Managing budgets is one of the toughest parts of project management. A lot is riding on the project budget, not least of all the happiness of your client and your bottom line. Keeping both those considerations in mind, while successfully managing a project budget, means staying on top of many moving parts.
We sat down with three Shopify Partners to discuss all those moving parts as well as what they’ve learned about managing project budgets. Watch what they had to say below.
In this article, we’ll look at the great advice these partners shared and how you can keep track of your budget throughout a project’s process, from the sales stage all the way to completion. Use this article as a guide to keeping your budget healthy and your clients happy throughout a project.
The importance of a budget in project management
The budget is a central component of successful project management, not only because it’s all about money—budgets also help keep the rest of the project in line. They determine the time and effort that will be spent on a project, and ensure all stakeholders understand the scope of the work ahead.
There are nightmare scenarios associated with poor budget management or incorrect estimations—losing bids, being underpaid, and seriously unhappy clients among them. But when done right, the budget is a tool to build strong, trusting relationships with your clients.
"Perhaps the most important role of the budget is in its inseparable relationship to the project scope."
Perhaps the most important role of the budget is in its inseparable relationship to the project scope. As the scope of a project changes, so too does its budget, meaning careful budget management is one of your strongest defenses against scope creep. Below, we’ll go into detail on how to use the budget to keep a project on track.
Throughout the project management process, keeping stakeholders in the loop on any budget developments avoids unpleasant surprises at the end of the project, and ensures everyone understands the project process.
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How to prepare a budget in project management
One thing about budget management is certain: the earlier you start, the better. Through the sales and estimating phases of a project, you should be nurturing transparent and honest conversations with your client about money.
1. Understand the scope of the project
You should start thinking about estimates as soon as you start speaking with a potential client, says Mike Samimi, VP of Delivery at Bounteous Canada.
“When we’re talking to a new prospect, what we need to make sure is that the right people are involved in that conversation during the sales process,” Mike says. “We need to make sure we have people who understand Shopify as a platform really well at a functional level, and who understand the technical aspects of Shopify, to be able to provide what the client might need and for us to assess what the budget might be for that project.”
By involving people in your sales conversation who are deeply familiar with the platform, your work, and the tools you use, you’ll have a clearer understanding earlier of what a project will entail. Doing so will set you up to make more accurate predictions on what the full scale of a project will be, and therefore make a better estimate on your budget.
Identify your client’s constraints
If your client knows what goal they want to accomplish with their project, you can help them identify their biggest constraints. Typically, these will be time and budget. Identifying the impact of these constraints early will help you build a budget that is realistic.
However, it can be extra challenging to define the scope of a project when your clients themselves aren’t sure what that scope will entail. For those clients less familiar with what they’re looking for—or those who are unfamiliar with the impact of the constraints they’re working with—you can help guide them forward. If your client is unclear on what they want, it helps to ask them for examples.
“I always ask for sites or other inspiration that these clients have, and then I can see where their minds are at,” says Nicholas Wiktorczyk, co-founder and CEO of Spently. “Then I can tell them those projects are within this size of budget, so if you want something comparable, you’ll need to have a budget of X.”
"Help them identify their core business needs, and the minimum viable product that will fill that need and align better with their budget."
Seeking examples of what your clients want will help you identify their needs and better manage their expectations. If your client didn’t realize the scope of what they’re asking for, this provides a great opportunity to lean on your expertise and provide pragmatic, honest advice to them. Help them identify their core business needs, and the minimum viable product (sometimes called an MVP) that will fill that need and align better with their budget.
You might also like: 3 Organizational Strategies to Prevent Scope Creep.
2. Build your estimate
Once you’ve worked with your client to identify the scope of their project, it’s time to start building your estimate.
Project estimates can be as simple or as complex as your business requires. Typically though, no matter how complicated, an estimate will contain at least the following information:
- Description: A detailed breakdown of each task to be done to complete the project. This can also be divided by project phases.
- Time: An estimate of how many hours it will take to complete each task or phase.
- Rate: The billing rate of the people working on each task or project phase.
- Additional costs: Additional charges (for example, photography), including markup.
- Estimated total: The final total estimate of the project.
While the above is a solid breakdown of what clients will expect to see in an estimate, it doesn’t help you determine what to charge—nor will it help you if down the line, the scope of the project ends up larger than expected.
No estimate is perfect—in fact, there’s a good chance you’ll have to revisit your estimate during a project. Luckily, there are steps you can take to mitigate the risks associated with shifting scopes and budgets.
Use historical evidence
If you’ve worked on projects before, you likely have older budgets you can reference to inform your current estimate. Look at what you quoted as well as any lessons learned from previous estimates, so that you don’t repeat past mistakes.
Give a holistic estimate
Trudy MacNabb, co-founder of Up at Five, highlights the importance of looking at all the work associated with a project.
“One thing to consider when creating your budget is the non-technical side of it,” she says. “This includes emails, in-person meetings, phone calls, and generally managing the client. You want to build those hours into your budget as well.”
