This article is part seven of a running series on the question How can you build a budget before you know the work involved?

I’ve covered five strategies likely to boost the success quotient: working in phases, using risk premiums, doing up-front analysis, turning the question around, and mining the wisdom of crowds.

Now I want to look briefly at a couple of strategies that are both common… and best avoided.

Bad Strategy #1: Guess

If you don’t know what it will cost, then you’ll have to guess, right?

There are all sorts of synonyms for “guess.” Project managers use “estimate” all the time, but too often for inexperienced PMs it’s a near-synonym for “guess.”

Technology has a variant on this term called a SWAG, which stands for “sophisticated wild-ass guess.”  I actually like this term, as long as everyone understands the acronym and remembers its final three words; it paints an accurate picture of the current state of budget knowledge.

“Estimate,” too, has meanings other than “guess.” At best, any cost projection is an estimate, since there is considerable variability even in the best projections. A budget, though, is not a cost projection, but rather a set of cost limits within which you expect portions of the project — phases, tasks, etc. – to live.

Thus a budget is a promise. It’s not a guess, not a projection, not an estimate. Occasionally it’s a promise that must be broken — a/k/a renegotiated — but that should normally happen only when circumstances have changed significantly from those under which you began the project. For example, if I’d asked someone to edit my book Legal Project Management based on my early projection of 225 printed pages, we would have agreed on a budget. However, when the actual book came in at 360+ pages (including front and back matter), I would have been the first to say, let’s rework the budget I gave you, because circumstances have changed materially.

And there’s a good use of the terms in that paragraph. My projection was an estimate, based on an early outline and two sample chapters. In truth, it was a SWAG, based on samples, an outline, and previous writing on different topics. The agreement to edit would have included a budget, or a cost/price agreement.

Likewise, the publisher might have given me a budget, a page budget in this example. I would either have had to conform one way or another (smaller print?) or renegotiate.

I’m not denying that there are times when you’ll have so little good data that you’re forced into working with a SWAG budget. However, before you accept that, consider the five strategies posited in the five previous articles in this series. Then, if you still  have more uncertainty that the parties are comfortable with, make sure that all of the caveats about the SWAG are written down and signed off by everyone involved in the money aspects — spending, receiving, or paying. And even then, expect there to be unhappiness down the line if the SWAG proves to have more of the “WA” part than the “S” part.

Bad Strategy #2: Overpromise and Underdeliver

Overpromise-and-underdeliver is a bad strategy for almost anything, but it’s especially undesirable when there’s money at stake. Everyone winds up with a bad taste in their mouths, along with vows to not work together in the future.

You can’t price in every single contingency. However, project budgets should contain a reasonable risk premium, as I’ve noted in articles elsewhere and in Legal Project Management.

This strategy might be called the Pointy-Haired Boss strategy, after the Dilbert manager who develops impractical product ideas and timelines and then expects his engineering staff to deliver them. As goofy as it may seem when you read Dilbert, remember that Scott Adams, a former telco engineer at PacBell, gets his ideas from the real world.

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This series will conclude with one more brief article on budgeting for something you’ve never done before.