A Guide to Budgeting with Agile Projects

Agile project management is a very involved process. While it is designed to improve project management in numerous ways — and by most accounts does just that — it still involves large teams, a variety of tasks, and a degree of flexibility that other methods don’t account for. If you’re not familiar with the ins and outs, our comprehensive guide to agile can serve as a nice introduction.

But basically, it’s a project management process designed to foster collaboration with stakeholders, on-the-go adjustments, and rapid prototype delivery, all in the name of achieving a perfected final product.

Generally speaking, agile project management is viewed as a very effective modern method.

The emphasis on collaboration and adaptability make it the preference of many development teams and clients alike, and the end products often come closer to meeting expectations than those developed via other project processes.

As important as the process itself may be though, it’s also vital for any team beginning an agile project to develop a sound budget before getting started.

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This doesn’t just mean coming up with a single overarching amount that can be spent on the entire project, either.

While such a number can offer some vague guidance, the benefits of making a budget can go far deeper.

A sound budget can help a team to gain insight into spending, prioritize expenses, and ultimately, reach goals.

These in fact are among the benefits sometimes described to individuals forming budgets for their own personal finance decisions — but they apply quite clearly to project management as well.

By creating as thorough and detailed a budget as possible, a team can better recognize priorities, and work more effectively toward an end goal.

But how, specifically, should you budget if you’re undergoing an agile project?

The answer to this question will always depend somewhat on what any given project entails.

However, there are some more general tips that can help you to budget effectively for a project of this nature.

Begin with a Clear Understanding

When budgeting for any kind of IT-related project, it’s important to have some idea of the difficulty teams often have managing finances for this sort of work.

It’s commonly said, for instance, that a majority of IT development projects end up going over their stated budgets; some studies have indicated that one in six projects has a cost overrun of 200% (and a schedule overrun of 70%).

Clearly, those are disastrous numbers.

That doesn’t mean your project is likely to fall into the same category.

But it’s good to be aware of the tendency of IT projects to go over budget — sometimes drastically so — in order to start the process with a realistic and strategic mindset.

Map out the Full Intent of the Project

This early step may seem like common sense, but it’s still necessary to mention.

Before estimating costs or trying to come up with a comprehensive budget, it’s best to map out the full intent of the project at hand, including all of the client’s expectations and all of the project’s anticipated components.

This should be done in a visual manner that the team and stakeholders can view all together, so that the general scope of the project can be made more apparent.

Some teams working on agile development use the mind mapping method in order to create this kind of visual.

For budgeting purposes, it can serve as a sort of early blueprint for all of the different tasks and collaboration that will factor into the ultimate cost of the project.

Determine General Cost

Once you’ve mapped out the full intent and expected scope of the project, you can begin working toward a general idea of the project’s total cost — not so much an estimate as an informed range of potential costs.

We should clarify that by nature, agile projects are meant to evolve as they go.

Specific products are worked in and out of the overall project, prototypes generate feedback that is then fed back into development, and so on.

Because of this, it’s almost impossible to determine an exact budget at this stage.

One way to account for these changes is to establish your own estimated costs for each stage of the project — development, UX design, and so on — and then apply hypothetical, scaling multipliers to each phase.

The more uncertainty there is in a given phase, the higher the multiplier may be. That way you can establish a range between your loosely foretasted cost and an upper-range alternative possibility.

Establish Collaborative Progress Viewing

Any effective IT development project involves one form or another of task and feature visualization. If you’re not familiar with what we’re referring to here, reading up on Kanban (or Scrum, if you want a popular alternative) can give you an idea.

But in the simplest terms, we’re talking about “To Do,” “In Process,” and “Completed” categories beneath which different processes and features can be listed.

As those process and features move along, they’re slid from one column to the next.

The idea here, in forming the most accurate budget possible, is to make this active picture of project progress visible to stakeholders, as opposed to just team members.

This way, questions can be addressed in real time, and non-essential features or functions can be eliminated when necessary.

This accomplishes two goals. First, in all likelihood, it reduces the likelihood that unnecessary time and money will be spent; second, it gives stakeholders a window into how and where cost is being applied.

Ensure a Streamlined Final Project

This final point isn’t actually part of coming up with a budget. However, it is related.

Agile project managers should keep in mind that by going through the processes outlined above, and coming up with the most accurate possible budget for the project at hand, they’re also streamlining that project.

Other development processes (such as the waterfall method) involve more up-front budgets that have little bearing on how work is actually carried out.

As this piece has hopefully conveyed though, budgeting for an agile project can result in collaboration and processes that actually help to trim unnecessary work.

So, in addition to forming an accurate idea of the total cost of a project, this should also enable the best possible version of the end product.