During the project planning phase, it’s best practice to estimate what you’ll be needing to get the job done. Project estimation methods take constraints such as cost, scope, and time into account to accurately budget funds and resources needed for project success. In this guide, we’ll cover each estimation method and the scenarios they’re best suited for.
Like knowing whether to pack for sun or snow, calculating the requirements of a project before implementing it can save you from making some uncomfortable mistakes. If you thought wearing a bikini in a snowstorm was awkward, try telling your boss you’ll be needing a deadline extension for a critical deliverable or asking for a few extra thousand dollars to complete your project.
Project estimation methods can save you from being caught off guard when planning your projects. While it’s impossible to account for every possible scenario that may arise, you and your stakeholders can feel confident you have what’s needed for your project to be a success.
Project estimation methods are techniques that help you accurately estimate the time, cost, and resources required to complete your project. While an accurate estimate may seem like an oxymoron, these calculations are needed to ensure you, your team, and any project stakeholders are all in agreement on what’s needed before a project begins.
Accurate estimates are paramount for sound project planning. However, during the early stages of a project life cycle, you may not have an exact sense of all of your project requirements.
Use estimation methods to create rough calculations of what’s needed to successfully complete a project. Traditionally, a project manager implements these methods right after the project initiation phase to document projected project constraints. However, if things don’t go according to plan, you can always refer back to these methods to update your estimates.
As opposed to traditional project planning, Agile projects use an iterative approach to deliver a project in short sprints. Because of this structure, your project will go through an initial forecasting phase to lay out project features and requirements, then re-forecast during each sprint. To incorporate project estimation into your Agile workflow, use these estimation techniques during the sprint retrospective to update project requirements based on the outcomes of the last sprint.Read: Create a better project plan in just 7 steps
With project estimation techniques, you can construct a ballpark estimate that roughly aligns the three main project constraints: cost, scope, and time.
You’ll need to balance these three elements in every project, and doing so can be challenging because they all affect one another. For example, your project can only stay within scope if your budget and time allotment stay steady. If you want to add on another product feature or ad campaign that you didn’t discuss in the planning phase, increase your time and budget to account for your larger scope.
Cost constraints include the overall project budget and anything of financial value required to get the job done. Put simply, if you don’t have enough money to complete your project, it will fail. That’s why it’s crucial to accurately estimate your project’s cost early on.
Items that may affect overall cost include:
Cost management isn’t a one-and-done task. Throughout your project, you’ll want to keep an eye on how closely you’re sticking to your proposed budget. It’s also important to stay flexible about changes that may affect cost.Read: Project accounting: How to weight project cost-benefits
Project scope refers to the exact outcomes, goals, and deliverables that are included in your project. Your scope technically isn’t an estimate, but stakeholders may expect to see scope risk and scope tolerance ranges when planning your project.
For example, if you have leftover money or time after mandatory deliverables are complete, you may be able to incorporate some additional deliverables before the project ends. The same goes for the opposite scenario—if you find yourself running out of time or money, you’ll want to know what deliverables aren’t necessary to complete ahead of time.
Project scope relies entirely on time and cost, meaning you’ll need more of both as your scope grows. Because of this, you’ll need to be aware of scope creep and create detailed project plans beforehand to prevent it.
Time management plays a huge role in project planning. Time constraints refer to the set processing times it takes to complete each task in a project. During the planning stage, you must be able to estimate both project duration and individual tasks needed to complete the project scope.
You should also factor in potential delays, risks, and uncertainties to give your stakeholders the most accurate time range. Give yourself some breathing room when things don’t go as planned—and know your project won’t fail if you have to reschedule.Create a project estimation template
While they may not be included in the triple constraints of project management, risk, resource, and quality constraints may present themselves throughout your project life cycle.
Project risks are any unexpected occurrences that can affect your project. Scheduling errors, contractor delays, lack of communication, and scope creep are all examples of project risks to consider in the planning phase.
But “unexpected” isn’t always bad. Some risks could have a positive effect on your projects, like approval for a grant or the development of a new technology that’ll save you valuable time.
Project resources are the things you need to get the project done, such as people, materials, software, contractors, and more.
