FEATURED ON THIS EPISODE:

JOIN THE WAIT LIST FOR MY REVAMPED COURSE, THE DESIGNER’S EDGE

WHAT YOU WILL LEARN IN THIS EPISODE:

WHY ALLOWANCES ARE OFTEN UNDERESTIMATED IN CONTRACTOR BIDS

HOW TO CONFIDENTLY NAGIVATE AND FLAG UNREALISTIC ALLOWANCES BEFORE THEY BECOME BUDGET

HOW TO INSERT YOURSELF INTO THE BUDGET CONVERSATION EARLY

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Allowances – those mysterious placeholders in contractor bids that seem like they might have it covered, until they don’t. This is a battle you truly can’t afford to lose because it affects everything:

Your hours

Your clients trust

And your perceived value on the project

What are allowances?

It’s a placeholder number. That’s it. It’s inserted when a contractor doesn’t yet know the exact material or fixture that will be used. It literally is as simple as that. 

Contractors need it to submit a bid. So they plug in a figure-tile allowance, a lighting allowance, an appliance allowance, and honestly, it seems fair on paper. 

Most, if not all, clients assume something along the lines of, wel,l if the contractor does million dollar homes all day long, then ofcourse, the allowances will reflect that level of quality, right? That, in theory, makes sense. But it’s an assumption. And it’s almost never true. 

That contractor doesn’t know if it’s going to be a $10,000 all bells and whistles tub or a basic soaking tub in the primary bath. 

So in order to keep their bids competitive, contractors use leveling formulas. It’s standard figure across every job. This isn’t personal or sneaky, it’s just the way the industry works, and it’s really hard to change. 

Unless every contractor agreed to use more realistic, customized numbers, the one who does runs the risk of looking overpriced even if they’re just being honest. 

Even though this is an industry standard where contractors do go wrong, and I mean way wrong, but they don’t explain this concept to clients well, or if at all. They don’t tell them that the number is a conservative placeholder and their actual selections may differ and will affect their real cost. 

The client is also again thinking, well, if it’s in the estimate, then it must be covered. And I’ve heard clients say this. And that comment always comes after they’ve picked out their dream fixtures, and they feel blindsided when the plumbing fixtures come in at $18,000 over budget. 

But here’s the good news: this is where we step in. We translate, we educate, and we protect. You, as the designer, actually understand why the allowances are low and you are the only one willing to say, here’s how the system works and here’s how we avoid budget disaster or disappointments. 

This is what will elevate you. This is where the client starts to realize that you’re not just picking pretty tiles and beautiful fixtures. You’re actually managing reality. You’re the one who brings context to those numbers. You keep everyone working as a team, and when you explain this calmly and clearly, you not only preserve trust, you earn it. Allowances not only impact your trust but also your time and your profit. 

What happens next? 

The moment that the client starts selecting actual fixtures and finishes, the moment real price tags come into play, that’s when the stress creeps in. The tile they love? It’s triple the allowance. That plumbing fixture total is absolutely shocking. And they’re suddenly calling and texting you, wondering how they are so far over budget. 

Hopefully, you’ve flagged the low allowances. You’ve prepped them for this moment. But sometimes that doesn’t happen, and you will find yourself in full on clean up mode. 

Sometimes the client is just not comfortable sharing their budget in the beginning. It is a very vulnerable thing to do and a very private piece of information. 

You also have to see that the lack of transparency there can also be a red flag. When client’s don’t share the budget or only share it in vague terms, it’s nearly impossible to align their wishlists with the reality of the estimate. This is where you, the designer, have to communicate the value of seeing that full estimate line by line. Not because you’re trying to control the money, or blow through it but because you’re trying to protect the investment. 

What if you didn’t know to flag the low item?

If that is you, you are not alone. Most design schools, if you attended one, don’t teach this granular detail. If you haven’t worked for a firm or had a mentor walk you through this process, you wouldn’t know what to look for. But now you do!

So the next time that estimate lands in your inbox, you’ll know exactly what to scan for and when to speak up. 

Because here’s the thing, if no one takes the lead budget alignment, checking all the allowances, making sure it will in fact be close enough to their wishlist, guess who will usually step in? The contractor. Makes sense. It’s his budget; he developed it. 

If you’re working with a great contractor and have built a solid team dynamic, that’s not necessarily a bad thing, but it’s also a missed opportunity for you to lead. 

And if there isn’t a solid team dynamic, then, well, you’re under the bus. Because selections go sideways and budgets are off, everyone’s looking for someone to blame. If you weren’t looped in or you didn’t assert your role early, it is easy as hell to become the scapegoat. Even though truly none of it was your responsibility. 

Here’s the thing: when it does go sideways, none of this extra effort or cleanup work you’ll have to do was built into your flat fee or your hourly estimate which means your profit is shrinking, your stress is absolutely growing and your client’s doubt in hiring you is starting to creep in and that is the triple threat. 

This is all preventable if you take the lead early

You review those allowance numbers with confidence, and you assert yourself in the budget conversation before selections begin. 

This is not overstepping. You are showing up as the expert they hired. When you do that project runs smoother. Your value is crystal clear and you protect your hours and your reputation in the process. 

How can you start implementing this on your next project, even without ever having dissected a budget before or looked at allowance numbers? 

First, listen to Ep236: “What Will This Cost?” The Budget Talk Designers Dread

You must have budget conversations before you even get the job. You’ll also learn how to start doing the homework to build numbers before they are actual. 

Then there’s the next layer where you’ve got the job. Once you’ve had more client conversations and seen their Pinterest boards, seen what they’re excited about, now you go back to your data and start narrowing it down. 

You can confidently flag allowances that seem off. Not just the low ones. Sometimes an allowance looks surprisingly high.  And when that happens, it gives breathing rooms and can allow for other extra things in the budget. When the client sees that, they feel reassured. That’s ultimately the key. We’re not just pointing out pitfalls, we’re helping them see the full picture. 

Your client may ask you to take over selections even when some of them are normally the contractors role. 

This is normal, and you can do this professionally and communicate clearly to keep everyone in the loop. There may be some negotiating that comes along with this, but that’s ok. As long as you are prepared for it. Go in with transparency and confidence and always frame it around what’s best for the client and the project. And nver throw the contractor under the bus. It’s not about cutting anyone out, it’s about building the best team for the job. 

There will be moments where allowance create tension and pushback

But there are just as many moments, if not more, where they create that opportunity. Because when you’re the one identifying the gaps and offering thoughtful solutions, your client sees you differently. 

Ultimately these conversations about allowances, budgets, gaps, and prep work isn’t just  about catching problems, it’s about showing your value in a way that no one else on the team can. You are not there just to choose finishes. You are there to align dollars with decisions, to guide your client through one of the most overwhelming investments they will ever make – and make it feel doable, and God forbid, enjoyable.