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How is
a Project Budget Calculated?

What is the problem? Pricing in the mobile app and website market is a very complex topic, although it shouldn’t be. Why is this topic complicated? Because few people really understand how price formation occurs. This is also confirmed by the fact that different agencies issue different invoices for the same services. Sample prices are […]

  • Rondesignlab Team

What is the problem?

Pricing in the mobile app and website market is a very complex topic, although it shouldn’t be. Why is this topic complicated? Because few people really understand how price formation occurs. This is also confirmed by the fact that different agencies issue different invoices for the same services. Sample prices are sometimes called random, and more accurate figures have to wait for weeks, which is inconvenient for many entrepreneurs. Fortunately, you can find out the project budget of development much faster. How to do it? You’ll find out in our wonderful article. Calculation is very important, because everyone wants their contract to be profitable. So, let’s take a look. 

Let us take a look at the situation on the other hand, in order to be as objective as possible, and to make this article useful to a large number of readers. If you have ever been involved in custom application development, you are probably familiar with the rather routine process of calculating the project budget and timing of it. It takes a lot of effort and time. And it’s okay if the project calculation was carried out only once, but often potential customers cannot keep within the project budget, and begin to change product requirements on the go. This is a typical phenomenon that happens all the time. 

Standard ways to simplify calculations, such as setting a fixed price per day for an employee or company, usually lead to a loss of accuracy of the results and still do not save us from manual calculations. Sometimes you should avoid a fixed price. If you work with a fixed price, then it is likely that you will either be dissatisfied or your customers. Use a fixed price wisely. If you cannot use fixed price wisely, then it’s better to forget about it. In this article, we will consider this topic at the same time from the side of the customer and from the side of the performer. This will be useful material, which will greatly help you in the future.

Settlement process

Settlement process

Your project plan should be a solid framework for everything you do. Your project plan isn’t only the intended actions, but also the amounts that are as close as possible to reality. For this reason, the project plan helps, not takes up all your time. Also, the project plan helps to navigate in difficult times when everything gets out of control. That’s what you should do for this.

First of all, we should decide how the deadlines and the project budget are generally formed. To do this, you will have to consider more carefully the calculation process. In this text, this process will be divided into steps, which we will discuss below. Of course, we take the averaged data that apply to most companies and a large number of projects. Specifically, in your case, you can use additional steps in calculating the project budget, but this already depends on many nuances and the specifics of your work. In order to prevent a large number of exceptions and footnotes, we offer you an average version of the settlement process that most companies use.

Step 1. Assessing Tasks

The first thing that needs to be done after studying the customer’s requirements is to divide the project into functional parts independent from each other, in other words, tasks. For example, if we are evaluating a mobile application for a standard online store, then the division may look something like this:

  • Catalog;
  • Cart;
  • Store News;
  • Contacts.

After that, the development team determines the time labor involved in the implementation of all these tasks. This stage is well known to everyone, but there may already be a misunderstanding due to a large number of points or because of the specifics of some tasks, which in practice took longer than originally intended. Of course, all this should be discussed, because no one wants neither work at a loss nor overpay.

 

Step 2. Calculation of project development timelines

No matter how hard the developers tried, project estimate is extremely rarely true. You can do a project estimate in different ways, but still you should not think that during the project nothing will happen that can move the deadlines, increase the cost or something like that. Therefore, project estimate is a rather conditional thing. Everyone who makes a project estimate should understand that this is easy enough to break, but still the project estimate must be reduced to the average, most real expectations.

You have to put up with this. So, first of all, starting from the complexity of the project and the experience of the team, we determine the amount of additional time necessary to resolve various unforeseen circumstances. Usually, it looks like a certain factor, in simple words, the percentage by which the total development period is extended. It is important that the customer takes note of this, rather than treating it as a meaningless formality. This percentage can indeed become an integral part of the project budget. You may be misled by the fact that this percentage is as if not required to be paid. But it is better to initially accept that the agreed amount will be debited from your account, otherwise, it will be insulting.

Next, we should determine the sequence of stages of the work. Regardless of the methodology used, such as agile or waterfall, we need to know in which order our team performs various types of work. This is important and you definitely need to find out.

For example, at first, the development of the back-end and the user interface is carried out independently, and when they are completed, parallel programming of the application for different platforms begins. After all, stages are completed, the project will be considered completed. But you need to discuss these steps. Any work must be measured and evaluated.

Only now we have all the necessary information and can start calculating the deadlines. Do not worry, you will come back to this stage again and again because the terms change very often. In the case of Waterfall, we summarize the amount of time for each type of work, such as UI / UX, Back-end, or something else, add insurance to them, and, given their priority, we find the longest sequence of work, which, in fact, represents the total number time required for the implementation of the project.

