Budget in an agile project.

Budget in agile projects
Budget in agile projects

When doing an agile project, you are doing a project with great many uncertainties. How do one create a budget for a task that has not been specified yet? Whether you say “Agile!” or not, your stakeholders will need some kind of indication on whether their expectations can be meet within budget, or whether they should look at which part of the project that can be excluded – Or maybe the project should be shot down?

Know your budget

First step is to figure out how much money and resources the project owner is ready to spend on the project. Next step is to do an extremely high-level estimation to see if it is possible to meet the budget and the expectation for the product. If you want to do a simple website and are ready to spent 5,000 $ then you are probably going to succeed. If you want to build a complete virtual 3D avatar chat program for the same amount, then you are probably facing a bit of a challenge.

In addition, you need to know what deviation is acceptable for you handle, without consulting you project owner or steering committee. E.g., you as a project manager can approve a deviation of up to +10% of the full budget.

Estimate, and then re-estimate, and then re-estimate…

Next you need to do estimates for the tasks at hand – If you are in the idea phase of the project, then you are probably planning to do a couple of workshops or other activities that will bring you closer to the next phase of your project.

A role of thumb is that the expenses of a it-development project will split as follows on a 6 phased project (Please note – THIS IS ONLY A RULE OF THUMB, IT ALL DEPENDS ON YOUR PROJECT, and I strongly advise you to check passed experiences in the field of Development that you are project managing in).

  • 10 % for the Idea phase.
  • 20 % for the analysis phase.
  • 40 % for the implementation phase.
  • 20 % for the test phase.
  • 10 % for the release phase.

These percentages will also help you to predict if your project is going to meet budget or not. Again if you have 5,000 $ for your project, and you estimate to spent 1,500 $ on your idea phase, then you probably will need some more funding for your project – Or scale down the scope.

For each phase, you should do a complete estimate of all the tasks before you start the phase (and the tasks). Therefore, before you start developing you need to breakdown and estimate all requirements for the new product.

Monitoring your budgets

Once your estimates are in place, and the project is on the way, you need to monitor your estimates versus your actual expenses. If you see that most task has been underestimated and you spent an average of + 20 % on all tasks, then you will need to do adjustments to your estimates and budget asap, and make sure to report this change to your steering committee, so that they can decide how to handle these new numbers.