Q&A: How do I develop a project or program budget?
How do I develop a project or program budget?
Developing a project or program budget can be challenging as we are building a budget based solely on what we plan to do rather than what we have done in the past.
While I'm a fan of zero-based budgeting for organizational and department budgets (which requires us to consider current needs and plans over past expenses), we can still rely on our experience with past and existing needs to inform budget creation. With budgets for projects and new programs, while we may look to similar initiatives for guidance, we have limited information to determine our anticipated expenses.
(Learn more about the value of a zero-based budgeting approach.)
To help us start from zero, I recommend a POD approach to budget creation for projects and new programs. A POD approach asks us to consider needed expenses in three areas:
People: Expenses related to our project team and other key stakeholders. These expenses might include salaries or wages for contractors or team members or volunteer stipends.
Operations: Overhead or infrastructure expenses for managing the project or program. These expenses might include facilities or space use costs, IT platforms, equipment, or supplies.
Deliverables: Expenses needed to build, create, or offer the project or program deliverables. These expenses may be required for task completion in projects or to deliver the outputs or services of a program.
We may encounter expenses that could be listed in two of the three POD areas (ex., our Zoom subscription may fall under Operations and Deliverables because we are using it for program team meetings and to host program events). Our goal in using POD is to help us think through all of the different types of expenses for our project or program to get to a comprehensive list of expenses. While a need may fall in or be shared by two POD areas, we would only list the expense once on our budget.
Once we have listed our needed types of expenses, we can get quotes or gather information to help us estimate costs for each expense. We may want to anticipate higher costs for longer projects or programs due to price increases that may take place over the project timeline or changes in the deliverables or project team. We will also want to include costs we could incur if there are delays to the project or program.
By using the POD approach (People, Operations, and Deliverables) to consider expenses and estimate costs, including anticipated higher costs for longer projects and delays, we can get to a draft project or program budget that we can share with leadership or key team members for feedback.
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