In the case of Agile, given the order of work, we determine the time to implement each of the tasks, such as the catalog of goods, news, or something else, after which, by summing them up and adding insurance, we get the deadline for the project. Allow enough time for this step. A mistake here can turn into a big debt, and it is always unpleasant to repay debts.

 

Step 3. Calculate the project budget development

The next thing we should get is the project budget, which is usually made up of two types of costs: the total monthly expenses, such as office rent, server fees, software licenses, and the salaries of the direct project executors.

Total monthly expenses are calculated very simply. This is done so, we divide the amount by the average number of days in a month and multiply by the number of calendar days required for the project. You need to perform such manipulations in order to get the total monthly expenses.

The calculation of expenses on the salaries of performers depends on the development methodology used. Let’s find out the details of this. In the case of Waterfall, for each employee, we divide the monthly salary by the average number of working days in a month and multiply the result by the number of working days necessary to implement the work phase for which he is responsible, and at the end, we summarize all payments.

In the case of Agile, for each employee, we divide the salary by the average number of working days in a month and multiply it by the number of working days needed to implement the entire project, at the end we summarize the results.

Now, knowing the project budget, and the project budget includes payments to performers and general expenses, we can get the final project budget by adding a couple more things to it, such as profit, taxes and the commission of the sales manager. 

 

  • Profit 

 

Here, everything is quite simple, we either add the desired percentage of the project budget or add the appropriate item to the total costs. Why do we have to do this? We do this only if we want to receive a fixed monthly income.

 

  • Taxes 

 

Everyone considers them a little different in connection with the variety of tax systems and the methods of evading them. In some cases, taxes can be considered as a certain average percentage of the project budget with profit included.

 

  • Commission of the sales manager

 

It depends on your conditions of cooperation, if you pay a percentage of the transaction, then this is a percentage of the total cost, profits and taxes, and if you pay a percentage of profits, then, obviously, consider it as a percentage of the pledged profit received in the first paragraph.

 

Automation Computing

Is it possible to develop an application or website that would automatically perform such calculations? After all, this would greatly simplify the work on the project.

Having familiarize ourselves with the calculation process, we can now say that yes, it is possible, but not without a couple of nuances. And the first of them is the calculation of the tax part.

Considering all possible taxation options in the calculations requires not only significant labor costs for development but also for the constant support of the formulas in the current state. There are several options for solving the problem: either we sacrifice the accuracy of the calculations and consider taxes as a percentage of the project budget, or we significantly complicate the calculation system, adding the possibility of manual modification. 

The next nuance is a way to safely store information about all expenses, salaries, and projects of the company. There are also several possible options:

We store data on third-party application servers (SaaS). Quick and convenient but requires trust in the owners of the service.

We deploy the application on our own servers. This option requires labor to configure and maintain the application, but allows you to independently control data security. Additionally, you can make the application accessible only from your own infrastructure, but this deprives certain amenities, such as the ability to access calculations from a personal phone outside the office.

The implementation of the program for calculations in the form of an independent desktop application that stores all the data in a local file. This case does not imply any configuration of the environment and allows you to independently control data security, sacrificing the ability to share data.

Nevertheless, despite the above problems, automation of the settlement process is still possible, and it brings with it a number of advantages:

  • The life of a billing employee will be a little easier;
  • Customers will be able to receive recalculations in a matter of seconds;
  • The cost of development will become a little fairer and more competitive.

Today, there are very few solutions for this type of calculation, and all of them have a fairly high entry threshold. Nevertheless, the chance to create something similar inspires hope, because it would make life easier for many.

 

The first thing to specify 

The first thing to specify

As we found out, the calculation of the project budget is based on an estimate of the total amount of time required to develop or integrate each function, including backend development, interface design, mobility, quality control, and project management. The number of hours required for the implementation of each stage is multiplied by the cost of the hours of work of the relevant specialists, then the results are summarized, and the final project cost is obtained.

The first thing to specify is which application is needed and choose a platform: iOS, Android, or both. The user is then offered a list of functions that can be included in the application. The online version of our website shows the total cost of each stage of development.

In addition, it is possible to request an extended PDF file by mail, with a breakdown of the cost of developing each function in the context of a particular stage.

Any developed application can have the following functions, which we will discuss below.

 

Social login

This is a secure authorization method that does not require a password and allows you to log in using social network credentials. Although this login form is relatively new, more than 75% of users already prefer it. The most popular authorization platforms today are Facebook and Google, followed by Twitter, Yahoo, LinkedIn, and others.

