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The Alternative Board Blog

Project Plan Budget - Project Management for Small Business

Dec. 31, 2012 | Posted by The Alternative Board
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Project Management for Small Business IX

There’s a saying in project management, any project can be estimated accurately…once it’s completed.

There’s nothing particularly unique about creating a small business project budget.  A lot times, a budget won’t even be created, since the project seems too small to estimate, or because a project just has to get done.  Even if you’re not creating a formal budget, it's still important to go through the budget making process. You’d make a budget to make sure that anything that you undertake will have a positive return. Therefore, it's important both to calculate the costs of your projects and also to examine the expected tangible benefit of doing the project.

 

English: Dollar/Peso sign (not a symbol of the Church of Scientology) (Photo credit: Wikipedia)

 

Because there are lots of resources available on what should go into a project budget, I’m not going to write about what goes into a budget here.  Instead, I’ll document the questions that you should ask when you're creating a project budget.

You can calculate the amount of investment that you’ll by asking yourself these questions:

  • How much will any external vendors cost? Are vendor costs fixed price, capped, or time & materials? If costs are time & materials, what controls do you have in place to prevent vendors from running over budget?
  • How much internal labor is involved for the employee team? Do you have an hourly fee, inclusive of benefits, to calculate the cost? If employees of significantly different costs are involved, do you have a different fee to use for each level?
  • How much effort will be involved for quality assurance?  What are the quality assurance costs?
  • What is the effort level/cost of training?
  • Is marketing involved? If so, what is the expense for that?
  • Once the project is delivered, what is the cost and effort of project support?

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If you want to calculate the return on your project (and you should) , here are some questions to ask:

  • Will this project result in increased revenue, reduced expenses or both?
  • Are the savings you will generate from this project real savings? For example, if an employee will spend less time on an activity as a result of the project, but they are still full time and your cost of the employee will stay the same, you’re not really saving?
  • Are the expectations for increased revenue realistic? Do these expectations consider that a new product or service takes time to catch on? Do you need to offer the product or service at a discount initially or utilize free trials to get significant adoption? Are expenses related to initial promotions factored into the calculation of additional revenue?

Once you’ve calculated the fees, and either increased revenue or reduced expenses, then you’ll know whether your small business project is a good investment. Even if you plan on going ahead with a project that isn’t cost effective, this is a good practice to follow, because there will be times when you realize that a project does not make sense to pursue. Good discipline for this kind of financial analysis will prevent you from making a mistake.

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Written by The Alternative Board

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