CXO

Managing your budget: Budget growth

Expanding your project's budget can be a good thing, but only when you're in control. Learn how to grow your budget while keeping your client happy--and bring in a few extra dollars while you're at it!


In the world of software development, purposely expanding your budget is virtually unheard of. Some consider a budget that grows to no longer be a budget but a working estimate. Regardless, whether it’s intentional or not, project inflation is a reality every software solution faces. By controlling the growth of your budget, you’ll not only ensure your client is happy, you may be able to bring in a few extra dollars for your company, and that’s quite a feat!

In this, the final part of the budget series, I’ll take a look at some of the tools and methods you can use to control additional expenses. I’ll also discuss when it’s appropriate and desirable to use them. If you missed the previous articles, be sure to go back and read them. Part one, “Creating your project budget: Where to begin?” discusses calculating costs and risks to define your budget. Part two, “Managing your budget: Staying the course,” identifies major sources of budgeting problem areas and explains how to overcome them.

When to grow your budget
When I refer to budget growth, I’m talking about additional expenses carrying a value-add that can be turned around to your client. If your project is forced to eat the costs of new items, that’s indicative of larger issues at hand. Refer to part two of this series for more information on keeping your budget on track.

The best time to grow your budget is when it’s still an estimate. At that point, you’ve still got some flexibility in design and (with luck) an open channel of communication with the client and/or project driver.

Once a budget is in place, timing is everything. As long as you’re far enough ahead of the juncture of impact, you should be able to propose new items. Don’t try to sell new costs once they’ve already been completed, and don’t try to upsize the budget by 25 percent when you’re a week away from launch—save it for the next release.

If you give your project driver some time before approval becomes critical, you’ll improve your chances. Depending on the type of budget growth you’re talking about, however, you should consider the following issues when you approach the subject.

Expansion reception
You can use two types of expenses to grow your budget: reactionary and proactive. The reception you get will depend on what you’re proposing. If you’re trying to expand your allotted finances in order to hit your deadline or compensate for oversights, that’s reactionary, and your client will see it as a definite negative. If you’ve discovered a unique opportunity to greatly improve the final product or have found a way to bring the project in ahead of schedule, that’s proactive, and your client should receive it in a more positive light.

It’s a fine line between these types of expenses, and sometimes a little spin and advance planning can change a minus to a plus. For example, if I fear the timeline may start to slip, I can propose bringing on a new body, and potentially bring in the project a week or two early. Depending on the client’s priorities, the extra expense may be worth it.

If you’re bringing proactive items to the table, do your homework. Before you make your proposal, know the answer to questions such as ”Will it affect the timeline?” and “Can it be rolled out in a later release?”

A good budget provides accountability, so you can meet expectations and learn from your experience for future projects. If your budget expands unexpectedly, it reflects poorly on your management abilities, and no amount of spin will earn your proposal a warm reception. Control is the key word, and the topic of our next section.

Control undesirable growth
Undesirable growth is anything that affects the original project plan. Whether it’s proactive or reactionary, if it forces you to change the project, it must be controlled.

To control undesirable growth, you must have a process. If you know how to handle changes before they happen, not only can you justify a modification to the budget, you can also reduce the impact the change has on your project and your team.

Below are some of the more common sources of impact, along with processes for dealing with them. Where appropriate, I’ve linked to other articles describing methods outside the scope of this article.
  • New functionality requests. Use a change order form. This will help you identify the benefits and costs a change will have on your project and will facilitate communication of costs and other adjustments to the project driver.
  • Escalated functionality. Refer to your original project priorities and determine whether they justify the weight added to a particular feature. If so, use a change order form as described above to outline effects on development.
  • Shortened deadline. Use a requisition form to add a new person to your project team. This type of form should outline costs, duration, and required skills of the requested resource, as well as how soon the person is needed. Additionally, a Gantt chart will help illustrate the benefits (or problems) this creates and identify areas in your timeline that can help absorb the impact.
  • Improved application performance. Create a proposal outlining benchmark tools to be used and identifying specific areas where additional coding time would improve the final product. Be wary of this type of request, however, as it will always increase development times. You may want to suggest a staged release to incorporate changes of this nature.

Unfortunately, most budget changes are the result of undesirable growth. Part of the challenge of keeping budget expansion under control is knowing when adding an item will adversely affect your project more than additional profits will compensate for. The extra money isn’t worth it if the extra work will prevent your team from starting on a project for another client. You must weigh each opportunity with the bigger picture in mind.

Encourage favorable growth
Favorable growth describes anything that doesn’t modify the original plan, just adds to it. As the project manager, you’re in a unique position to maneuver these types of add-ons so they seamlessly integrate with the project as it stands. Examples of favorable growth include rush delivery bonuses, new (modular) functionality, enhanced support options, additional documentation or user training, and improved post-production services.

Often these features are a hard up-sell, but if you can pull it off, everyone benefits. You may want to propose these growth items up front, and then try again over the course of the project once the client can see how well things are going.

Conclusion
Growing your budget can be a valuable source of otherwise untapped income. As long as you anticipate necessary budget changes and handle them professionally, you’ll succeed in keeping your client happy. In business, nothing is free, and having a process to help illustrate that point will facilitate and offer improved justification for expanding your budget.

 

My, how you've grown!
Send us an e-mail or join the discussion below to tell us how you’ve proposed expansions to your budget. Were they reactionary or proactive? Were they approved? In what areas have you been able to up-sell your team’s skills?

 

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