In Agile project management, burn rate refers to the rate at which a team consumes its budget or resources over time. It is a metric used to measure the productivity of the agile team. It is a financial metric that helps track how quickly funds are being spent. By monitoring it, teams can ensure they stay within budget and can make informed decisions about project pacing and resource allocation.
What Burn Rate measures:
- Progress over time: Burn rate helps visualize how much work the team finishes each day or throughout the sprint.
- Efficiency: It indicates how well the team is pacing itself to complete all planned tasks within the set timeframe.
There are two main types of burn rates:
- Velocity Burn Rate: Measures the rate at which the team is completing work items (such as user stories) over time. It is usually tracked in story points per sprint.
- Cost Burn Rate: Measures the actual financial expenditure over time. It is usually tracked in terms of money spent per month or sprint.
Both types help in forecasting and managing the progress and health of a project.
An Example of Burn Rate
Here’s an example, illustrated with a diagram.
Example Data:
- Sprints: Sprint 1, Sprint 2, Sprint 3, Sprint 4, Sprint 5
- Velocity Burn Rate: 20, 22, 18, 25, 24 story points completed per sprint
- Cost Burn Rate: $5000, $5200, $4800, $5300, $5100 spent per sprint
Diagram Explanation:
- The blue line with circles represents the velocity burn rate, showing the number of story points completed in each sprint.
- The red line with squares represents the cost burn rate, showing the dollars spent in each sprint.
This diagram helps visualize how the team’s progress (velocity) and expenditure (cost) change over different sprints.
Another Example
Assume a project has a budget of $100,000 and is expected to last for 6 months. After 3 months, the project has spent $50,000. The calculation is as follows
- Total amount of resources consumed: $50,000
- Total amount of time elapsed: 3 months
- Burn rate: $50,000 / 3 months = $16,666.67 per month
This means that the project is consuming resources at a rate of $16,666.67 per month. If this rate continues, the project will consume its entire budget in 6 months.
