Have you ever made big plans, started working on them, then gave up after getting started because you run out of money, time, or distractions just get the best of you? That’s what happened to our Elgin O’Hare expressway, that goes neither to Elgin nor O’Hare. The state ran out of funding to complete the project so the expressway is now just 5 miles long and connects Lake Street in Hanover Park to the 290/355/55 expressways after a stop light. How do we make sure our projects don’t end like this?
1. Break your projects into the smallest pieces
An accurate estimate of your project costs can only be gotten by breaking the whole project down into it’s smallest pieces and estimating the cost for each piece. Add up the total to get the total project cost estimate.
2. Double your estimate
To give yourself some room for the unknown, double your estimate for the cost of the project. There is always scope creep to any project, or gotchas that catch you at the worst possible moment, so allow for additional costs.
3. Is there known risk to your project? Double your estimate again.
If you know that there are possible risks in your projects that you can identify, you must allow for more cushion to work with. Things don’t always work out for the best case scenario.
4. Is this a multi-year project? You must consider inflation and capital costs.
Add in estimates for inflation and capital costs for the life of your project for multi-year projects.
5. Recalculate your return on investment given your new estimate
Is your project still worth pursuing? Your ROI must still be in line after completing your cost estimate, otherwise you might want to abandon the idea at this point.
6. Make sure you have enough available capital to run your business
Given your estimate for project costs, will you continue to have enough capital to pay your normal expenses while implementing your project? Are there capital risks during the life of your project? How will you compensate for cash flow issues? All important things to consider.
Hopefully these ideas help so that you don’t run short of funding while implementing your big project. Do you have any other ideas that might be helpful?