How To Set A Custom Software Project Budget

Revised June 25, 2018

When someone reaches out to FrogSlayer about developing a web app or building a software product, the top question we’re asked is “How much will my project cost?”

This is understandable. Building software is a major investment for a person or business to make. However, when your software project is just getting started, the difficulty of setting a budget is at an all-time high.

But have no fear. After a decade of estimating and building software, our development team has developed an approach to help potential and current clients determine a sound budget for their software project.

Custom software is an asset. Like any asset, it’s important to determine the potential for the software to do one of two things:

1. Generate profit or
2. Save money

In other words – will this custom software help drive revenue or drive efficiency or both?

Refining the scope and budget to an acceptable range will cost time and money. Knowing that the potential reward will outweigh the costs is important in determining whether the project is viable or not.

After we get a clear understanding on the project’s value, potential ROI, and refine the scope a bit, we will size up the project and provide you with a ballpark estimate.

We’ll use early requirements, high-level conversations about feature sets and business goals, and previous project experience to estimate cost at this stage. Keep in mind, this is when the estimate for your project will be at its broadest.

We start by dropping it into a broad bucket (shown below):

Next, we’ll try to tighten up the range by saying, “Your project will definitely cost $75,000, but probably won’t go over $125,000.”

If the initial ballpark estimate is too high, we can review the requirements and see if we can refine the scope. From here, we’ll estimate the project again.

If the ballpark estimate is acceptable and the viability outweighs the costs and risk then we will move forward with a Discovery, Design & Planning phase.

This phase helps our team to further define and refine the requirements and implementation plan. The output is a blueprint for initial development along with a tight budget and schedule.  Your project will start to look something like this:

Occasionally, the DDP results in an estimate that is higher than the initial ballpark estimate, but don’t let that scare you. By investing a small amount of time and money, you reduce the risk of cost overruns because our team is more certain after the DDP about the cost of the project and the potential ROI.

After the DDP phase, you will decide whether or not to move forward with development of your custom software project.

About 90% of our clients move forward from here. With the budget set and risk reduced, it’s all about a predictable delivery with no surprises:

• We track our team’s progress each week to see how quickly we’re moving through the backlog to determine velocity.
• We track the budget and project final cost all along the way.
• If needed, we work with you to refine scope to keep the project on budget and on schedule.

It may seem like overkill at first but taking the time upfront to answer “How much will my project cost?” is worth the time and cost. Having a responsible and realistic budget upfront keeps everyone aligned and focused on shipping custom software that can pay you back quickly.

At FrogSlayer we begin with pre-project consulting, at no cost to you, where we size up the project and prepare an informal estimate. If the ballpark estimate is within a viable budget, a more formal and detailed letter of proposal can be prepared for an upfront cost of $500. The reason for this cost is due to taking consultants off billable work to ensure the proposal is comprehensive and accurate.

Remember, find a development team that:

• Has a clear process for refining your budget along the way as requirements get more focused.
• Is concerned about return-on-investment (ROI)
• Is looking for ways to shorten the payback period by reducing unnecessary scope.