Ready, Set, Budget
In many corporate projects, you are told what your budget will be without participating in the process. However, when starting a personal project or a project in your own business, you have to put together your own budget. You can use software and other technology as a guide, but you'll still be responsible for the actual money behind the numbers. It will still be your call as to exactly how much you can set aside for this project.
Budget building requires certain skills, including being very well organized and meticulous in your planning. Putting together a budget for a month-long family trip to Aruba or a budget for building a new warehouse for your business means breaking down the project into each component and determining the cost. It is a demanding process in which you need to visualize the way each task is to be completed. If, for example, your project is to plan a fiftieth anniversary party for your aunt and uncle, you'll need to start out at the beginning and think your way through all the details. Ask yourself questions as you proceed:
How many people will attend?
How much will you spend on invitations and postage?
How much will the facility cost?
Is catering included? If not, how much more will it cost?
How much will decorations cost?
How much will you need to spend on entertainment?
Will you need to pay hotel costs for out-of-town guests?
How much will you spend in transportation?
The list will continue through all of the details with an approximate amount based on research and acquiring cost estimates. Often, the budget builds as you answer these questions. Once you determine how many guests will attend, you can determine how many invitations you will need. Of course, a party for twenty will cost less in each area (invitations, food, etc.) than a party for 200. You'll find that the different elements of your project, scope, and budget will drive each other.
The need to combine resources with manpower is essential in putting together a budget. If you're leasing or renting equipment, you'll need someone to operate it — you don't want equipment sitting around unused. Likewise, you don't want people on the clock for an eight-hour day if the equipment is only available for three hours. Coordinating resources and manpower takes careful planning. Make sure they go hand in hand.
It's also important that you have enough work to keep full-timers working full time. If you're hiring someone for a thirty-five-hour workweek (and paying them a weekly rate), you'll be spending extra money if you only have twenty-two hours of work for them to do. You might hire someone on an hourly basis instead. However, if you are paying this individual $2,000 for the week and the rate of $100 per hour would put you at $2,200, you would actually be saving money with the weekly rate, even if the person isn't busy all the time. If you have this person on your payroll, he or she could be doing another task during those extra hours.
What are the elements of a budget?
Similar to resources, budget elements are the people, materials, and tools (along with anything else) necessary to complete a project. They are the individual aspects of the budget to which money will be allocated. The anticipated project cost at the start of a project is known as the budget cost.
Use either/or scenarios to determine which is the most cost efficient way to run your project. Often, someone will rent equipment thinking that they will only need it for a short time, so they will be saving money. In the end, they need the equipment for a longer time frame and end up spending more money than they would have if they had purchased the equipment. Therefore, it's important to judge your needs in terms of equipment and time frame. No, you need not buy a forklift (which you'll probably never use again) for a two-week job, but if you buy a computer for a two-week job, you'll probably use it on your next project and the one after that. Keep in mind the practicality of buying versus renting for long-term usage.
It's also very important that you know the going rate for consultants, experts, or any specialists you may require. If the going rate is $75 per hour and you have found an expert looking for $175 per hour, guess who you shouldn't be hiring? But while you want to keep costs down, keep in mind that if this expert is the only one available, you may need to pay the higher rate, and factor it into your budget.
Let's say you're building a patio. For this project, you might estimate spending $2,500 on wood for the patio plus $75 an hour for the contractor for ten hours, assuming this is the estimated time he assumes he needs to do his part of the job. This would give you $3,250 in the budget for the patio ($2,500 + $750). Add to that $500 for paint, assuming you'll do the painting yourself (which saves you money), and $300 for additional supplies, including screws and tools. This gives you a budget of $4,050. Tack on an additional two hours for the contractor, in case he underestimated his time, and you'll be at $4,200. If you know you have $4,500 in available funds, you could put aside the remaining $300 for miscellaneous expenses — all those extra items that come to mind after you've put your budget on paper. Try to think of everything up front so you don't need to dip into those miscellaneous funds too often. In business, the extra funds, or a small portion of the budget, becomes petty cash, which usually disappears quickly.
Don't sell your project short by hiring inexperienced personnel for low pay. More often than not, you will be left with substandard work.
When determining the cost of anything from renting office space to planning a catered meal, have an estimate of the size or quantity you'll need. Don't rent an office space for twenty if you only have five and aren't expanding. Similarly, don't plan a buffet for fifty when you've only invited twenty-five. The size of the party, office, room, or any other space you will be renting or buying is a factor in estimating the cost. The more accurate your estimate, the less money you'll waste on too much space. Track RSVPs or confirmations as they come in to be sure your estimates stay realistic.
Another important aspect of putting together a budget is research. After all, how are you expected to know the costs of all materials and rates for services rendered unless you do your homework? You'll need to check with associations, network with professionals in the field, review similar project budgets, use the Internet or the library, and ask whomever you know what the going rates are for resources, especially when it comes to hourly, daily, or weekly pay rates.
When starting a project, you might decide to buy a copier to use for the project. The copier, purchased for your project, is considered a
You may get significantly different quotes from vendors. There must be a reason. Before you jump at what seems to be a bargain, make sure you aren't missing some important information. Are you getting an authentic reproduction of what you believe to be an original? Is the material substandard? Poor quality? Illegal? Remember, a deal that sounds too good to be true probably is.