The cost of a Story Point

In general I’m highly sensible to the cost of things and recently I understood how I could leverage this to prioritize the backlog.

By thinking in terms of the cost per Story Point delivered. As the name suggests, it represents how much a Story Point costs to be delivered by a Dev team. It’s purely a back of the napkin calculation, but it gives me that very last input to prioritize the backlog.

Why should you care?

Prioritization is not always straightforward. It takes multiple inputs and, involuntarily, one of them is our gut feeling — and thanks God! If it would be so straightforward, the Product Owner would be just another app and probably implemented as a state machine. Our mission is to reduce as much as possible the percentage of gut feeling involved and back our decisions with as much diverse data as possible.

The cost per Story Point idea came up when I had these two User Stories competing for a slot in the Sprint. The data I had was validating both User Stories, both would bring added value to the stakeholders and both had pros and cons. There was no reason to leave one behind the other, they were just the same priority. And then I thought “Would I pay this much for this User Story? It sounds too expensive.“. Immediately it was clear in my mind.

Btw, what’s the cost of a Story Point in Dublin?

Finger in the air, let’s imagine a Dev Team is composed of 1 Senior, 1 Mid and 2 Junior and costs 195k per year (gross salary). Considering 11 months delivering points (the other 1 month is annual leave) 18k is the Team’s cost per month; 800€ per day; 8k per 2-week Sprint. Considering an average velocity of 30 Story Points, each Story Point will cost 265€.

Personally, analyzing a User Story from the perspective of its cost to the company feels slow motion, like The Matrix. You see things you didn’t realize before. Almost like if you — customer — would be the one being invoiced to have this User Story delivered. “Adding an Order By option to a table is just 3 Story Points, but spending almost 1k€ for that seems a bit too much for the time being. De-prioritize”.

Use with caution

I find this technique useful but I’m aware that it falls on the gut feeling category. It’s actually the quantification of my gut feeling. In the end it represents how you perceive its value and it can turn out to be dangerous. The Product Owner must not forget that his job is to represent the customer and how he feels towards the User Story.