Precision Alignment Approach for Calculating Agile Project Budget

To measure an agile project’s budget and schedule, multiple approaches are readily available for agile teams working with methodologies like Scrum and Extreme Programming. They are mostly size-based estimation techniques including “Planning Poker” and “Affinity Grouping,” which are applicable only to making technical decisions such as “What features can we finish in next iteration?” or “How long will it take to finish the following features?”

When it comes to strategic decisions, such as “Do we have enough fund for the project (i.e. whether to even start it)?” or “What is the range of budget that is required to finish the project?” a time and money-based budgeting technique such as “Precision-Alignment Approach” is the right answer.

Precision-Alignment Approach is quite straightforward, easy to grasp, and appropriate for both IT and business agile projects. To better illustrate the principles of the approach, we will use a business agile project as an example–building a website for an online bookstore:

The desired and prioritized features of the website are listed below (which should be known by the bookstore owner):

  1. Search Books Function
  2. Checkout Function
  3. Manage Inventory
  4. Landing Page
  5. Preview Inside of Book

Based on previous experiences or some guidance from developers, an estimation of what each task would take can be obtained:

This gives a budget range of $190k-$320k. If the bookstore owner’s budget limit is $350k, he would know that he has enough fund to launch the project; and if he only has $180k available, he can’t start the project at all.

However, if the budget limit is $200k, the information so far is not enough to make the decision, so the next step is to spend more time to estimate the three most important features with more precision:

Now we have a more acceptable budget range of $230k-$300k, which allows the bookstore owner to make the decision as to whether to launch the project or not.

This budgeting process takes substantially less time (completed in a day) than traditional methods and provides the business with enough data to not only make a decision to go ahead, but a reasonable budget range to manage the project.

Sources:

Agilest. (n.d.). Agile budgeting: How much will it cost? Retrieved from https://www.agilest.org/agile-project-management/budgeting/

Madden, D. (2014, Dec. 29). Your Agile Project Needs a Budget, Not an Estimate. Retrieved from https://hbr.org/2014/12/your-agile-project-needs-a-budget-not-an-estimate

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Maggie Sun

Maggie Sun

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MBA, certified agile coach and experienced strategy analyst, specializing in business agility, agile leadership, Beyond Budgeting, and general management.