top of page

How to Make a Project Budget

The project budget is the tool used by managers to estimate client fees based on team effort, expressed in terms of:

  • the number of resources staffed on the project, split by grade, and

  • the number of hours that each resource will spend working on the project over its estimated duration.

For one reason or another, budget forecasts are frequently missed. More often than not, a project's duration will extend beyond the original estimate, because the client takes longer than expected to provide information, or decides to update a crucial document mid-project. At times, a firm may initially ask for fees that are well below budget to generate a win, only to charge cost overruns at a later stage. Very tacky.

Let's have a look at how to make a relevant budget, based on appropriate timelines and team size.


Choose Your Fighter

Ideally, you should pick team members based on their:

  • experience on similar projects,

  • expertise in the relevant industry,

  • previous exposure to the client, ensuring relationship continuity, and/or

  • individual development goals and needs.

We say 'ideally', because staffing almost always means war. Booking the best resources is essentially a power move (not to say pissing contest), to assert superiority over others. Project leaders will want to work with the same people over and over again, because they will already be familiar with their particular management style, working practices and preferences. Too many projects coming in at the same time means that the best in the team will be juggling several engagements, often without managers even knowing about it.

Team size will depend on project fees and complexity: USD 10-50k projects will obviously see a heavier involvement of junior resources (analyst to senior consultant) working under limited supervision of senior team members, compared with larger engagements.

In addition to the people who actually do the work, your budget must include the number of hours spent by your director(s) and partner(s) on reviewing your deliverable(s). Although this greatly depends on their individual management style and working practices, as a rule-of-thumb you can estimate the hours dedicated to reviews in 10% of the total hours charged by the rest of the team.

The most important KPI you will need to consider when drafting your budget is the recovery rate, expressed as the ratio of revenue to total project costs. Should this ratio fall below a given floor (typically included between 35% and 50%), it would not be profitable for the firm to execute the project. Only on very rare occasions (e.g. to win back a lost client) can projects with estimated recovery lower than the set threshold be pursued.


Set Realistic Timelines

Many times, the client will try to impose unreasonable deadlines. If the partner agrees to them without giving much thought to how long it actually takes to perform the work, it will lead to overtime, stress and, eventually, burnout. When the budget is prepared properly by a manager who has extensive experience in similar projects and has, ideally, already worked with the client in the past (therefore knows how responsive and professional they are), it becomes a meaningful tool for effective planning and scheduling.

In parallel with the budget, a manager will prepare a Gantt chart, i.e. a daily or weekly schedule laying out the main activities and tasks to be performed by the team, as well as the key milestones and deliverables. The budget will need to be aligned to the Gantt chart, which is usually included in the proposal slides: a schedule that is well-known and agreed by all parties involved will ensure a smoother project execution, other than making it easier to manage expectations and build trust.

Here's our PowerPoint template to create daily and weekly Gantt charts:

Download PPTX • 62KB

Budget vs. Actual

At the end of every project, it is fundamental to carry out the budget vs. actual analysis, mainly for the following reasons:

  • to evaluate the performance of each resource staffed on the project, by comparing the number of hours charged with the amount and quality of work performed,

  • to assess the efficiency in the utilization of staffed resources on behalf of the project manager, by analyzing and comparing each team member's chargeability distribution across the duration of the engagement,

  • to assess the reasonableness and achievability of the deadlines set at the beginning of the project, and

  • to verify that any delay, inefficiency, and/or cost overruns were beyond the team's control and not their responsibility.

All of the above, together with the project's actual recovery rate, will serve as benchmark for similar projects in the future, in terms of proposed fees and timelines.


We hope you found this article useful. Make sure to download our Excel template to create a project budget:

Download XLSX • 30KB

The hourly rates per grade included in our template are purely illustrative. A firm will generally apply a 20-30% discount to the standard fees, to win a project and/or on account of the strong relationship with the client.

For questions or clarifications, feel free to reach out. Thanks for reading, and good luck!

155 views0 comments

Recent Posts

See All


bottom of page