Project Estimation 101: A Complete Guide

Before starting work on a project, there is some serious prep work that has to be taken care of.

You need to make plans, set budgets, and allocate resources — as well as complete an exhaustive list of documents so that your team has a rough idea of what the project entails.

But before you can do any of that, you need to cover the most basic facts about the project first: its size, its scope, and its timeline. You essentially need to come up with a ballpark figure for how long the project will take and how much it will cost.

This is what we call project estimation.

Estimation might seem like a daunting task, but it doesn’t have to be.

In this guide, we’ll show you everything you need to know about estimating your projects correctly — from the basics of what should be included in an estimate to more advanced tips and tricks.

Let’s get started!

What is Project Estimation?

In simple terms, project estimation is the process of coming up with a numerical value for how long a project will take to complete, and how much it will cost.

This might sound like an easy enough task — after all, you probably have a pretty good idea of how long it will take you to complete a project, right? And as for the cost, well, that’s just a matter of adding up the costs of all the materials and resources you’ll need.

However, estimation is actually a very complex process that requires taking into account many different factors — some of which might not be immediately obvious.

For example, you’ll need to account for things like:

• The experience level of your team and their availability
• The amount of time that can realistically be spent working on the project (taking into account other commitments)
• Potential disruptions or delays that could impact the project’s timeline
• The amount of time needed for things like testing, QA, and revisions

As you can see, there’s a lot that goes into estimation — which is why it’s such an important part of project management.

Not only does estimation give you a better understanding of the work that needs to be done, but it also allows you to set more realistic expectations for your team, your clients, and yourself.

What Should Be Included in an Estimate?

Now that we’ve covered what estimation is and why it’s important, let’s take a look at what should be included in an estimate.

Generally speaking, there are three main elements that should be included in every estimate:

• The work to be done: this is a detailed description of the project itself, including everything that needs to be accomplished in order to consider the project complete.
• The time required to complete the work: this is an estimate of how long it will take to complete the work, broken down into smaller time increments (days, weeks, etc.)
• The resources required to complete the work: this is a list of all the materials, tools, and other resources that will be necessary to complete the work. This might include things like personnel, equipment, and software.

It’s also worth noting that estimates can — and should — be revised as the project progresses. As you learn more about the project and its requirements, you may find that your original estimate was too optimistic (or too pessimistic).

In these cases, it’s important to update your estimate so that everyone has a more accurate understanding of the project’s timeline and budget.

Project Estimation Techniques

Now that we know what should be included in an estimate, let’s take a look at how to actually calculate one.

Bottom-up Estimation

There are a few different methods that can be used to calculate an estimate, but the most common is known as bottom-up estimation.

This method involves breaking the project down into smaller tasks, and then estimating the time and resources required for each task. Once all of the tasks have been estimated, they can be added up to get a total project estimate.

For example, let’s say you’re estimating the time required to build a simple website. You might break the project down into tasks like:

• Researching the topic and coming up with a list of content that needs to be created;
• Writing the content for the website;
• Designing the layout and look of the website;
• Building the actual website;
• Testing the website to make sure everything is working as it should

Each of these tasks can then be further broken down into smaller subtasks, and so on. Once all of the tasks have been estimated, you can add up all of the individual task estimates to get a total project estimate.

Analogous Estimation

This is where you use the estimation of a similar project to estimate your current project.

For example, if you’re building a website that is similar to one you built last year, you can use the same process and timeline to estimate this year’s website.

Parametric Estimation

In this data-driven age, mathematical models are all the rage. This method is no different, and involves using mathematical models to estimate the project.

For a project where you are developing a piece of software, you might use the number of lines of code in a project to estimate the amount of time it will take to develop it.

3-point Estimation

If you choose this method, you will come up with a best case, worst case, and most likely case scenario for the project, and then take the average of those three numbers.

Delphi Estimation

When following this method, you ask a group of experts for their estimates on the project, and then take the average of those estimates.

It’s important to note that bottom-up estimation is the most common method, but there are a number of other methods that can be used as well.

The most important thing is to use the method (or combination of methods) that you feel will work best for your particular project.

Estimate Accuracy

Once you’ve calculated your estimate, the next question is: how accurate will it be?

This is a tricky question to answer, because accuracy is relative. An estimate can be considered “accurate” if it’s within the range of what you expect the actual project to take.

For example, if you estimate that a project will take 40 hours to complete and it actually takes 45 hours, that’s considered an accurate estimate.

However, if you estimate that a project will take 40 hours to complete and it actually takes 60 hours, that’s considered an inaccurate estimate.

It’s important to keep in mind that estimates are always going to be somewhat accurate — there’s no such thing as a 100% accurate estimate.

For resource estimation regarding employees, you can use timesheets to gauge whether your estimates are accurate — but the goal is to get as close as possible so that you can plan and budget accordingly.

Tips And Tricks for Accurate Estimates

There are a few different things that you can do to improve the accuracy of your estimates. Here are some tips and tricks to keep in mind:

• Make sure you have a clear understanding of the project before starting to estimate. The more information you have, the more accurate your estimate will be.
• Break the project down into small tasks and subtasks. The more granular your estimate is, the more accurate it will be.
• Take your time. Don’t rush your estimates — they’re important!
• Use historical data to inform your estimates. If you’ve completed similar projects in the past, you can use that data to inform your current estimates.
• Use estimation tools and techniques. There are a number of different estimation tools and techniques available (like bottom-up estimation, which we mentioned earlier). Use whichever tool or technique you’re most comfortable with.
• Get input from others. If you’re not the only one working on the project, make sure to get input from your team members. Their estimates will help improve the accuracy of your own.
• Make sure your estimates are realistic. It’s important to be realistic with your estimates — if they’re too high, you’ll miss your deadlines; if they’re too low, you’ll end up going over budget. Don’t let your emotions cloud your judgement.
• Update your estimates as the project progresses. As the project goes on and you get a better understanding of what’s involved, make sure to update your estimates accordingly.

The Bottom Line

Project estimation is an important part of the project planning process. By taking the time to accurately estimate the size, scope, and timeline of your project, you can set realistic expectations and avoid surprises down the road.

In this guide, we’ve covered everything you need to know about estimation, from the basics of what should be included in an estimate to more advanced tips and tricks for optimal estimation.

Keep in mind that estimates are always going to be somewhat accurate — there’s no such thing as a 100% accurate estimate. The goal is to get as close as possible so that you can plan and budget accordingly.

With these tips in mind, you should be well on your way to creating accurate estimates for your next project.