How to Create a Budget for a Custom Software Project: A Step-by-Step Guide

Is there anyone who likes budgeting? For most people, it’s like trying to herd cats while riding a unicycle—blindfolded. As custom software developers, though, we know just how critical it is to create a budget for software projects. Not only does it help keep costs under control, but it also provides transparency and accountability throughout the project’s lifecycle. Lastly, it fosters better communication between stakeholders, allowing everyone to align project activities with financial objectives and priorities.

Why does nearly everyone dread budgeting so much? Experts say it boils down to five gripes:

1. It takes too long.

2. There are too many iterations, so it rapidly becomes outdated.

3. An overwhelming number of people are involved.

4. There’s too much “game-playing”.

5. It doesn’t help run the business.

In truth, budgets have been around for over a century, and most businesses wouldn’t dream of giving them up. However, creating a precise software project budget is, to put it mildly, challenging—especially considering the pace at which software changes. It's always best, then, to have a developer provide a ballpark estimate. Because while an experienced development company can approximate your cost, you’ll likely need to re-evaluate the budget frequently and often.

What is Typically Included in a Software Project Budget?

Learning to love, or at least appreciate, budgeting is a key ingredient for successful project execution. It helps the entire team identify and understand significant weaknesses, speeds decision-making, and keeps all stakeholders focused on a successful outcome.

The budget for an agile project must consider the combined costs of all activities, tasks, and milestones the project must fulfill throughout its many changes. And while you don’t want to make frequent changes just because you can, it’s nice to know you have the luxury of pivoting when the situation calls for it.

Agile development is done in sprints. It’s no surprise, then, that agile budgets are designed to align with each sprint.

A standard agile budget includes:

• Ballpark estimations based on project requirements. These rough approximations are based on information the client or product owner provides about the software, its intended users, and what issues it’s meant to solve.
• Personnel costs and third-party services, including internal and external engineers, testers, managers, and support staff.
• Hardware and infrastructure required for development, testing, and deployment.
• Testing and quality assurance, including external testing services.
• A buffer amount or contingency for unexpected changes, costs, and events.
• Maintenance and support such as bug fixes, software updates, and ongoing tech support.

What Do I Need to Consider When Budgeting for Custom Software Development?

By now, you should feel a little better about diving into the budget pool. Once you’re clear on your requirements, have planned for potential risks, and made a careful estimation, creating a budget that supports your project is much easier. As you do, take into account these key factors.

1. Project scope. Identify and document your project’s goals, deliverables, features, functions, tasks, deadlines, and costs. The more detailed and precise the plan, the more accurate your costs will be, and the more likely you’ll avoid “scope creep” that often impacts budgets and timelines.

2. Resource allocation. Will you use in-house resources and external talent? Allow for associated costs such as salaries, benefits, and outsourcing fees.

3. Development approach. Different methodologies come with different cost implications. Zibtek’s practical agile approach improves overall project efficiency, making it a cost-effective method.

4. Technical complexity. Projects requiring more specialized expertise, integration with existing systems, or extensive testing typically come with higher costs.

5. Third-party services. Factor in cloud hosting, payment gateways, and other integrated third-party services, as well as any licensing fees or subscription costs.

6. Maintenance and support. Continuous maintenance and support include everything from updates and upgrades to integration and performance optimization. These ongoing activities are critical to your software’s longevity and usability.

7. Outsource partner. If you choose to work with a third-party software development company, carefully evaluate their pricing models and weigh whether their expertise, reputation, and cost align with your project’s requirements and budgetary considerations.

What Steps Do I Need to Take to Create a Custom Software Budget?

We won’t go so far as to say creating a custom software budget can be fun, but it doesn’t have to be torturous, either. As you navigate the twists and turns of financial constraints, you’ll soon learn to uncover the most efficient and cost-effective solutions. And along the way, you’ll learn more about your project intricacies, weigh multiple costs and benefits, and ultimately forge a path that meets your needs.

Ready to do a little work? These four simple steps will have you creating a custom software budget with confidence and clarity.

Step 1: Define Tasks and Milestones

Development, testing, and maintenance are agile’s major phases. Each should be broken down into smaller stages representing each feature to be completed during development. Once you know the project’s scope, you need to evaluate which resources you need, including personnel, technologies, and infrastructure.

Step 2: Request Software Budget Estimates

Each item now needs a realistic estimation. The fastest and most dependable way to get this information is to consult with qualified software developers. Their extensive experience tends to surpass that of internal teams, as they’ve worked with various industries and in multiple languages. In most cases, they can draw on this expertise to deliver valuable insight into the time, effort, and cost involved, ensuring your budget’s based on accurate and up-to-date information.

Step 3: Compare Custom Software Development Estimates

Scope alignment, cost breakdown, delivery timeline, and resource allocation are a few of the factors that can help you make an informed decision. You also want to look at case studies and references and ask about additional services and support like post-development maintenance.

Step 4: Finalize Your Budget

Having done your research, you know your priorities and how those priorities impact the cost of your software project. You can now confidently make informed decisions and allocate the necessary funds to each aspect of your project.

How Much Does Custom Software Development Cost?

Factors affecting custom software development costs range from project complexity and scope, to team size and skillsets. The tech stack you choose can also affect the bottom line, as can software and tools licensing fees. Quality assurance is also a crucial aspect of software development and can impact costs, particularly on projects calling for more resources and time.

Custom software maintenance costs vary depending on the system’s complexity, update and bug fix frequency, and the level of support required from the development team.

No matter your project’s scope, Zibtek works with you to establish a responsible budget that incorporates a comprehensive plan. Before you know it, you’ll be herding cats like a seasoned feline whisperer, guiding your project toward a successful—and cost-effective—launch. To learn more, reach out to us today.