Software Development Blog

How to Decide on a Sensible Budget

Here is something that a lot of software development houses will not tell you, not all software development makes sense. Low cost projects can represent bad value, just as projects costing 10’s or 100’s of thousands of pounds can be excellent value. So a key decision on if you should proceed with a bespoke development project should be based on if it represents value for money for you and your business.

Where do you start? It is not as hard as you think. Development projects are typically for increasing revenue or increasing productivity (decreasing cost). The challenge is to identify those benefits and then attach a value to them. On a simple project it might be just one benefit, for example integrating two bits of software so an employee doesn’t have to manually do anything. The obvious benefit is that the employees time is freed up, it might be a few hours a week, but you can put a value to that. There are other benefits too, what is the cost of a human error of transferring from one bit of software to another manually? What is the benefit of the system being able to easily deal with an increase in volume of no extra cost? Or the benefit of the system not going on holiday or being off work?

So if even simple projects can have many benefits, how do you go about capturing the value of them all? Capture too few would produce a low budget that it may be impossible to meet. Trying to capture too many and you can spend longer on your budget than it would actually take to do the work. Our recommendation is to write down a list of 5 – 10 benefits that you can either attach a good estimate to or a real world value to. In our experience a relatively small list can be enough to get a really good budget and the good news is that the ones you miss that would make it even more accurate are in your favour as well.

So say you have an annual benefit from 5 things that covers 80 – 90% of the total benefit. Then the only remaining thing is to decide on a payback period. If the benefit is only for a fixed period then that is your payback period. If it is ongoing, as it will be in most cases, then choose something sensible, we always suggest 2 – 3 years (remember to make sure you have the matching cost for the project, for example include any hosting or support and maintenance costs that will be incurred over the same period).

Having a budget in mind when you meet developers is vital, in fact it is one of the first things we ask for in the project discovery phase. We prefer not to proceed to a quote without one in place. What we really like to do though is help with the 5 to 10 benefits list and in some cases even how to attach the correct value to them.

We love to develop at Full Metal Software, but more importantly we want that development to be the right choice for our customers.  

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