Project Estimation is an underrated skill that has not been talked about much. Despite 35,00,00,000 search results for the query as we speak, project estimation still remains a topic that needs education.
If you're an aspiring Product Manager, you need to be proficient in project estimation. We’ve put together this blog post which will throw light on the meaning of project estimation, benefits of project estimation, its types, and other bonus topics.
What is Project Estimation?
Project estimation is the process of analyzing available data to anticipate the time, cost, and resources required to finish a project.
It includes 6 key components which also prove to be its benefits. Learn more about it as we explain each of them below.
Key Aspects of Project Estimation
Project Estimation evaluates 6 key aspects where each of them plays a critical role-
1. Cost: The budget is the primary aspect that the planning of a project begins with. For accurate prediction of the cost, you need to assess the scope, timeline, and resources. When this is clear, your rough estimate of the project is ready.
The foundation for your estimation can come from your previous projects. If you don’t have historical data, seek help from people who have undertaken projects of similar scale.
2. Scope: Project Scope refers to documenting your project where you will define goals, deadlines, and project deliverables. If your project scope has clarity, you will achieve all your goals and deliverables on time.
Other critical information such as processes, stakeholders, assumptions, and challenges are addressed. The project statement of work (SoW) mentions all the details including SDLC, core meetings, and status updates.
You can get a concrete understanding of the cost, duration, and possible problems if you estimate the scope accurately.
3. Time: Time is another important factor you need to consider when estimating a project. When the project scope is clearly defined, estimating the time required to complete every milestone gets easier. The time frame should be long enough for management and supervision.
High-priority tasks should be allocated more time than others. You need to consider other factors like meetings, holidays, disturbances, and QA failures.
Estimating your project schedule allows you to accurately define the deliverables and meet client expectations.
4. Risks: Project Risks are inevitable events that could derail your project. Estimating the risks and the magnitude of damage they can cause can help you come up with strategies to mitigate their damage.
You can prioritize and develop risk management plans so that projects can progress without major interruptions.
5. Resources: Resources are assets that one needs to get the job done. Resources are limited and often get exhausted if there is no right planning. It includes materials, tools, software, labor, subcontractors, and the like.
Resource Management helps you confirm all the resources you require are available and can be used as efficiently as possible.
6. Quality: Quality is an indispensable aspect that can’t be compromised. Products have to undergo quality tests and meet certain regulations. Estimating quality helps you critically evaluate the other five aspects of project estimation.
All the six aspects are interconnected and estimations for one aspect have a bearing on the other five aspects, so it is recommended to use one project estimation technique for evaluating all the six aspects.
5 Types of Project Estimation Techniques
Project estimation techniques are always in vogue. Here are the six types of project estimation techniques you should know in 2023 and beyond-1. Top-Down Estimate
The Top-Down Estimate allows time for the whole project and divides the project into phases, work, and tasks based on the Work Breakdown Structure (WBS). This helps in determining if the appropriate cost is assigned so that modifications can be done if need be.
This method is best suited for single-owner businesses with limited resources. However, this method is based on guesses and has less scope for changes in the budget.
2. Bottom-Up Estimate
The Bottom-Up Estimate is the inverse of the Top-Down method. In this, a single task or aspect is estimated and later the overall project estimate is done by combining all the single task estimates.
The Bottom-Up method fares better in comparison to the Top-Down estimate since it is more accurate but is more time-consuming.
This method helps in monitoring the project timeline and budget. The downsides include it is time-intensive and requires a large amount of resources. The project has been elaborated on each step and there is a high chance of cost overestimation.
3. Analogous Estimation
Analogous Estimation is a project estimation technique that refers to past data to determine the estimation. It is also known as the comparative estimation method and is similar to the top-down approach.
It provides a rough estimate but may not be always accurate since data can be subject to changes due to time and inflation. Two projects can be similar but not identical which can result in errors.
4. Parametric Estimation Model
The parametric Estimation Model is an improvement over the Analogous method which it uses historical data and adjusts it using pro-rates to estimate the current project.
This method gives accurate estimates and is flexible to accommodate changes in the budget. Despite its many pros, it is not ideal for digital projects as it can lead to price disparity.
5. Three-Point Estimation
The Three Point is a mathematical approach that uses three durations for a task instead of one- Optimistic, Pessimistic, and Most Likely. The average of these 3 is taken. This is also called the Program Evaluation Review Technique(PERT).
This technique gives accurate estimations and thereby minimizes the risks. It is time-consuming and is complicated to learn.
What is the ideal time for estimation?
The ideal time for estimation varies according to the nature of the projects.
Agile projects take an iterative approach and projects are divided into sprints. Estimation can be done during sprint planning or during sprint retrospectives.
Who estimates the projects?
The project team is responsible for the estimation of the project. The onus of verifying and evaluating the data estimates lies with the project manager.
The accuracy of the estimates is dependent on the team's efforts so the involvement of the subject matter experts can help deliver precise estimates.
What are the must-have Project Estimation tools?
Any project estimation is only good if it can create-- Solid Project Data
- Project estimate tools
Any good project estimation tool can refine data by recording, making changes, and correcting errors to improve future project estimates. It also helps in sharing project estimates with stakeholders without hassles.
Wrapping Up
Project estimation should be based on data and mere guesswork. The above five project estimation techniques can help you out. Choose a technique that suits the nature of your project.Knowing when to estimate and whose responsibility it is, can make project estimation transparent and accurate.
