The Best Tips for Accurately Estimating a Project

Project management has existed forever now and with it – project estimation. Now it’s more important than ever to estimate projects properly, with everything changing so quickly. Decisions must be made almost instantly, and with badly estimated projects it’s easy to make a bad choice.

Do you want to know:

• What project estimation is and why is it crucial?
• What are the major parts of project estimation?
• The best tips to use when estimating projects?
• You’ve estimated the project – what to do next?

If your answer is yes, grab a cup of coffee and read on!

What exactly is project estimation?

Project estimation is a part of project planning. It’s a process of forecasting or approximating the project parameters like cost, time, effort, etc., for successful completion of the project. As the definition suggests, estimation begins before the project starts and ends with it. You should revise your estimations in the course of the project, to make sure that they’re most adequate to the current situation.

Why is it so important?

First of all – you can’t start planning your project, without knowing the basics. How to schedule tasks, if you don’t know how much time you’ve got and how much time the task will take to complete? Estimation is an essential part of planning. It prevents your expectations from getting too high or too low and enables you to make work more organized for your entire team.

What should you estimate?

There are 3 major parts of project estimation: effort and time, resource, and cost. The three estimates combined make up project estimation as a whole.

Estimating a project can be a daunting task and breaking it into smaller parts will make it ten times easier, and possibly even more accurate. Also, Estimating effort and resources will shed new light into the costing of a project.

Effort and time estimation

You can do it in a few simple steps. First – ask yourself what needs to be done for the project to be completed. In other words, what do you want to achieve with this project, what’s your goal? Then, you can start thinking about the smaller tasks that need to be done. This approach is called “top-down” because you start with defining your final deliverable and break it down into smaller pieces or tasks, called work packages. This is a good technique when you know the big picture well.

Sometimes, however, you may not have all the information needed to imagine what the final result should look like, but you just know what needs to be done and organize the smaller tasks into bigger work packages. This technique is called bottom-up approach.

Then, after you’ve gained insight into the scope of the project, you have to assess how long it’s going to take. It’s impossible to know it for sure, that’s why it’s called “estimation”, but there are ways to make it more accurate. And one of the best is analogous estimating.

Analogous estimating requires you to keep track of the hours of work that each team member works on a project. Having accurate data about time spent on a project will help you to create more accurate forecasts and in turn make better decisions.

Best tip #1:

Use helpful software. Your team members already have lots of work on their head, so having a seamless time tracking solution is a must if you want to have more accurate estimations, without negatively impacting your employees.

One of the best tools that offer hassle-free time tracking is TimeCamp. You can add projects and tasks, and keep track of time spent working on them.

Resource estimation

Resources of the organization consist of time, knowledge, people, materials and equipment. We’ve covered the topic of time estimation already, but another very important aspect of resource estimation is estimating workloads for the team as a whole and for each of the team members.

Best tip #2:

Work with your team to estimate effort for each resource assigned to the task. It will help you to make sure that your team is not burned out at the end of the project.

Best tip #3

Use technology to your advantage. In TimeCamp you can work with your team, assign them to projects and allow them to move between tasks, making their work more flexible and enabling you to have teamwork under control.

Cost estimation

It’s another crucial element of project estimation. Cost estimation is the process of forecasting the cost of completing a project. There are a few different types of costs you need to take into consideration:

1. Fixed costs
   

   They are the easiest to account for because they don’t change throughout the life-cycle of a project. Fixed costs are for example for assets needed for the completion of the project or your rent – the things that usually don’t change from month to month.
   

2. Variable costs
   

   The opposite of fixed costs – the ones that are changing throughout the life of the project. Examples are the salary of staff, cost of labor, fuel, and so on.
   

3. Direct costs
   

   The costs incurred by your project are direct costs. If your project is to build a robot, then the direct costs consist of the cost of buying tools and parts, hiring a robot specialist and a programmer, for instance.
   

4. Indirect costs
   

   Those costs can’t be attributed to one specific project. If your employees need computers in their work in general, but they will also use it for this project – this is an indirect cost of the project.
   

5. Sunk costs
   

   These are the most disliked, but unfortunately unavoidable costs. They have been incurred in a project, but haven’t produced any value towards the project’s objective. Back to the robot example, all of the screws you’ve lost, they’re sunk costs. You’ve paid for them but never used them to build your robot.

What is the difference between cost estimating and costing?

Estimating costs happens before the project is over. It means calculating and assessing the likely cost of the end result of the project. Back to the robot example again, estimating the cost of the end result of your robot building project is done before the project starts. You have to assume how much you’ll have to pay your employees for the time they will be working on this project and how much will needed materials cost. Also, you should assume any unexpected costs that may arise during the life-cycle of a project.

Costing, on the other hand, seems to be easier, because it’s the process of finding the price of a project or a product after it was finished by adding expenses from different areas of a project that incurred in the process.

Best tip #4

Plan for inflation. Even your theoretically fixed costs (such as rent) may vary depending on the duration of your project.

Best tip #5

Use budgeting tools. TimeCamp can help you to keep your project’s budget under control. You can set a time budget or money budget for each task, as well as enable notifications when you come close to exceeding your budget.

You’ve got your estimation and plan – what now?

Your estimation process doesn’t end when the project makes it into realization. You should be revising your project estimation to adjust budget, deadlines, and workloads. This may be very difficult if you’re not tracking time and expenses. Without the needed data about the project, your revisions of estimate as well as estimations of future projects may not be as accurate as they could be. This is when project tracking software comes in handy.

TimeCamp can help you keep track of your project budget – both in hours of work and money. Also, you can track time both manually by clocking-in and out, or automatically with TimeCamp desktop app and Google Chrome extension. You can also add billing rates to specific users, groups, and projects.

All in all…

Estimating a project is very difficult, but the more information about the past projects you have, the more accurate it gets. It’s important to remember that after all, estimation is not meant to be 100% accurate, and it will vary in the life-cycle of the project. However, it must be somewhat adequate to be helpful in the decision-making process.