The project budget -- where to start?
We have a piece of good advice to start with. We have numerous methods for assessing costs of projects. We are not here to compare or discuss them. We would like to focus on presenting crucial issues that should help you to estimate the cost of the project. We assume that you are not experienced in it and do not know whether the valuation for 25,000 you just received is a lot or a too little ... or maybe it is accurate.
We suggest starting project budget evaluation from calculation of two things:
- Profits or savings which implementation of the project/application may bring
- Losses being the result of possible delay of the implementation of the project / application
Transfer above calculation to the file, on which you can further work on and which will finally become a rationalization report of the project so called Business Case (BC)
. BC is a document which helps to convince the management of project implementation. Based on our experience, we recommend all companies to go through such analysis beforehand. They don't take up much time and give very good overview on how fast the project needs to be carried out.
Business Case itself, besides financial calculations, aims to answer the following questions:
- Do we need this particular activity?
- What is the project range?
- What options are available, which should be chosen, and which rejected?
- What is the risk of the project?
- What impact on business would a decision have of not to implement the project?
- When can new solutions be used?
If you do not know how to calculate the profit of the implemented solution, don't worry. At the beginning it usually seems impossible to estimate :) Think for a while how much you can gain or save by the project. What added value will it have and which specific need will it fulfill?
Example: Your employees are paid for working hours spent on individual tasks. Reports are prepared by managers and it takes them on average one full day. You have 5 managers, so during every month your company devotes 5 days to reporting. Then take the average payment rate of a manager and voila. You have just figured out how much you can save by implementing a tool where employees will register time devoted to each task, the application will count it and in real-time a report and the relevant statement will be prepare for you.
We can give you more examples. However, we are positive you already know what we mean and what to do next. Remember, if you get stuck, you can always contact us. Maybe our point of view will help you to proceed in the right direction and prepare your business case. It's absolutely clear to us, that such correspondence will always stay confidential.
Don't worry if the report will show that the project is not profitable.We do not applaud the approach where financial calculation or answers to questions are bent over to justify the implementation of the project. For larger investments, we advise the report to be approved by skeptical person :). If BC indicates unprofitability of the project, that is a success not a failure. Think about how much money you just saved for your company...
Negotiating the price we are willing to pay
Yes, it is a very delicate matter. We always leave the decision on whether to give the IT company the price or not. Certainly, we should not give a price, if you do not have the knowledge of how much the implementation of the Internet application may cost. If we're able to analyze cost scale necessity, the cost which we're willing to bear in the building of our application, then it's worth for us to engage the subject.
Below I will present two arguments that may convince you to consider this form of inquiry:
- Price estimation saves time. You should receive responses only from companies interested in project implementation within your given budget.
- IT company should immediately be able to choose the solution that meets your needs and your budget.
To sum up, I would like to remind you again, that the decision on whether to give estimated price or not, which you are willing to pay for the project, we leave to our customers. Knowing it or not does not influence negotiation process of our offer. You should never give a price, if you have no knowledge of how much it may actually cost.
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