The Costing Process

Breaking Down the Costing Process

Costing is far from simple. Personally, I feel like it is the most tedious part of the entire project, but also the most important. Properly costing your build process will prove essential in mapping out the project and then keeping it on time and on budget.

There are countless examples of projects going sideways and issues popping up due to a lack of planning in this book, and across the business environment. I would guess that outside of a lack of validation, a lack of understanding in planning is the number one reason for the failure of SaaS businesses. Small changes in the system infrastructure can lead to huge changes in cost down the road and this can often be discovered during the system costing process.

There are four phases to costing your project:

1. Estimate

2. Information Architecture & Flows

3. Operation Costs

4. Working Numbers

We'll review each step briefly here, but there will also be a more thorough breakdown below.

Estimate

Your estimation is, essentially, going to serve as a rough draft of your scope of work. That means you're looking in-depth at estimates for multiple areas of work then estimating minimum and maximum times for each.

Even with a substantial amount of time put towards your estimation, it is still just that, an estimate. It's not final, and it's certainly not exact, but it should give a firm idea of what the project may cost. The more work you put towards you estimate process, the less time your actual scope of work will be to write out and the less time it will take to do plan the rest of your project build.

The estimate should be based on 3-point pricing. This is a pricing system that takes into account the minimum number of hours, maximum hours, the architect's estimation on the most likely number of hours, and an average of all three of these items. With this method, you can accurately balance expectations with reality.

Information Architecture & Flows

Your estimate will then be fleshed out further into a full Information Architecture (IA). If you're not familiar with project scoping, you may want to take a look at this comprehensive guide to scoping at BrainLeaf.

Paired together, you information architecture and flows will serve as the primary planning documents for the project, much like a set of blueprints acts as the primary planning document for a construction project. These documents keep everybody, at all levels of the project, on the same page and pre-empt issues.

The Information Architecture

The Information Architecture (IA) is a written document that describes each page, feature, view, state, and functionality of the system. As you are writing this document, I recommend to describe the features by structure as well as to note the functionality of each area. Every element and it's functionality envisioned on every view should be described insofar as what components make it up as well as how it works. In the best case scenario, this document will also describe every page, every view, every element, every function, and the purposes of all these things within the system. The more time you take to plan this aspect of your project, the faster and smoother the rest of the project will go.

Flows

The flows are page by page designs that incorporate the elements noted in the information architecture. As you can imagine, it is substantially easier for a designer to start working with a complete information architecture than to start from scratch on any complex SaaS project. With a fully described system, a designer can plan their design processes or a team can plan resource utilization.

The flows are also very important because while an architect may plan a particular feature or system into a page, the flow and user experience for the ideated system may not actually come together as envisioned. So having a viewable, even if basic, design is critical to a well-planned system.

Operational Costs

It is important to remember throughout the planning phase that you are not just building a website or a SaaS tool - you're also building a business. You have to begin planning for not only the creation and utilization of the tool, but also for continued operation of the tool, implementation of new features, and support for your customers. You'll have staff that needs to be paid, overhead to track, advertising to purchase, taxes to pay, and much more.

And if you don't begin calculating these costs now, they'll catch you off guard later, and you'll potentially have under-priced your services, leaving you scrambling to make up the difference after launch.

Working Numbers

Once your information architecture, flows, and operational cost planning is finalized, then you will have a great starting point to understand the true costs of the system and be able to make a determination as to the success of the system. Please also remember that the total you come up with here still isn't quite "final". These working numbers might still fluctuate a bit over the course of the project.

The Cost of Costing

As you prepare to cost your system, you may need to have some idea as to how much it costs to do this. Generally, you can expect to spend somewhere in the range of 1.5k to 20k to cost out the entire system. Even if you're doing this yourself, the cost is going to be substantial. When we I work to do this kind of project, the overall cost of using my team usually comes in at ranges like this:

Size of Project	Cost Range to Plan
$35,000 - $50,000	$3,000 - $10,000
$50,000 - $100,000	$8,000 - $25,000
$100,000 - $250,000	$15,000 - $50,000
$250,000 - $500,000	$40,000 - $100,000
$500,000 - $1,000,000	$50,000 - $250,000

As the size of the project goes up, the costing range becomes harder to predict. It is possible that even a very large project could be easy to plan, but for the most part as project builds go up the complexity of planning goes up quadratically.