How to set a budget in custom software development

Mar 21, 2019

The software is now an indispensable part of the business world. In fact, there is barely a company that will thrive in this century without making use of a software program to manage its operations.

You will agree with me that, before you purchase a car, you will first research into the different brands of cars available and make a comparison based on the prices of the cars for sale. This helps you to budget and choose a car within that price range.

Unfortunately, you cannot make browse “car lot of apps” before creating custom software. This is because the software is intangible and there are diverse ways to it can be built by applying varying technological tools. You cannot actually judge the complexity of software by merely looking at the outside. Most times you will end up getting it wrong because it can be simple on the inside even with a complicated outside look.

Building custom software is one of the greatest investments to make as a business owner or manager. Setting a budget for your new software project can be bothersome because you barely know what it will cost you to fully execute the project. So you often ask “how much will my project cost?

Why are budgets important in a project?

Without a proper and well-planned budget, a project can easily fall apart or be left incomplete. This is why you have to consider budgeting before starting a custom software development project. Your budget for this project is usually flexible depending on the tools you are using and the complexity of the software.

Balance in project

There are different advantages of budgeting that you should consider as a manager before developing your custom software. The major advantages include:

1. Establishing guidelines

A budget can help you streamline your most important needs in the development of custom software. You only work with the main objectives and you spend only on the vital aspect of the project. You can put other parts of the project on hold until you get the money.

2. Cost estimating

As a project manager, you can use your budget to determine how much you want to spend on each aspect of the custom software development. This even allows you to know if you can fully complete the project with the available budget you have. Remember the advice “look before you leap” whenever you think of budgeting.

3. Future planning

When you have a budget as a manager, you can determine how much extra money you will need to finish an incomplete project. For example, if what you have can only cover for three objectives of the custom software project, you can easily plan your future cost with the budget you have at hand because each part of the project will carry its own cost.

How to plan a project budget for custom software development

When you are planning a budget for the development of custom software, it is important that you involve key players and subject matter experts within your organization. This gives you a chance to put all the different software features that your business needs into consideration. This is important so you don’t come up with new requirements when the project is already in progress. The key security features and key integrations are important, so it is imperative that you address them to avoid exceeding your defined budget.

Create a plan for a project

Careful planning helps you maximize your time and money and you should have completed the following steps before contacting a potential development partner.

1. Determine your goals

The first and most important question you need to ask yourself when you are thinking of a custom software development is “What do I want this software to accomplish?”

  • Do you need automation to reduce or eliminate errors in your business processes?
  • Do you want to boost productivity with limited workers?
  • Do you want to improve on your customer satisfaction goals or boost your quarterly sales?
  • Do you want to remove inefficient processes in your business?

You need to know which solution you want to provide with this custom software before making a choice of its design. Also, identify the metrics and key performance indicators (KPIs) that you will use to evaluate the success of the project.

2. Map your business processes

Speak with people who have much understanding about the day-to-day operations of your business and listen to their suggestions. They will help you identify the fundamental needs of your business. Propose a custom integration and give your employees good information about your intention.

3. Prioritize features that are essential

You don’t have to include all the available features on your custom software. Make a list of important features that will bring value to your organization: for example, reduction of errors, greater output and cost savings – these are the “must have features. You can also include some “nice to have” features like an attractive user interface, better reporting features, etc.

4. Make room for business-specific rules and requirements

There are governing industry laws and regulations for each business, so is important that you inform your development partner about the specific rules and requirements governing your business before they begin the custom software project. Some of the features that much industry regulation requires software that is up-to-date and free from security vulnerabilities.

5. Set your budget

The price for custom software varies depending on the scale of the project and the addition of custom features. Some features like reporting and integrations add to the cost of the project. You should make an estimate of your budget before speaking with a developer partner. This will help the developer understand what will work for your budget.

When you need to hire dedicated developers, consider a web development company that has experience and well-documented processes. Also, they must be well invested in the unique situation of your business. You can consider proximity too to save stress.

What to do if a project over budget

Sometimes, after you have made careful plans, you still end up going over budget. It may be due to lack of attention to the budget or critical part of business operation. It can also be caused by extended project time. No matter how you try, a project will often go over budget when it goes past its deadline.

When project over budget

Lastly, a project may go over budget if a business fails to set boundaries for the scope of the project. Now, what can you do to remedy this? The first step you can take as a manager is to identify the extent of the problem. You need to identify how far from completing the project is and what percentage of the budget is left. Once you do this, you can:

  • Seek additional funding
  • Reduce the project scope
  • Reduce cost

These methods can help you reduce the extra amount on your initial budget.

How to manage your project budget

There is a need to manage your custom software project to ensure it doesn’t fall out of scope. This will save your reputation and help keep your project safe. You need to be cognizant of your project’s trajectory to manage your budget. Follow the following simple tips to manage your project budget:

  • Review the progress of the project every 2-3 weeks and calculate the projected total cost
  • Reconcile your total projected cost with figure your developer is providing
  • Ask questions when tasks are taking longer or are costing more than anticipated
  • Make cost-value decisions when you need to change the scope of the project


The cost any project matters a lot and a custom software development project is not left out. As a manager of a business, always make realistic budgets to keep your potential developer aligned and focused on custom software that will serve you efficiently. Try to avoid over budgeting and ensure you manage the budget of your project throughout the process from start to completion.

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