A budget establishes a financial base for every project. It’s necessary to keep a project grounded to prevent the business’ time and resources from being exhausted. Without a budget, it could be easy to invest too much to complete the task at hand, to the detriment of the overall project. One project could become a great loss to your business if you extend yourself too far.
A lack of a project budget could make it more difficult to set directions and limits during the work process. This involves considering many factors involved in the project. That is why there are steps to follow when calculating your budget. Not only are you setting a pathway for your team, but you’re working to ultimately ensure that you make a satisfying profit for your business to continue its path to success.
These steps will guide project managers to calculate their necessary budget so they don’t turn a successful job into an unprofitable one.
Step 1: Plan
As soon as a brief of your client’s requested product is placed in your hands, you can start considering what your project budget will be. This is when you start shaping ideas for how to meet their needs. The brainstorming process is not quite the time to restrain your ideas with practical concerns. However, it is important to have the numbers in the back of your mind as you start considering your choices and the general outline that will guide your project along.
When planning your project, you need to look ahead of what it will entail and how much you are willing to spend. You take on a predictive role by imagining the best possible result and what must be done to lead to this.
Factors to Consider When Planning Your Project Budget:
- How much time is available for you to complete this project (what is the deadline)?
- How much time will this project take?
- Who do you need to include on your team?
- What will be the general labor costs, according to your team size and the time requirements of the project?
- What programs or resources are needed for this project? Will these cost your business money to use?
- What projects need to be postponed or set aside? What money is being lost from this?
Composing a list that answers these questions and adds a numerical value beside them will help you begin to hone in on a general budget to ensure you are not ultimately losing money on this endeavor.
Step 2: Rally Your Team
As you start to see the sum of the above mentioned possible costs, you can determine how much labor you can afford to invest in the project. If this is a larger company project, you may need all hands on deck. Otherwise, it’s best to choose workers who will be efficient and can handle the extra workload of the project. You may need employees with specialized skills to take on certain tasks.
When choosing your team, you can predict how much their labor will cost your business. This could be one of the most expensive components in your budget for this project. If your employees are spending more time on this project and getting less done on other tasks, you could be losing money from other clients. This is why you need to choose how you prioritize their timing and how much of their labor you want to be invested in this task. Find the general sum that you’re willing to spend on labor, and then you can proceed to decide other budget costs.
Step 3: Determine the Costs of Services and Other Necessary Materials
Once your major labor costs have been shaped, you can look at other vital expenses in this project to determine your whole budget. Do you have everything you need on-site to meet your clients’ requests? Or do you need to outsource to other providers? This is where you must decide if other services will be necessary to complete the project and how much they will cost.
To save these costs, you can look outside of the box and consider how you could manage to deliver these services without hiring another business. You could invest in long-term resources or training for team members so they can provide specialized in-house services when needed.
Step 4: Leave Room for Emergencies
It may seem that the sum of your investments involved in this project is complete once your team, the services and resources are decided. However, in general, it’s important to remember that anything could happen. Keeping this in mind while determining your project budget will be valuable in the long run. Should anything go wrong, it will help to have extra funds put aside so you have already accounted for their costs in your budget. These emergencies could include a rushed deadline where services need to be sped up or a glitch in the development process that may require a restart. New additions to the client brief could alter your process as well.
It’s always best to be safe than sorry. Include an emergency fund of about 10% of the budget sum. That way, you will know the ultimate cost of the project in the worst-case scenario. There will be no surprise costs that need to be allotted to the project’s budget once it’s been established.
Step 5: Keep Track
As your project starts moving forward, keep track of every expense. This includes keeping all receipts from related purchases or orders or monitoring the labor hours invested by your team members. It helps to invest in time tracking software, like actiTIME, to accomplish this. Time tracking will help ensure that everyone is committing the required amount of work hours into the project task they’ve been assigned, and no more or less. That way, you will know that the allotted budget is being met when it comes to labor costs.
Time-tracking will also help with ensuring that every deadline is met. It offers a roadmap for your project to guide it along. That way, you will be able to submit the finalized project to your client on time, with no extra costs or need to discount their billing for delays.
Remain Disciplined, Save Money, Earn Profits
Your project budget will ultimately help you and your team remain disciplined as you progress through your project and its various required materials and hours of labor. Limiting the amount to commit to the project will ensure that your business is not negatively impacted by taking it on. Instead, you’ll have spent a restricted amount of money so that your profits, in the end, are much higher.
For long-term benefits, always decide your project budget early on, and stick to it. Use tools like tracking software so you can hold others accountable for their work hours and make sure you remain on schedule.