In my last post I talked about how important it is to include a budget in your request for proposal (RFP). People have since asked, “How do I know how much it will cost?”
I think that's the wrong question. There are two better questions. The first is, “how much will we get?” The second is, “how much will we save?”
How much will we get?
If your goal is concrete, say online fundraising or ecommerce, take the net funds currently raised after all costs for a year. Add your current growth rate and estimate that figure for the next year. Use real comparable data from similar efforts if you don't have your own.
Now multiply that by your goal. the amount of increased value you expect the site to deliver. Make your goals realistic and conservative. Perhaps your goal increased subscriptions of 20%. Your maximum budget ought to be less than the amount you expect to gain from the new project.
For example, let's say our site brought in $1,000,000 in 2010 with $250,000 net after all expenses. In 2009 that figure was $800,000, so we have a 25% growth rate. If that trend continues we'd expect $1,250,000 in 2011, or a net of $310,250. If our goal is to increase our subscriptions by an additional 20%, that gives us $370,500 in the first year. The difference, $370,500 - $310,250 gives us a maximum budget of $60,250. If our project costs less than that and delivers on the 20% goal, the project is a success.
Before I address our second question let's talk about budgeting when the goals are less measurable.
How much do we have?
In many cases the goal is less concrete. Awareness campaigns, political movements, and educational organizations fall into this category. In this case you need to know your budget before you go shopping.
Identifying a figure in a simple formula is impossible, but most organizations are putting the bulk of their outreach budget into online campaigns because it tends to be the most efficient use of budget. On top of that, results can be tracked and therefore easily improved, and the time to engage and close your prospect is faster.
No more than 50% of your budget should go into the entire technology deployment. At least 50% needs to be held back for staff to do the work – creating content, putting together online marketing campaigns, tracking the results and improving the campaign for the next run.
How much will we save?
This question is one of the most overlooked, least considered aspect of a technology buying decision. For example, a solid content management system (CMS) like Drupal can save an organization enormous amounts of time and money, particularly when compared to a proprietary closed CMS or a website managed by Dreamweaver.
The areas where savings can be had in a Drupal CMS fall into over a dozen categories, not all of which will apply to every organization. Those categories are software licensing, license management, content management, technical management, hardware, hosting, security/reliability, support contracts, development or customization, training, opportunity cost, hardware upgrades, software upgrades, and eventual migration to another system. Total up actual or projected costs for each of these areas. The difference between your existing costs over the expected lifetime of the CMS is what you stand to save (or lose). I'll cover each of the categories in more detail in future posts.
For example, your costs to manage a proprietary CMS might be $175,000 per year, and you project costs of $125,000 per year to manage Drupal so $50,000 a year stands to be saved. If you expect your new Drupal site to last you three years, that savings is $150,000. Coupled with our prior budget of $60,210 that gives a maximum budget of $210,250.
Answering these questions should help your organization identify a budget for your project.
