How to Manage a Budget in an Agile Project: Lessons from Your Morning Coffee and Dream Vacation

The challenges of navigating how to manage a budget in an agile project can feel overwhelming, but I recently recognized a direct parallel between the corporate world and two of life’s simple pleasures: vacations and hot coffee.

Grabbing a large Americano from my local coffee shop is my simple, low-stakes ritual I rarely think twice about. The caffeine was especially needed this week, after a few late nights planning a trip to Mexico City next month. That dream vacation sits on a foundation of budgeting, prioritizing, and even cutting back on a few Americanos here and there.

This balance between small spending and big-picture planning mirrors budget management in an Agile project, and this light-hearted comparison can teach us a few lessons about effective project planning. It’s about setting goals, continuously reprioritizing investments, and making sacrificial decisions. This is agile budgeting.

What is agile budgeting?

Agile budgeting is the flexible, interactive approach to financial planning. The framework focuses on incremental resource allocation, continuous feedback, and rapid adaptation to changing business needs.

How to manage a budget in an agile project

Agile budgeting works best when it’s flexible, adapting to changing needs and objectives while keeping an eye on the overall goal. Like saving up for a vacation, Agile budgeting must be intentional without micromanaging every penny.

Here’s how it works.

1. Define Your North Star and Set Your Objectives and Key Results (OKRs)

Similar to planning a trip, “Where are we going?” and “How are we going to experience it?” should be the first questions asked when asking yourself how to manage a budget for an agile project. In business, we often see answers to these questions reflected as as Objectives and Key Results (OKRs), a fundamental goal-setting tool in business agility.

What are OKRs and how do they support your North Star?

Your North Star acts as a compass, guiding strategic decisions and providing a clear, singular focus. It’s not intended to be directly achieved or changed frequently, but to continuously guide long-term objectives.

OKRs serve as specific milestones or targets on the journey toward the North Star, allowing for measurable, actionable steps toward fulfilling the broader purpose. OKRs are revisited each cycle, allowing for agility and adjustments based on measurable results.

Think of Objectives and Key Results (OKRs) as a strategic goal-setting framework. Objectives are your project’s end goal, while Key Results are the metrics and outcomes that indicate progress toward achieving it.

Why are OKRs important?

Setting the project’s OKRs early helps the team stay focused as a project progresses. Financial decisions along the way should align and adjust with that objective in mind.

Hyperdrive CEO Stacey Louie says metrics should incorporate the project’s budget.

“This is the piece where one of those key results needs to be budget related,” said Louie. “Be able to tie the budget and goals together”

A look at one of the world’s most iconic brands, Nike, reflects why OKRs can amplify a team’s success. After the company tapped Hyperdrive to expand their Agile capabilities across teams, Nike earned increased engagement and a reduced time-to-market. Setting clear goals in the project helped align financial decisions across each phase of the project, ultimately increasing customer engagement and cost-savings.

Learn more about how to build OKRs and how to do OKR planning with Hyperdrive’s OKR Certification Course.

2. Break Down Costs into Sprints: The “Latte” Purchases and the “Vacation” Investments

In Agile, projects are delivered in “sprints,” which are short, focused periods (usually 1-2 weeks) where a team works on specific tasks. Treat each sprint like a mini-budget period. Think of it like deciding, “How many Americanos will I buy this month, and how much will I put away for vacation?”

We see the power behind this framework with multinational financial technology company PayPal, which embraced this mindset after struggling to launch new products and features. Executives brought in Hyperdrive consultants who provided a fresh perspective toward how to manage a budget in an agile project, advising the company to utilize quarterly budgets instead of annual budgets while updating the budget forecast after every sprint. The team replaced static, annual budgets with rolling forecasts reviewed regularly. This method prompted greater agility and response to the changing market and business needs. PayPal’s agile transformation generated more meaningful feature releases and doubled the number of product releases in a matter of months. More than 500 teams became obsessively customer-focused, ultimately resulting in PayPal going public at over $45 billion dollars.

3. Prioritize Spending: Essentials vs. Nice-to-Have

Prioritizing essentials over nice-to-haves can become tough in the trenches of a project, but practicing Lean Portfolio Management can help teams define what belongs in their Agile budget.

What is Lean Portfolio Management budgeting?

Lean Portfolio Management budgeting focuses on funding “value streams” over individual projects. Lean budgeting utilizes continuous feedback loops, encouraging regular assessment of the value for each project. This ideology empowers teams to make decisions based on what stakeholders deem is most important, ultimately creating a better product for the customer. As the project evolves, the continuous feedback helps teams adjust spending as needed.

For instance, say your Agile project involves designing a new website. The priority should be building a clean, user-friendly interface. While some fancy graphics might look great, they might not be necessary in the initial stages. Prioritizing core functionality allows you to save budget for areas that can make a real impact.

4. Stay Open to Change: Adjusting the Budget as You Go

Just like a vacation budget might change if you find out about an unexpected must-try tour, Agile budgeting must be flexible. However, companies often struggle to adjust the budget when executing a project.

In a Hyperdrive survey about budgets in business, respondents named inflexibility as their biggest challenge in managing a budget. Hyperdrive CEO Stacey Louie calls the ability to adapt and innovate within agile budgeting crucial for success in today’s rapidly changing business landscape.

Another look at Nike reflects the value of a flexible budget in an agile project. With the guidance of Hyperdrive coaches, Nike’s teams stayed open to feedback, enabling strategic pivots that aligned with their Agile vision and kept teams engaged. This adaptability ultimately contributed to significant operating cost savings and positive growth results for the company, which reported OPEX savings of over $4 million.

5. Review and Reflect: Make Budgeting a Learning Process

The final step when considering how to manage a budget in an agile project requires review and reflection. Teams should periodically assess how the budget is working, celebrate the wins, and adjust for any losses.

When working with PayPal, Hyperdrive consultants encouraged executives to leverage real-time data every two weeks, reviewing the work delivered after sprints to determine whether teams were on track to meet their quarterly budget. This Agile budgeting incorporated real-time data to monitor budgets, track performance, and make timely data-driven decisions to optimize resource allocation.

Retrospectives at the end of a sprint, at the end of a quarter, and at the end of a year reveal different insights to project execution. Did certain features cost more than expected? Did budget constraints create any obstacles? Reflecting on these questions at different stages in a project can help you build stronger budgets for future projects.

Final Thoughts: Making Agile Budgeting Work for You

Agile budgeting doesn’t have to be a rigid, rule-driven process. Managing your budget should share similarities with planning a trip, staying flexible for spontaneous adventures along the way. Start with a clear goal, break the budget down into manageable sprints, prioritize wisely, and stay open to adjusting as new insights emerge.

Just like that dream vacation to Mexico, Agile budgeting is about knowing when to invest and when to save, keeping the focus on what matters, and ensuring that every dollar counts toward a successful journey.