Resource and cost constraints go hand in hand because, put simply, resources cost money. Without proper resource management, your project can experience timeline delays, decreased quality, and a surplus of resources, ultimately leading to higher costs.
Project quality is the measure of how well your project deliverables meet expectations. Projects that must meet quality standards like required safety regulations may need more money, time, and resources than those with fewer requirements.
However, there are aspects of a project unrelated to the above constraints that can affect quality. These can include a lack of communication, too many project changes, a lack of necessary skills, and more.
Depending on your scenario, one estimation method may prove more useful than another. Keep reading to learn how each type of technique can help you plan for your project’s success.
Once the scope of the project has been identified, the top-down estimation method breaks down the project into distinct phases, work, and tasks, depending on your project’s work breakdown structure (WBS).
With this estimation technique, primary stakeholders with ambitious visions can create an overall timeline or budget for a project without knowing all the particulars. That plan can then be broken up into smaller chunks, leaving the details to others with more knowledge about the project specifics.
For example, say your company plans to release a new product within the next six months. That would involve almost every team member, from developers to marketers. Because you know your overall timeline, you can break down the project into smaller phases with discrete timelines assigned to individual teams.
Unlike top-down estimation, the bottom-up estimation method looks at individual phases of the project first in order to define the overall timeline or cost.
Bottom-up estimation is often preferred over top-down estimation since the people doing the work are the same ones setting the timeline and budget. It’s also likely to result in more accurate estimates.
If you were to look at the above example again, you may ask yourself how this management team decided on a six-month timeline for a product release. If management had consulted with each individual department first, they may have concluded that eight months was a more realistic timeline.
While bottom-up estimation isn’t always an option when pressed for time or money, managers typically prefer it to top-down estimation. However, while this method is more accurate, it does take a bit longer to put together.
The three-point estimation method takes an average of three figures to determine the amount of work needed for an individual task:
Your best guess
Your optimistic guess
Your pessimistic guess
This technique is often paired with the bottom-up method to create even more accurate estimates.
For example, say you’re planning the development phase for your product. If all goes according to plan, you should have a beta version within three weeks—their best guess. If the team is able to get approval for better software, then development could be as short as two weeks—an optimistic guess. But if they run into multiple error messages or malfunctions, the task could take up to five weeks—their pessimistic guess.
By taking the average of three, two, and five weeks, you can reasonably predict the task will take about three and a half weeks.
The analogous, or comparative, estimation technique compares similar past project requirements to create an estimate for your current project. Combine this method with the top-down technique to break down the overall project into discrete phases.
Let’s look at our product release again. If you released a similar product in the past that took eight months to complete, you can reasonably expect this project to take eight months. With an overall timeline of eight months, you can start breaking down the project into smaller tasks.
Use analogous estimation when you have little to no data on your current project. No two projects are alike, but comparative estimation can still give you and your team a rough idea of what’s required.Read: How to capture lessons learned in project management
Parametric estimation also uses historical data from similar projects but attempts to adjust for differences between past and present projects.
For this estimation technique, a set of algorithms calculate the estimate. Let’s say it took your marketing team four weeks to develop a campaign for the last product release. Well, that was a year ago, and your team is now twice as large. If every person on the team is involved in the campaign, you can assume it will take only two weeks this time to complete the same task.
Often the quickest and easiest of techniques, expert judgment relies on an expert’s “gut feeling” to estimate projects.
This method takes skill, expertise, and specialized knowledge into account when drafting an estimate. You may have to collaborate with other members of your team, project stakeholders, consultants, or subject matter experts to get the information you need.
Expert judgment is a useful technique if evaluating risk response or project opportunities is a priority for you. However, be aware of biases, such as overconfidence, that could skew your data.
Having an accurate estimate of what’s required to complete your project will help protect you from being blindsided along the way. While you can’t account for all things, having time, scope, and cost estimates before developing your implementation plan is crucial to your overall project success.
Project planning software can help you stay on track when managing project constraints and tasks. Using online software to manage budget, deadlines, schedules, and resources means you can edit in real-time, helping you stay flexible when things don’t always go as planned.Create a project estimation template