Cost vs. Budget Planning

Written by on December 7, 2012 in Project Management with 0 Comments

cost vs. budgetI presented a webinar called “How To Successfully Take On Any Project – Big or Small”.  If you would like to take a look, here’s the link:  http://engage.vevent.com/rt/icmarketing~9192012  Here is another question that was asked during the presentation.

Julio asked “Customers normally ask how much a project will cost to determine if they have the budget…so, project cost or customer budget must be defined first?”

In order to give the customer a budget, you will need to know what deliverables they are requesting and the parameters they set for the project.  It’s helpful to ask upfront if the customer has a budget.   Sometimes they will give you a range, other times they say they don’t know.  This makes it difficult to determine if you are within their budget.

In my experience, it’s best to come up with the project costs first.  You need to know how much your fixed costs are going to be before you can determine your markup.  You may have experience with a similar project that you can use to give the client a ball-park figure. Just be sure that the numbers you provide are ones you can live with.  If you come up with a ballpark figure that is low, and then your project budget is higher, you are setting your self up for a challenge by the customer.

Once you know your costs and markup, you can then provide the customer with a realistic proposal.  If you find you are outside the budget limits of the customer, having your costs will help you negotiate with the customer to remove items from their project.  It’s never good business to discount your services.  Instead, provide a realistic project proposal with options.  If the customer really wants to add a deliverable, they must come up with the money.

It’s surprising how often this approach works.  The key is really understanding the requirements of the project and then having an understanding of your true costs.

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