Stage 2: Designing, budgeting and appointing
The budget that holds, the contingency, the cashflow, and your professional team.
The examples in this stage follow the Aldertons, an invented family - who they are is on the course page.
You have a plot. Now the design starts moving, and every decision on it costs money that nobody is counting yet.
This is the stage where a self-build’s cost is actually decided. By the time you are on site the number is largely fixed; what happens on site is the working out. The decisions that set the number are made in this stage, mostly in conversations about how the house should look.
2.1 The budget that holds
A budget held as one number cannot be managed.
If your budget is “£385,000 for the build”, then when the roof comes in over you have no way of knowing whether that matters, because you do not know what the roof was supposed to be. You cannot tell whether you are ahead or behind. You cannot price a change against anything. And you cannot see trouble coming, which is the entire point of having a budget at all.
Broken into the packages you will actually buy, the same money becomes a tool. Now the roof has a number. When the tiles you chose cost more than the tiles you allowed for, you can see how much more, decide whether to accept it, and know exactly where the money has to come from.
This is called a cost plan, and it is the ordinary working document of every construction project of any size. It is not complicated. It is a list of the parts of a building with a figure against each.
Use the packages your build is actually bought in, not textbook categories. If your builder is pricing the whole job, use the headings on their quote. If you are buying trades separately, use one line per trade. The point is that when a price comes in you know which line it belongs to.
A reasonable starting set for a new build:
| Package | What is in it |
|---|---|
| Preliminaries | Site set-up, welfare, scaffolding, plant, site management, the builder’s insurances |
| Substructure and groundworks | Excavation, foundations, drainage under the slab, ground floor |
| Superstructure and external walls | Frame, external walls, upper floors, internal load-bearing structure, stairs |
| Roof | Structure, covering, insulation, rainwater goods |
| Windows and external doors | Long lead times. Order early |
| Internal walls and partitions | Studwork, blockwork, plasterboard |
| Internal finishes | Plaster, screed, decoration, second fix joinery |
| Fittings | Anything fixed that is not in your own purchases |
| Mechanical and electrical | Heating, plumbing, wiring, ventilation |
| External works and drainage | Drives, paths, external drainage, boundaries |
Preliminaries deserve a note, because they surprise people. They are the cost of having a building site at all: the fencing, the welfare unit, the scaffolding, the skips, the site manager’s time, the plant hire. They are typically ten to fifteen per cent of a construction cost, they are entirely real, and they are the first thing a household assumes is padding. They are not padding. They are also the thing that costs you most if the build runs long, because they are mostly time-related.
External works are the other classic. The drive, the paths, the boundaries, the landscaping. They come last, they get cut when money runs short, and they are almost always underestimated at the start because nobody is thinking about the garden while choosing a kitchen.
2.2 Contingency, and why it must be visible
Contingency is money held for the things nobody could reasonably have predicted. It is not slack, it is not padding, and it is not for the things you have simply not decided yet.
Two rules, and the second one matters more than the first.
Rule one: hold enough. Ten per cent of construction on a straightforward new build. Fifteen on a renovation or a conversion, because you are working on something you cannot fully see until you open it up. If you are doing something unusual, more.
Rule two: hold it visibly, as its own line.
This is the rule that gets broken, and breaking it is the reason contingencies fail. It is tempting to spread the contingency through the packages, adding ten per cent to each line so that the budget looks tidy and every number looks generous. Do not do it.
A hidden contingency gets spent without anybody deciding to spend it. The roof comes in at the padded figure, everyone says the roof is on budget, and the contingency for the roof is gone without a decision ever being made. Repeat that across ten packages and you arrive at the difficult part of the build with your contingency spent and no record of what it went on.
A visible contingency forces a decision every time it is used. The roof comes in over, somebody has to say out loud “we are taking £3,000 from contingency for the roof”, and the line goes down where everyone can see it. That is not bureaucracy; it is the only way you ever know how much you have left.
They held £17,700, being 10 per cent of their £385,000 construction figure, as its own line. Across the build they used £11,880 of it.
They finished over on construction and inside their budget, and never once had a crisis about money. That is what a visible contingency buys: not a cheaper build, a calmer one.
The tool: the Budget and Cost Plan. Set your own figure against each package, add or rename packages to match how your build is actually being bought, and put the contingency percentage at the bottom where it stays visible. The committed and spent columns are filled in as the build runs, so the sheet keeps telling you what is left.
2.3 Money out against money in
A build can be fully funded and still run out of money, because the money arrives on different dates from the bills.
This catches more self-builders than any other single thing, and it has nothing to do with being over budget. It is purely a matter of timing.
Self-build mortgages come in two shapes. Some release money in arrears: the stage is completed, a valuer inspects it, and then the money is released. Some release in advance: money is released for the next stage before it is built, usually after an assessment. Arrears is more common and is much harder to manage, because it means you fund each stage yourself first and get reimbursed afterwards.
