for that design, that finish, now we could be looking at 60, it's 65, give or take two or three problems.

speaker-0: Yeah. And I think where people often get frustrated too is you have to pay to get that level of clarity. ⁓ It's just part of the reality of the profession. It doesn't matter if you're with a builder or a contractor, like you still need a designer. Oftentimes you need an architect and it's these pre-planning phases that take time. that are rooted in strategy before you ever start executing. I mean, we've worked on projects where clients are very eager and excited as they should be, but they're wanting to move out before they need to move out or jump the gun. And we have to be very intentional about pumping the brakes because it's a process. Design takes roughly three to four months easily. just to get the full design concept before you ever execute. And so, yeah, we don't want people to move out of their house before they need to.

speaker-1: And the bigger the project, the more planning that goes into it. sometimes that design can be a little quicker. Sometimes it's a little longer. That does depend on the complexity of what all we are looking at doing.

speaker-0: This is how we structure how we run our business in it. We do it transparently, but we have people that come to us, our clients, you know, and they want to know immediately how much is this going to cost. But even when we're giving that number initially, we are estimating, you know, building material. It's like it's like trading commodities. mean, the prices are always fluctuating. You know what lumber is today may be different than what lumber is tomorrow. So you've got to give enough grace. for people to understand, like, if I'm not going to be building the framing of a structure for four months, I'm purely estimating based off of what I know today from a price point. And four months, material prices could be different and the labor required could be different. Everything's economically supply and demand driven. And that's important to keep note of. So if people come to us and they tell us what they want to do and we're kind of... you know, scoping out our initial assessment of the property, kind of what their goals are, trying to identify, you know, what is their expectation and can we actually be of service to these people? They do ask us, how much is it going to cost? And we do our best to estimate based off of what we know, what we know labor is going to cost, what we know on that high end

speaker-1: And we a lot of those numbers we base off of things that we can actually control. You know, like I know what I know what this contractor, he charges me to lay this tile, things like that. OK, now I know what the material cost is today. If if I can go ahead and secure it all today, then my numbers, my number, that's not going to change on you because, you know, I've already got the material paid for. I'm not fluctuating with what's it going to be in six months.

speaker-0: we reiterate, we have to have a design first. That is the first part of the process, is we have to solidify that design. takes time. And so really our design build structure is you are paying us for the design fee. They give it like a totally, totally separate thing. We're going to design the space to the fullness. It doesn't necessarily even mean that we have to execute everything within that design, but it is impossible to help them make decisions on what they actually want to do without a design. And this is specifically in the construction aspect.

speaker-1: Yeah, because without the design, without knowing, hey, we are painting this much, we are building this much, we are demoing this much, we're this much flooring, know, having those accurate numbers, I can't give you an accurate price. I can also tell you that, ⁓ with the design as we've laid it out, this is the point for just a specific example, the flooring.

speaker-0: Yeah, that's step one, design first.

speaker-1: I know I'm going to go with this style flooring. I know a pretty decent range of what that material is going to be. I can give you a pretty accurate estimate of this is what your material cost is going to be and your labor cost based on this design because this is how we've laid it out.

speaker-0: Yeah. So we're getting really accurate, but yeah, you have to, you have to get through that design first. That's when you move into that step to pricing out, actually pricing it out. So we've come up with a design plan of, you know, what type of flooring we're going to use as an example. Maybe we're going to use wood floor. We've already selected our material. I'm sorry. Now we move into that actually getting scope quotes for the each.

speaker-1: the labor, the install, and then, and also I'm able to get the timelines of when's my material going to be ready? When can I have the contractor that's going to do that work for me in there because of, you know, piece A, B, C that's ahead of when that needs to be done. You know, I can start to price your timelines and we can be moving in that direction.

speaker-0: And I want to just hover for a second on this to craft a real expectation for people in your own process. When you hire somebody to come in and build something for you, design something for you, renovate, you are not going to see a whole lot of heavy action for some time. If people come in the next day and they're ripping your bathroom out, that's would be a red flag.

speaker-1: that'd be a definite red flag for me.

speaker-0: because your odds are you're going to be displaced for longer than you need. Of course, there's always factors that you can't control, but to be able to identify the amount of time that is required to develop a good plan, order materials, get all your logistical timelines in order before you really start executing is important.

speaker-1: Yeah, absolutely.

speaker-0: Like I said, a design takes a good three to four months easy and and you typically are not ordering any material until your design is

speaker-1: Yeah, you've got to have that design, plan before we start.

speaker-0: Material selections on the fast, you're looking at like four to six week lead time. now you're five, almost six months into your project and you may have not actually executed anything yet. But it doesn't mean there's not a lot of things happening. That's where all of the magic is really happening is on the initial side to get that return on.