 

Email login

This is a typical login scenario in which the client or user must provide an email address, username and password for authorization. This feature also provides email authentication, and password recovery if necessary.

 

Control Panel

To ensure comfortable user interaction with your product and data management, implement the information panel in the application. It will allow you to review key performance indicators of your business processes. Such a panel usually contains numbers, diagrams, as well as visualization of other types of data and is useful in that, guided by the information received, the user can regulate his activities.

The customer himself determines what indicators he wants to see on the product toolbar.

 

Activity feed

This is a list of actions taken in the application. This function helps to track the recent and most interesting user actions in the application.

Grading system. This feature provides users with the ability to rate content and / or other users. Recommendations are a very powerful tool, with the help of a rating system, users can see whose opinion is the most expert or which advice is the most useful, who are trustworthy in one aspect or another. Thus, the trust of the content in the application is automatically increased.

 

Geolocation

Geolocation

The user’s current location can be useful for many reasons, allowing you to determine his location, paving the way, and providing the most current information depending on its location.

 

Photo and video gallery

A function that allows you to store photos and videos in the application, create albums and adjust the visibility of albums, pictures, videos.

 

Customization of the user interface

If you want to add personalization to your software solution, one option is to let users customize the interface to their liking.

 

Accept payments

If the application is associated with commercial activities, it is necessary to integrate a variety of secure payment methods into it. The most common systems we work with are Stripe, PayPal and Apple pay. However, almost any payment method can be integrated into the customer’s application. Once we were faced with the need to connect two local Scandinavian payment systems to the product and set up their perfect work. The variety of payment systems will facilitate transactions for users and increase the rating of the application.

 

Sync on all devices

It is currently possible to synchronize data on different devices. You can implement it automatically or provide a backup function to synchronize data as needed.

 

User profile

You can allow users to customize their profile (of course, it depends on your template): determine how to organize personal information and adjust its visibility to other users of the application.

 

Audio and music

If you want users to listen to audio messages or music, you can provide them with such an opportunity in the application. Although streaming is quite convenient, it consumes mobile traffic. Therefore, the function of listening to audio from the application is useful for products that work with audio data or music.

 

Search

Search

For quick and convenient receiving and use of data by users of the application, the search function is absolutely necessary. This will help to instantly receive the necessary information.

 

Checklist

If you have any administrative functions and you need to manage a group of users, the checklist function will be useful in the application.

 

Barcode Scanner

Barcode scanning has become a must-have feature for most popular mobile applications. This helps you compare prices in stores, track supply chain assets, or manage inventory. A correctly selected and customized barcode scanner will turn your application into a powerful business tool.

QR code scanner makes it easy to detect QR codes to scan and retrieve additional data. Currently, QR codes are found on invoices and invoices, and you can also save it in PDF format. This feature is convenient for business purposes.

 

Calendar Integration

Today’s users value the ability to plan and track activities in one place, and calendar integration is useful for that.

 

Social Media Sharing

social media sharing

This is not only a way to exchange data and the opportunity to show oneself on social networks, but also a powerful tool to attract a new audience and turn it into regular customers. Brand development in social networks is a modern trend, and therefore it is worth considering this functionality.

 

SMS integration

Sending SMS directly from the application without having to switch to smartphone mode is a pretty convenient feature. It can facilitate integration with system notifications, for example, to confirm authorization or to notify the user that the car has arrived, as in the case of taxi service.

 

Moderation

If you allow users to provide feedback, write reviews or comments, it is important to manage the published content, and therefore it is necessary to provide a moderation function in the application.

 

Reports

The function should be integrated for ease of data administration and quick access to their various levels. It is reasonable to implement such functionality in an application for management and analytics.

 

Content management system

To publish information of various kinds and administer it, you should be able to manage your content and plan its publication. To do this, the content management system must be built into the application.

 

Summarizing 

Calculating the project budget of a mobile application or site can be quite difficult, but thanks to this article you have a plan to help you do this.

Costing is the most important issue when you are creating your own website or mobile application. And honestly, the answer will depend on what your requirements are. The final cost may vary, but it depends more on you than on freelance programmers with whom you decide to collaborate or agency rates.

If this article makes your project plan better, then it can be considered that this is the best thanks. Much depends on the quality of your project plan. Remember, if you prefer to work at a fixed price, it is better to think twice. You can find out how to use fixed price profitably from our other articles or from our consultants.

In this article, we have provided real guidelines so that you can better understand the different costs on a website or mobile application and plan your project budget. We considered a wonderful calculation model, which will become a useful basis for your fruitful work, despite agency pricing or any other pricing at all. This is your way to do it. 

Thanks to this article, you’ve got a new vision of calculation of the budget. So, it’s time to try.

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