Everyone has heard the old business axiom, “You have to spend money to make money.”
But have you heard the saying, “You have to invest in project management technology to grow your business?”
OK, so I just made up that second saying, but that doesn’t make it any less true. While every small business leader needs to be mindful of their budget, long-term skimping on tech and training can lead to the demise of your business.
With that in mind, how much should you spend and what benefits will you get out of spending on project management technology?
Spending more on project management technology can increase your organizational growth so that you can keep pace with the competition. In this piece, we’ll look at how many small and midsize businesses (SMBs) are investing in PM technology and how much they’re spending, as well as the impact of technology investments on project management success.
How much should I spend on PM tech?
Last month, we tackled part of the spending equation when we wrote about how to determine your annual budget for project management technology.
A few of the key takeaways from that piece (based on Capterra’s 2018 Top Technology Trends survey):
- Funding is one of the top three challenges SMBs face when planning investments in new technology.
- Most SMBs consider PM tech an important strategic investment, and about 40% have already planned a PM software budget in the next one to two years.
- One-third of SMBs with an approved budget are planning to spend between $1,000 and $10,000 annually.
A general rule of thumb is the bigger your revenue, the more you should invest in project management technology.
If your organization is making $80 million per year, for example, but you’re only spending $5,000 each year on project management technology, you’re in the minority and potentially putting yourself at a competitive disadvantage.
The size of your organization is also an important factor, as most project management software is sold by a per-user license. The majority of project management software costs somewhere in the ballpark of $50 per user per month, though there are certainly less expensive and even free options.
The chart below shows what you can expect to pay for project management software for your organization.
2018 estimated PM budget* based on license cost and number of users
*Budget estimates do not include costs associated with setup, maintenance, support, etc. (Source)
Now that you know how you stack up against your peers when it comes to project management technology spending, let’s take a look at why you should be spending this much on PM tech and how it can help your business grow.
3 ways PM tech can help your business grow
We should take a moment here to acknowledge that while growth is a worthwhile goal for most small businesses, it should not come at the expense of good ethics, quality of life for you and your team, or sound business practices. One need look no further than British fintech company Revolut to see what can happen when rapid business growth comes before doing things the right way.
As it turns out, when you “move fast and break things” it can sometimes be difficult to put them back together again. Doesn’t it make more sense to move deliberately and build things?
Fear not, though. This article will only show how you can use project management technology to grow your company in a healthy way through better collaboration, better scheduling, and better budgeting.
1. Growth through better collaboration and communication
As your team grows, you’ll undoubtedly find that it is increasingly difficult to keep all the right people in the loop on your projects.
Poor communication is cited as a leading cause for failure on almost one-third of doomed projects (29%). (Source)
Even when your projects are on steady footing, good collaboration is still a key driver to growth.
According to a Gartner webinar (available to Gartner clients), enterprises that effectively communicate:
- Have a 19% higher market premium
- Experience 57% higher shareholder returns
- Are 4.5 times more likely to report high levels of employee engagement
- Are 20% more likely to report lower turnover
The flip side of all those numbers is that teams that do not effectively collaborate will have a lower market share, lower shareholder returns, lower employee engagement, and higher turnover. In other words, they will struggle to grow or even survive.
How investing in project management technology can help
Project management technology improves communication and collaboration by breaking down the walls between individuals and teams.
Good project management software allows teams to centralize documents, work on schedules and budgets together, and tag each other in updates and requests. In other words, project management software keeps everyone connected and aligned.
This helps your business grow: You may be able to keep track of what five different people are working on using email and a spreadsheet, but your time would be better spent finding opportunities for growth. And when you do find those opportunities leading to more projects and more employees working on those projects, you’ll quickly reach the point where email and spreadsheets can’t handle the load anymore.
So why not bolster your infrastructure now, before you’re overwhelmed?
Collaboration in project management tool Wrike (Source)
2. Growth through better scheduling
As you grow, a mismanaged calendar is a recipe for disaster. It leads to unrealistic or missed deadlines, last-minute scrambles, and bottlenecks.
According to the PMI Pulse of the Profession survey of almost 4,500 project management practitioners from around the world, only about half (52%) of projects are finished within their initially scheduled times. (Source)
And that number doesn’t even include the number of projects that were completely abandoned or restarted because they fell so far behind schedule.