Meanwhile your builder wants paying monthly for what they have built, and your window supplier wants a deposit twelve weeks before delivery, and neither of them cares when your lender inspects.
The fix is to put both on the same timeline before you start. List, month by month, every payment going out. Then list every arrival of money coming in, with the dates you actually expect them rather than the dates you hope for. Subtract one from the other, carry the balance forward, and look at the lowest point the balance reaches.
That lowest number is the answer. If it is negative, you have found a problem while it is still a phone call.
Their forecast, done in February before anything started, showed month seven going £17,100 negative. The windows balance of £22,400 fell due on delivery, and their stage four drawdown was released eleven days later. The gap across those eleven days was £31,400.
Found in February, it was two emails: they moved the window order two weeks and asked the lender whether the stage four inspection could happen a week earlier. Both said yes. It cost nothing.
Found in September, it would have been a bridging loan, with an arrangement fee, a valuation and a month of interest, for a problem that was never about affordability at all.
The tool: the Cashflow and Drawdown Forecast. Spread your cost plan across the months you expect to spend it. Put your funding in with real dates. Watch the lowest point, not the last one. Then update it every month once you are running, because the dates move.
2.4 Appointing your professional team
The first money you commit is usually professional fees, and it is the money you understand least.
Households will spend three weeks comparing builder quotes and sign an architect’s appointment the day it arrives, because it came from a professional and looked like a formality. It is not a formality. It is a contract, and there are four questions it must answer.
Which stages does the fee cover? Design work is organised into numbered stages, ending at handover. A proposal covering the design stages only stops when the drawings are finished. Everything after that, the tendering, the site inspections, the certifying of payments, the contract administration, is a separate fee you have not budgeted for. This is the single most common surprise in a professional appointment, and it is usually discovered at the point of going out to tender, when you have no time to do anything about it.
How is the fee calculated? A percentage of construction cost rises every time the building gets more ambitious, which means the consultant is paid more at exactly the moment your budget is under most pressure. That is not a scandal, it is just a mechanism, and you should know you are choosing it. A fixed fee holds only against the brief that was priced, and every fixed fee has a change trigger in it somewhere. An hourly rate has no ceiling at all.
Who pays if the design comes back over budget? On most appointment terms, you do. The redesign is charged as an additional service. That single clause has cost self-builders more than any other line in a professional appointment, and it is almost never read.
What is excluded? The structural engineer is often not included even when the architect arranges the appointment. Site inspections are frequently additional. Surveys, planning condition discharge and building regulations packages may or may not be in.
Level the proposals before comparing them, exactly as you will later level builder quotes. Add an allowance to each proposal for whatever it excludes and the other includes, so that both cover the same work. The apparent winner changes more often than not.
Two proposals. Larch Studio at 9 per cent of construction cost, which on £385,000 is £34,650. Bexley Architects at £34,000 fixed. Within £650 of each other, and apparently a coin toss.
Larch covered the design stages only, excluded the structural engineer, and charged site inspections hourly. Bexley covered every stage to handover, included the engineer and twelve site visits, and allowed two rounds of redesign if the cost came back over.
| Larch Studio | Bexley Architects | |
|---|---|---|
| Quoted | £34,650 | £34,000 |
| Add: structural engineer | £6,000 | included |
| Add: administration stages | £14,000 | included |
| Add: twelve site inspections | £3,600 | included |
| Levelled | £58,250 | £34,000 |
They appointed Bexley. The two proposals were never within £650 of each other; they were £24,250 apart, and the difference was entirely in what each one had quietly not included.
Ask, in writing, before you sign. Four questions cover most of it, and a written answer from a consultant becomes part of the deal:
- Which stage does your appointment finish at, and what would the remaining stages cost?
- If the construction cost rises, does your percentage apply to the higher figure?
- If the design comes back over our budget, is the redesign at your cost or ours?
- What is excluded that we will have to appoint somebody else for?
What Stage 2 leaves you with
A cost plan with your contingency standing separately. A cashflow that shows the lowest point your balance reaches and when. A professional team appointed on terms you have read. And, critically, a budget you can now measure everything against for the next eighteen months.
If you are engaging trades directly, your cost plan has more lines and each one is a real contract you will place. Add a line called “gaps between packages”, because on this route they are yours: the thing neither the bricklayer nor the roofer thought was theirs is a cost, and somebody has to own it.
If you are buying a kit, the kit is one very large line in your cost plan and its payment terms will dominate your cashflow, because kit companies take a large proportion of their price before anything arrives on site. Build the cashflow around those dates first and fit everything else around them.
Guidance, not legal advice. Every figure in this guide is invented, including all of the Aldertons' numbers, and none of it is a cost guide or a benchmark. Rates vary by region, by the shape of a building and by how it is bought. Use your own figures, from your own market, and state the basis you used.
Beyond the course
If you want a stage taught rather than read - your own paperwork on the table, me walking you through it - Commercial Consultation is one session booked for exactly that. If you want the money side run for you instead, I run it month by month through Commercial Management while you build.