Common pitfalls in software development budget planning and how to avoid them.

how to plan budget for software development
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Every successful project starts with two things: a project idea and an adequate budget.

Ideas drive innovation, of course, but without a clear budget plan, your project can end up in failure.

The main purpose is to prepare a budget that will meet your expectations and will help to deliver project goals.

What things determine your project budget?

The software requirement specification (SRS) and statement of work (SOW). You should define an ultimate list of features that should be developed first in order to save your software project budget.

Very often, many features that were originally considered as necessary became not essential parts of the application and as a result, it extends the project development time.

A clear version of the project. Software development is never finished but only released. This is the nature of software development: it is constantly evolving. There will always be issues to fix, changes to make, security to update, and of course new features to add.

If you don’t set a budget first and define clear project goals at the initiation phase, a software project can drain your resources for years.

Identify hidden costs

The larger and more complex the project, the more costly to execute it in terms of time and money.

Very often, some of the “sneaky” costs, such as recruitment are overlooked at the beginning, which ultimately affects the quality of development or the project timeline.

Generally, the project budget can be divided into 5 main categories: staff, software, hardware, project kickoff, and remaining expenses. Each category includes:

  1. Staff expenses
  • Recruiting costs
  • Internal team
  • External resources (team augmentation or body leasing)

2. Hardware expenses

  • Servers
  • Computer equipment
  • Network infrastructure

3. Software expenses

  • Licenses or subscriptions
  • Communication tools

4. Project kickoff expenses

5. Other expenses

  • Quality assurance
  • Network costs
  • Travel and expenses

Compare estimations

Once you decided to delegate software development to other company don’t stick to one estimation. Project estimations differ from company to company: developers may vary in terms of background knowledge, expertise, velocity and team composition.

For example, you receive an estimation from the company that states that they need X hours and X developers to complete this project. So you can’t simply pass this estimation to another team with lower rates and expect to receive the same result (timeline and quality).

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Underestimating time for UX/UI design

Usually, programmers actively involved in the project estimation work and very often they underestimate the time needed for design and UX/UI prototyping. That’s why it’s very important for UX/UI designers and software developers to work together when estimating a software project.

Calculate project risks

When budgeting software projects, it is worth considering contingency (project risks), which can vary from 5% for a small project and up to 30% for a large and complex project.

The easiest way to calculate risks is to simply add a percentage to the total cost based on your best estimation. However, for better accuracy, you can identify known and potential risks and then estimate the contingencies for each category cost in the project.

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