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One of the best times in an
entrepreneur’s life is when
they get their idea; an idea
that changes the world, that
warms hearts and minds, and
that takes his business, and
his world, to the next
level. And one of the most
painful times is when he has
to match his idea with a
budget!
Of course, the cost factor
is important, but that cost
doesn't dictate the value of
your idea. In this article,
we'll take a look at how to
budget that will support
your idea, give it momentum
rather than hold it back, so
nothing gets in the way of
your dreams and
inspiration.
A matter of cost is often an
unloved point in the
software development
process. You’ve also
probably noticed that the
cost range for custom
software development is
extremely wide.
The easiest
way to
estimate software
development costs is
Time x Hourly Rate. For cost
estimation, you need to
multiply the development
time by an hourly rate of
all roles involved in the
project.
Do your homework
Yes, the words “dreams” and
“inspiration” are followed
by the word “homework”.
Indeed, preparation and
information are the
prerequisites for an
informed budget decision.
Preparation: comparisons and
lessons
Homework consists of two
complementary elements:
preparation and philosophy.
Preparation allows you to
make comparisons to situate
yourself.
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Ideally, you
compare apples to apples,
but sometimes there are no
two comparable apples. Keep
this in mind when comparing
"similar projects", and
avoid assuming that one
outcome guarantees another.
In addition, ask yourself
how
your business will
maintain its operations
despite the overload of an
additional project (software
or otherwise), since a
software development project
could disrupt your daily
activities. The industry
average accepted cost to
maintain software is roughly
15-20% of its original
development cost.
Successful projects rely on
strong collaboration −
which, in turn, will take
time from your staff.
Finally, learn from your
previous plans (and those of
others), and always keep
them in mind.
Philosophy: cost insurance
and value insurance
The second element to
completing your homework is
to define your
budget philosophy. There
is a misconception that the
existence of a budget
represents cost insurance
(not to mention its impact
on the certainty of
deadlines!) Consider whether
you are really looking for
cost insurance, or rather
value insurance. Value is
cultivated and refined over
time - do you want to
position your team to seek
value? The value orientation
does not mean a blank check;
it simply means that you are
willing to revisit your
priorities and fine tune
your budget as the situation
evolves.
A good software development
plan never follows the plan.
However, if you do your
homework well, you will be
able to make decisions
mid-project and make
adjustments based on new
facts, sound reasoning, and
new goals, rather than
constantly putting out
fires. |
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Check-list
Now let's identify the
elements of a software
development project:
Work, including travel
costs: This includes the
work of your company or that
of an external consultant.
Remember, you are paying for
expertise in addition to
coding: Technical advice
isn't free, and in fact is
the most important part of
your project.
Equipment, Software
Licenses: So many
options are available to you
that you need to clearly
define the goals and
understand the context. For
example, free open source
software may be suitable in
some cases, but not in
others.
Impact on Daily
Activities: Your project
will remove your staff from
your daily activities. And,
once the project is
delivered, you will need to
budget for training and
adoption costs for the new
system until it is fully
integrated into your
business.
Recurring maintenance
costs: You should budget
between 10% and 30% of the
initial project cost per
year. When putting together
your checklist, consider the
many factors that will
affect your budget for each
of the following:
· Direct and indirect costs
· Fixed and variable costs
· One-off and recurring
costs
· Desires and necessities
Building a checklist is
easy; it is difficult to
match it with realistic
estimates. |
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This is where
your preparation pays
dividends: your comparisons
will help you estimate the
initial outlay, and the
lessons will help you make
your assessment of risks and
contingencies. Finally, the
most important remains the
acceptance, by all, of the
budget and of the intrinsic
value of the project. It
will be necessary to form a
united front when it comes
to collecting quotes.
Collect quotes
Now that you have a
preliminary budget for your
software development project
- for your idea! - you can
start collecting quotes from
companies and suppliers.
You will receive a whole
range of quotes, including a
few surprises. Take a look
at these surprises: Some may
be testament to things you
forgot or underestimated,
while others are nothing
more than "upgrades" or
scams. Or, they could
indicate that these
companies or suppliers have
misunderstood your
philosophy, or that they are
basing their quotes not on
your needs, but theirs. Take
this opportunity to review
your philosophy.
Finally, remember that these
quotes are only a part of
the total budget - that's
why we've calculated the
indirect costs and the
impact of your project on
your day-to-day operations. |
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Keep dreaming!
We started this article by
talking about
your big idea.
The energy and
passion that
you felt when visiting your
idea should be bottled and
shared throughout the
project. The daily grind of
managing a budget risks
clouding your original
vision, which could distort
it.
There is a good balance
between, on the one hand,
staying within the budget −
even if it is set in stone −
and, on the other hand,
bringing your idea to life;
your preparedness and
leadership will help you
succeed on this tightrope
walk. |
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