Agile Budgeting: How to Calculate Your Planned Budget Using Story Points

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Estimating project budgets is challenging in any methodology, but Agile's flexibility adds another layer. Story points and velocity offer a different approach to budgeting – one better suited to the adaptable nature of Agile projects.

This guide outlines both the process and how the Time & Cost Tracker for Jira add-on can support your calculations.

Why Traditional Budgeting is Tricky

Detailed, upfront cost estimates ("This project will cost $100,000") rarely work well in Agile. This is due to:

• Scope Fluidity: Agile welcomes changes; traditional budgets don't.
• Resource Uncertainty: Team availability shifts, affecting costs.
• Unforeseen Expenses: Some expenses are hard to predict early on.

Benefits of Agile Budgeting with Story Points

Story points shift the focus to relative effort. This budgeting approach helps because:

• Complexity: They account for uncertainty by assigning more points to complex tasks, even if an exact dollar value is elusive.
• Team Dynamics: Story points work because they don't rely on everyone billing at the same rate. This reflects real-world team structures.
• Adaptability: When priorities shift, it's easier to reprioritize based on story point value than trying to reallocate an already set budget.

How to Calculate Planned Budget

Here's a simplified approach, assuming you're already using story points:

1. Estimate Story Points per Sprint: Based on historical data (ideally from Time & Cost Tracker reports), see how many story points your team typically completes per sprint.
2. Determine Cost per Story Point: Divide your known expenses (team salaries, overhead, etc.) by your average velocity. This gives you an approximate 'cost' per story point.
3. Apply to Project: Multiply a task's story point value by your calculation above for an estimate of how much it might cost in the context of your team's typical sprint expenses.

Where Time & Cost Tracker for Jira Helps

• Historical Analysis: The add-on acts as your data hub for accurate sprint cost calculations. Track expenses directly in Jira, gain project or team-level insights, and refine budget estimates over time.
• Expense Tracking: Go beyond labor costs. Associate expenses (software, travel, etc.) with projects for a complete cost picture, ensuring they're included in your planning.
• Progress Visualization: Charts and reports visualize budgeted cost vs. actual expenses in real-time. Catch potential budget overruns early and adjust your resource allocation as needed.

Using Earned Value Management (EVM) for Cost Analysis

While story point budgeting helps set expectations, EVM adds a layer of real-time tracking.

With the Time & Cost Tracker add-on, you can seamlessly incorporate these concepts:

• Earned Value (EV): This tracks the value of work actually completed against your initial estimates, helping you see if the project is progressing to plan in terms of the work accomplished so far.
• Cost Variance (CV): Are you staying within your calculated "cost per story point"? CV lets you know if you're over or under budget at any given time.
• Schedule Variance (SV): This tracks if you're completing story points as fast as expected, crucial for understanding how project timeline aligns with budget.
• Estimate at Completion (EAC): A forecast of the total project cost based on current performance trends.

Important Notes:

• Estimates are Still Estimates: Budgets will need adjustments, even with this method.
• Communication is Key: Transparency about how your budget is calculated helps the team take ownership of cost goals.

Elevate Your Agile Budgeting with Time & Cost Tracker

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[Syed Osama]

Ok, Story points are quite confusing but now I am clear about story points.