6 techniques for accurate project estimation

When you’re cooking dinner for your family, you have a small group of hungry people wondering when it’s time to eat. You know that you have to prepare vegetables, preheat the oven, and set the table. When you tell your family, how do you accurately tell them the right amount of time to wait?

Estimating how long things will take to complete is an essential part of both dinner preparation and project management. Both require accurate information and communication with stakeholders—the more accurate the estimation, the happier the stakeholders will be.

What is project estimation?

A project estimation is an informed prediction for the time, cost, and resources a project will need from start to finish. Most project estimations use past information to make an educated prediction. For example, this information can include timelines and budgets from similar projects, past project estimation experience, and previous stakeholder requirements.

Stakeholder management and requirements gathering are incredibly important parts of project estimation, as you’ll need to know exactly what requirements are necessary to complete a project. For example, do your stakeholders need the end result by a specific date? Are there any project constraints or requirements necessary to ensure that it’s a success? All of this information can help you create an accurate project estimation. 

Project estimation is important for project managers because it helps you establish your project scope. A project scope then helps project team members understand what deliverables to complete, who is working on what tasks, and any required deadlines. 

How to accurately estimate a project

The estimation process starts with the same tool: the project management triangle. The project management triangle consists of three main variables:

• Cost

• Scope

• Time

The idea is that every project requires a perfect balance of all three variables. If you have to increase one part of the triangle, something else has to change for the project to remain balanced. For example, if the project scope increases, often the cost or the time must increase as well. If a project’s time decreases, either the scope or the cost must increase to balance it out.

The project management triangle is an important part of the project estimation process. Because of the relationship between these three variables, you can accurately estimate the third variable if you have enough information about the other two variables. 

6 common project estimation methods

If you aren’t able to estimate a project with the project management triangle, try these six additional estimation techniques. These techniques will help you uncover enough information to make an accurate estimation. 

1. Top-down estimation

The top-down estimation strategy estimates an overall time for a project, and then breaks that project down into smaller phases and tasks based on that estimated final time. This estimation technique is commonly partnered with the work breakdown structure (WBS) project management strategy. The WBS strategy helps to break down larger deliverables into smaller, subtasks.. 

Top-down estimation in action

If you think of a project as a pizza, top-down estimation is like dividing up that pizza into smaller slices.

If your team has a deadline to complete a project within one calendar year, you’ll take the one year timeline and divide the project into different parts with key milestones in-between. For example, a product development team is set to launch a new product within one calendar year. The project manager will set key milestones, such as completing the product wireframe, alpha build, product testing, and the final launch date within that calendar year. 

Using the pizza analogy, each section of the project is a “slice” and the entire project from beginning to end is the whole pizza.

2. Bottom-up estimation

Bottom-up estimation is the opposite of top-down estimation. Instead of knowing how long the project will take and then dividing it up into smaller tasks, bottom-up estimation looks at how long each smaller task will take and adds them together to estimate the final project deadline. 

This technique is similar to the critical path method. However, the main difference between the two is that bottom-up estimation takes into account every single task a project requires, while the critical path method only looks at the essential tasks that need to be completed.

Bottom-up estimation in action

Going off the previous pizza analogy, bottom-up estimation is taking all of the slices of the entire pizza to figure out how big the final pizza is. 

You have the task of developing an e-commerce marketing website, and the client wants to know approximately how long it will take. As the project manager, you list out all of the tasks necessary to complete the project, and then add up the estimated time of each task to come up with the final estimated timeline for the client.

3. Three-point estimation

Three-point estimation can make a bottom-up estimation more accurate. This technique takes the average of three different variations of a bottom-up estimation: the most optimistic timeline, the most pessimistic timeline, and the most likely timeline to come up with the final time estimate for the project. You can find these three estimations by using a PERT chart.

For example, a team may have three estimates for their project: 10 days for their most optimistic timeline, 14 days for their likely outcome, and 30 days for the most pessimistic outcome. When you find the average of these timelines, it ends up coming out to approximately 21 days. 

4. Analogous estimation

Analogous estimates look at past projects and identify specific details that are similar to the current project. The information from past projects are then applied to the current project. Then, based on the similarities and differences, the project manager estimates their current project’s cost, scope, and time. 

For example, a website development team may be tasked with updating the website for their new product. They can look back at the last time they updated the website with a product and use that to estimate the timeline for this project.

5. Parametric estimation

Parametric estimation uses historical data from past projects to estimate any part of a project including resources, budget, equipment, and project timeline. Parametric estimation is often used in combination with analogous estimation to come up with a more accurate estimate. This is because it takes both historical data and experience into consideration to create a more accurate estimation. 

For example, imagine you’re an IT project manager and your task is to install a specific software onto 150 different devices. Since you know the installation process takes about 10 minutes on one device, you would use that estimate and multiply it by 150 to get an estimation for how long this process would take. 

6. Expertise-based estimation

This estimation method is entirely based on the experience of the project manager. Very experienced project managers may know how long a specific type of project will take because they’ve completed a similar project many different times. If you’re thinking about using an expertise-based estimation, it’s best to discuss this with someone who is an expert in their field. Otherwise, it’s best to use this technique in combination with other estimation methods.

For example, a web developer may have started building websites back in the early 2000s. With 20+ years of experience, this web developer would know exactly how long it would take to build a simple website, based on all the sites they’ve completed before. 

Why estimation is important for project management

Estimations are a necessary part of the project planning process. Almost every type of project— from Agile projects to more linear waterfall projects—can benefit from project estimation. Here’s why.

Estimations keep your team on track

One common way project managers keep projects running smoothly is by making sure their teams match estimations as closely as they can. Because they know exactly how much time, budget, and resources they have available for a certain phase of a project, they’re able to help the team stay within those boundaries.

When project managers, team members, and stakeholders are all aware of the project’s estimation, everyone can hold each other accountable. To make this happen, make sure you share your project estimation in one central location, like a digital project management software. 

Requires a project plan before the project starts

To make an accurate project estimation, a project manager must first identify the key tasks that need to be completed before the project actually kicks off. This means that project managers will clearly identify the critical path and major dependencies prior to project kickoff. Establishing the critical path also gives you a high-level overview of what tasks need to be completed, and what resources you need to complete those tasks.

Having all of this information before a project begins can help prevent any confusion. Should a project member have questions or if they’re unsure of what comes next, they can refer back to the project plan that was established during the estimation phase. 

Helps mitigate risk

Project estimations can help project managers mitigate risk as the project progresses. Establishing a clear timeline before the project starts is a good way for your team to reference the project timeline and budget. To mitigate risk, add a little bit of extra time, budget, and resources to your project plan to prevent the risk from going over deadline or exceeding budget restrictions.

If your team does happen to run into issues, quickly jot down issues and resolutions into an issue log and help guide the team back towards the plan created during the estimation process. The project estimation and critical path can be used in conjunction as a reference point so the project team understands where they are in the project process.