8 Mistakes with Software Development Budget Planning

Software Development

It can be easy to get wrapped up in design ideas when developing software. However, it is important to stop and make sure everything is planned out. Without proper estimates, you will find yourself with unhappy stakeholders, confused teams, and even perhaps a project that is on hold for years.

There are a few steps that can make or break a software development budget. If you want your project to run smoothly as a developer, these are the key steps to follow:

  • Understand the importance of the project for your business
  • Get a ballpark estimate
  • Get funding for 150% or more
  • Break the budget into phases

As soon as you have your plan ready, a clear idea about the project requirements, and an initial estimate to help you schedule your resources and budget, you’re ready to get to business. However, if you want to be able to handle unforeseeable project expenses and manage properly your allocation of resources, it is best to be aware of possible mistakes that might interfere with your estimation process and have an impact on the software development budget planning:

Tasks and Phases Aren’t Broken Down

Having a detailed plan that is broken down into several phases with multiple tasks makes sure that the project costs and the progress follow the timeline closely. This gives your teams an idea of what is expected from them, and when. With a detailed outline, teams can work better together and project managers can set clear goals for the entire team. Small goals may also allow them to feel more productive and rewarded for their work.

Accurate planning may also benefit the business as it can appease the stakeholders. By having a set of phases, stakeholders will have a good idea of when to expect certain parts of the project to be done and get to see progress happening.

project manager

Only the Ballpark Estimate Costs Are Secured

When you secure budget estimates for your software development projects, the rough estimates are usually the average cost you want to work with. You don’t want to have to worry about any additional cost. Maybe you spent a lot of time on the budget and think you’ve included everything.

When you go to secure enough funding to cover software development costs, no matter if you work with highly accurate estimates, it is recommended to always secure funding for at least 150% of what your total costs should be. Better safe than sorry!

Estimates Treated as Final Values

People have high expectations for their software. They want it to be the best and most innovative software available. Everyone is going to love it, and you barely have to market it. However, sometimes the software doesn’t do as well as you expect, and you find yourself not making the money you planned.

For this reason, you want to have backup plans besides your original estimates or at least a few ideas of what to do if the software doesn’t bring in the income you expected. This way, you won’t risk disappointing your project team or stakeholders by having to abandon your software development project.

Team is Overbooked

It is understandable that when you are planning a timeline and a budget, you expect your team to invest 100% of their time and energy to ensure the success of the entire project. Even if you have a dedicated software development team, getting 100% is highly unlikely. People get sick, need to take personal leave, or simply take breaks.

There might also be other work inside the business that takes their time, such as meetings, other projects, helping others, etc.

In total, a more conservative estimate of around 80% makes more sense. You can even go lower if you desire. As with planning the financing, it is easier to have an experienced team that has more time to work and get the project finished early than having a project team that is overworked and pushed past their limit.


Stakeholders Aren’t Well Informed

Many stakeholders aren’t super involved in the building process or know a whole lot about what the development process implies. When they are given an idea of deadlines and the budget plan, as well as product features, they may not realize that these ideas aren’t set in stone.

They also may not realize that the budget isn’t a set amount either and that it may change as the project has to make adjustments. In other words, let the stakeholders know there isn’t such a thing as a perfect budget.

Keeping the stakeholders informed allows them to understand more about the project, and perhaps be more willing to help fund additional money when something comes up. They may also be able to set more realistic priorities to keep your full-time project team and their goals on the same track.

Total Costs Aren’t Taken into Account

When you get or make an estimate, often it is only for certain parts of the project. Things like taxes aren’t usually included in a cost estimate or maintaining the software after it is developed. If you have to outstaff as well to create this software, that might cost more, and those funds need to be taken into account too.

It is important to think about every aspect of the cost when trying to create a budget so that you aren’t left with unexpected costs in the middle of development and find yourself unable to progress any further.

Sometimes, budgeting inaccurately can leave a project stalled for years, so you need to spend enough time on the budget to make sure every cost is accounted for and avoid having a project halted due to technical debt.

Total Costs

Teams Aren’t Communicating Properly

Even in the same company, different teams may handle projects differently and use different programs and techniques to move forward in their work. When using external teams, this probability increases even more.

Therefore, when developing software, it is incredibly important to make sure that your teams can work together and have a clear idea of what is expected from them.

Each team must also keep in constant contact with every other team to make sure everyone is always aware of what is going on. This prevents gaps in the process where an important part of the software wasn’t developed due to miscommunication. It also prevents multiple teams from working on the same part of the project and wasting valuable time and energy.

There is No Plan for Failure

Failures happen. The software may not work as planned, the team may have misunderstood what you or the client wanted, or you might have wanted to use a resource your team isn’t experienced in.

By getting an estimation for a budget and a timeline that incorporates any failure, you aren’t forced to push everything to the limit and have a real chance to get a viable product. This gives your team time to research everything and experiment to get your software to be the best it can be.

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