While occasional delays are inevitable, if your projects are consistently coming in significantly late, your growth will be stunted because you won’t be delivering on time.
How investing in project management technology can help
Good scheduling starts with good planning, and project management technology is instrumental in good planning and scheduling. Let’s take a look at how.
Most project management software scheduling is built on a Gantt chart foundation.
What are Gantt charts? (Source)
In it’s most basic form, a Gantt chart is a grid of boxes that plots a list of tasks against the progression of time. Gantt charts are an indispensable project management tool because they elegantly show important dates (including project start and finish dates and key milestones), codependent tasks, and how important tasks relate to each other.
That may be getting under the hood a bit, but the important thing to know is that your project management software handles all the minutiae for you. Once you input deadlines and interdependencies, project management software will allow you to drag and drop deadlines and tasks and adjust your schedule accordingly.
For example, say that Task #2 of a project takes two days longer than expected. Your project management software will reflect this overrun in your overall schedule so that you know how to adjust to finish on time.
Project management software also helps with scheduling by sending automatic notifications when deadlines are coming up, and identifying the critical path to forecast the realistic duration of your projects.
This is all critical to the sustainable growth of your business because delays and missed deadlines will only snowball as your business grows. With collaborative calendars, schedule forecasting, and deadline notifications, project management software helps you deliver on time whether you have a team of 5 or 55.
3. Growth through better budgeting
It may be true that only 57% of project managers report completing their projects within their initial budget, but this isn’t one of those situations where you can just say, “Everyone else is doing it, so it’s OK if I blow my budgets, too.”
Overspending is not only bad for your company’s growth, it could even lead to the failure of your business: Income/cash flow shortages were the leading cause of small business closings in 2015. (Source)
Just like project management software works behind the scenes to help you stay on schedule, it also works to help you stay under budget so that you have more funds to reinvest into your business and encourage growth.
How investing in project management technology can help
Project management software allows project managers to enter all project expenses at the outset and then track them during the project lifecycle.
Say, for example, you’re repairing a vehicle. At the beginning of the project, you estimate that you’ll need:
- $350 for parts
- $195 for equipment rental
- $45/hour for labor with an estimated timeline of 10 hours of labor for the repair
So, your budget is $995.
Your project management software will track your budget throughout the project. If your labor finishes early—say, in eight hours instead of ten—you can quickly see that your project is running $90 under budget. On the other hand, if your $350 part is marked up to $375 by the time you order it, your software will let you know that you’re running $25 over budget.
This may seem like an oversimplified example, because it is, but you can imagine how helpful a tool like this can be when dealing with a project involving hundreds or thousands of different expenses.
Sound budgeting through project management software doesn’t just help your business build a nest egg through the successful times, it also helps your business survive the lean months by letting you know when to scale back on unnecessary spending.
By connecting your accounting software data to your project management software budgeting module, you’ll have a complete picture of your company’s financial health, allowing you to chart a course for growth over the next five years and beyond.
In addition to project management technology’s impact on growth in the areas of collaboration, scheduling, and budgeting, Capterra senior project management analyst Eileen O’Loughlin has identified three more reasons that make PM software a strategic investment for SMBs:
- Employee effectiveness
- Bridging the strategy-to-execution gap
- An immediate ROI for SMBs.
Check out her article, What Small Business Leaders Need to Know to Make Strategic Investments in 2019, for more on those strategies.
What are your project management growing pains?
Which project management issues does your organization struggle with? Communication, deadlines, execution? Let me know in the comments so that we can work on finding solutions together.
Technology can help with lots of problems, but only if you know how to properly apply it.
Our project management blog is packed full of great tips on not only leveraging technology to help your organization grow in a healthy way, but also the soft skills you need as a project manager and small business leader to stay on track.
Here are a few recent articles to get you started:
Information on Capterra’s Top Technology Trends for SMBs survey
Capterra conducted this survey in June and July 2018 among 715 U.S.-based SMBs with more than one employee and annual revenue of less than $100 million. The survey excluded nonprofit organizations. The qualified respondents are decision-makers or have significant influence on the decisions related to purchasing technologies for their organization.