speaker-1: Also with that the clarity in it helps to prevent surprises. Surprises, nine times out of ten equal more cost. Very rarely do you get the surprise of, that was actually easier than we thought.

speaker-0: One of the other beautiful things about structuring your process this way is that you can pivot. Like before you, you put a whole lot of money into something you can pivot. An example is let's say we are doing custom cabinet design and you know, we had a client where we we were going to do an office mudroom combo. And after we got it designed and bid out, that was an area we had to reduce costs for them to maintain their budget. Now, if we had started prematurely executing without first the design, then the estimation for that, you know, cabinet fabrication and all of the things to execute that, they wouldn't have been able to make an informed decision of, this something we want to invest in or not? So going through these motions, first design, then you get a really big

speaker-1: It's your estimations. Yeah.

speaker-0: and then you make decisions on what we're gonna actually execute. This just prepares you to really fully understand what you're getting yourself into.

speaker-1: Yeah, and I think another benefit to working through it this way, instead of just trying to come in and blow everything out and do it all at once, you know, one, you have more control over your budget, which everybody wants. Every, every person to, you know, every homeowner or trying to renovate wants control over their budget and their numbers. Yeah. But what this allows you to do is, yes, like you said, pivot. but it also gives you the ability to add in later and be set up like, ⁓ I know in the case of this office motor, we know that that's something that the homeowner wants. Okay, so let's go ahead and we can have it planned and we can set up so that in, you know, six months, a year when things have changed and, you know, I've gotten a few other things that they were planning to taken care of and they're ready to move on. It's ready to be picked right back up where it was. We've already set up a lot of the infrastructure and already set up a lot of the ability to have that done. And now when we have to come back, it's going to be a very smooth process.

speaker-0: Yeah, which I'm glad you brought that up actually, because that allows our listeners to understand that design is separate from execution. And when we're designing it, we're designing it for the now and the later. Execution is what are we going to do today and how are we going to prepare for the rest of that design later?

speaker-1: Absolutely.

speaker-0: And it really is two pieces and needs to be treated that way. And that is going to help you be happier at the end because you understand the full strategy and of course manage the cost to get that full return on design. You and I were just chatting yesterday about how, you know, your home is your investment. Yeah, that is how you should view it. Even though it's a very personal place and, you know, all the things that come along with like your personal space, it's still an investment.

speaker-1: And at the end of the day, you want it to retain the value of what you've put into it. Yeah. Nobody buys a home thinking, ⁓ in five years, I'll sell it and I'll have lost $50,000. And that's OK. No, in five years, I want it to be worth everything that I've put into it and hopefully more.

speaker-0: Yes. And this is why, you know, we're telling you all of this because a design led process is going to be fruitful when you have the right team, a designer that can work alongside the builder, the architect, your contract labor, you know, help coordinate, oversee all the logistics and of course execute because it's inevitable. You can have the best plan ever as you should. before you ever start and you're still gonna run into hiccups. It's part of construction and having the ability to be able to pivot quickly and the most cost effectively. also, this method is going to position you to do that as well.

speaker-1: Think of it, think of the design build process as having kind of a, a cart menu, so to speak. I know what each piece is going to be. Yeah. I know instead of ordering the full meal and I'm only able to really eat half of it. And now I feel like I've really overpaid or, know, was way more expensive than what I got out of it because I only got half of what I fully paid for here. get to pick, want, I can do this, I can do this and I can do this. and I know what my budget is.

speaker-0: Yes, it's just yes, it's allowing you to make informed decisions.

speaker-1: And then, oh, in the middle of it, it's like, my circumstances changed. Let's go ahead and add that. Let's add that little dessert piece on there. That's just going to be real nice.

speaker-0: That's a great analogy, actually. I'll look hard. Think of it that way. Yes. Okay, so let's close this bad boy.

speaker-1: Yeah, look, you can't accurately price your project or your renovation or new build without a scope, without a plan, without a design. You can get a rough idea and having a rough idea, OK, kind of gives you some information, but it's not going to determine your scope. It's not going to determine your materials. And those are the things that really come boil down to what affects the needle. So having that clarity. in your plan and in your design comes back to where am I going to be? And is this the full investment of what I want? So.

speaker-0: So think about that when you're hiring people, when you're choosing your team, when you're dreaming about redoing your bathroom. There's a lot of layers and depth that goes into it and we want you to succeed. So make sure you have subscribed if you're not already a subscriber because we are continuing to roll out relevant content that is going to actually produce fruit in your life. You can Connect with us on our socials at realreturnondesign. And if you want to work with us, connect with us online at audaciousdesigns.design. We will see you next time.

speaker-1: Appreciate it.