"Don’t underestimate the time it takes to manage a project effectively. Scope creep happens in all areas of a project, not just from a technical perspective."
Don’t underestimate the time it takes to manage a project effectively. Scope creep happens in all areas of a project, not just from a technical perspective. Protect yourself by building a buffer for all the time that’s spent managing the people and tasks associated with the project.
Get the information you need
Considering a holistic view of your project will also help you identify early on what you need from your clients to do the job well. Ask yourself what information you require. This could include:
- Brand guidelines
- Emergency contacts
- Passwords and/or access
Having this information in hand before you start work helps mitigate the risk of delaying the project down the road as you wait for your client to get back to you.
Budget for surprises
Finally, remember that nothing is certain. Add wiggle room to your budget for those unpleasant discoveries and unfortunate circumstances that come up in any project. This protects both you and the client, and allows you to rest easy knowing that you’ve allocated resources to deal with anything unexpected.
You might also like: A Web Designer’s Guide to Pricing Strategies.
3. Manage the budget
Once your estimate is signed, it becomes your project budget. You now have the responsibility of ensuring that your team and your clients are kept updated on its progress. Why? Because clear, open communication about the project budget is the key to keeping you and your clients aligned. Here are a few high-level best practices on managing budgets throughout a project.
Host regular check ins
Budget (and therefore, scope) conversations shouldn’t only come when there’s bad news to share—instead, regular budget check ins should be something your clients can rely on.
“We have constant check ins with our clients,” says Nicholas of Spently. “We send them screenshots, we do screen shares, we’re constantly asking for feedback and making them part of the process. This way we don’t get to the end of the project and show them a site that is not what they wanted or what they expected. Because they’ve been part of the process the whole way.”
Mike of Bounteous Canada notes that in addition to regular check ins, it’s important to communicate clearly, even when it’s less than positive.
“[Communication] comes with good news and bad news, and we need to share that as soon as possible,” Mike says. “We need to be the experts that we are in ecommerce, and pragmatic with our clients. Communication and pragmatic problem solving together as one team will really help us manage that project and scope.”
In any project, the unexpected will occur. With open and honest communication, you can work with your client to bring together your areas of expertise in order to tackle obstacles.
4. Adjust the project budget as necessary
Sometimes, despite your best efforts, changes to the budget and scope of a project are unavoidable. Knowing how to effectively adjust a budget will help you navigate these problems when they arise. Below are some tips for handling different situations that impact project scope and your budget.
When resources change
Resources often change throughout a project. This means reexamining the project scope or timeline. There are steps you can take throughout a project to avoid this happening down the line.
One is to review the resources that the project is consuming on a weekly cadence. How many people are working on it? Is everyone’s time being used wisely? These weekly check ins will help you understand how your resources are being allocated.
This is key, because ensuring that your team’s resources are being consumed wisely and efficiently can help make further resources available down the line, should the scope of the project change. Reviewing and reforecasting as necessary means being prepared for inevitable shifts in priorities.
When the client requests a new feature
Clients can, and will, request new features in the middle of a project. Trudy from Up at Five suggests looking at how the requested change affects all areas of the project, to better communicate the impact of it to clients.
“When a new feature comes in that the client requests, we cost out the number of sprints it’ll take,” she explains. “That will allow the client to also know the timeline and budget it will take to complete that feature.”
Since you identified your client’s constraints at the start, and have been transparent with them throughout the project, addressing these change orders will be a smoother process.
When your estimate was too high
At the end of a project, it’s always wise to reflect back on your estimate versus the actual outcome. Not only will it help you identify pitfalls and mistakes to make estimating your next project easier, but it will also help you understand if you’re estimating too much.
If you find that you have rarely exceeded your estimates, take some time to dig into why. Estimates that are too high can mean losing out on bids. Instead, estimate lower on the work, and budget any additional resources to be used to deal with scope increases or changes.
You might also like: Five Steps to Successful Client Management.
Project management budget software
Budget management takes time and resources. Luckily, there are plenty of software options to help lighten the management load. While the ultimate choice of software depends on the particulars of your industry, there are some considerations to bear in mind:
- Expense management: At the heart of good project management software is a robust system to easily track the expenses associated with a project. Look for software that tracks profit margins, billable hours, and cost rates.
- Project costing: Your budgeting software should help you input expenses, personnel, and billing rates, and compare bandwidth and scope with previous jobs.
- Time tracking: Good budgeting software options will also include tracking of billable hours, timesheets, and project phases, making the invoicing process easier. Some will even have integrations that plug into accounting software.
- Reporting: Clear reports will help you stay on top of everything, so look for software that provides customizable dashboards and analytics.
Budget management matters
Consistent budget management throughout a project will help you stay on top of not only the scope of the project, but also the relationship you have with your clients. By building realistic estimates, holding regular budget check ins, and adjusting the budget as necessary, you’ll finish projects with happy clients and strong lessons to bring into your next endeavour.
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