How to estimate projects? The Complete Guide

Project estimation is a crucial point for a project management team to have a precise idea of workload, cost, and many other things to consider while starting a project. Project estimation can be followed by using different domains like construction, IT, engineering, agriculture, and finance, etc.

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A project manager is responsible to make the right estimation before establishing a huge economical investment. To have an estimation of a project is not easy and accurate always, but it is necessary to do this to meet the expenses, schedule the tasks and hire a skilled team.

If estimations are not made, then it is not possible to have a better plan for your project and you do not know that the resources you have are enough for the completion of the project or not. This situation may lead you to quit the project that causes your efforts, investment, and resources to go waste.

A complete guide on How to estimate projects

Some important tips to estimate the projects are shared that will aid you before starting a business project. So, let’s start to understand How to estimate projects.

Core components of project estimation are:

  • Estimation of budget
  • Estimation of resource
  • Estimation of effort

1. Top-down estimation

Top-down estimates are made by the project manager along with the other upper management that include the financial manager, the owner, and the experienced jury of the company. Top-down project estimation is based on past experiences and specifying the tasks to start a project.

  • You can say that top-down estimation is an approach to set the goals and mission statement of a project and then to select the team members accordingly to achieve these goals.
  • This estimation requires the division of work into chunks to make it more precise and clearer for team members. After setting a goal, the tasks are expanded further into small pieces.

By considering the past experiences about the same project, the needful steps are defined and categorized to team members showing them a big clear picture. The project manager makes it easy to identify the major tasks that are further refined by the team.

A rough estimation of the timeline, cost, and budget is made by a project manager that is not accurate at all but provides an initial direction to handle the project. This initial rough sketch about the budget can be of advantage to satisfy your client about the estimated budget and duration. But it is just prediction based estimation without knowing the details and falling into processing.

2. Bottom-up estimation

The bottom-up estimation seems the same as a top-down estimation as it is also based on past project experiences but it is more accurate and precise estimation than top-down estimation. This type of estimation makes the project manager most confident about the estimated cost and timeline for completion of the project.

  • There are very few chances to vary with estimated cost and duration. Bottom-top estimation is more detailed as it is made after a long study of the project and the goals set before starting it.
  • The project manager defines every task to team members individually scattering them from groups as made in top-down estimation.

Bottom-up estimation proves right about budget, schedule, and the use of resources. Therefore, you can say that this budget is helpful to make distinct differences in expected and actual cost, time duration, and resource quantity used.

If you follow the bottom-up estimation technique you will require a long time duration to develop a plan. More resources are taken under consideration to make an accurate estimation like you will need transport to make a field tour to have a detailed study about the site.

For which you will estimate the number of laborers to make hiring; you will decide the use or resources and yes, the exact deadline to satisfy the client.

Corresponding estimation:

This type of estimation is based on comparing the same type of past project with a recent project. This estimation provides support when you do not have enough information about the project cost and time required to complete it.

When enough details are not shared with you by the client or the client does not know more about the project and ask you to estimate the cost to meet the expenses to complete the project and the resources needed by the team member to make achieve the set goal.

The main elements to set a corresponding estimation are:

  • Information of past and recent project are compared
  • Suppose the cost for the previous project was one million and it is estimated that the cost of this project will also be the same
  • Similarly, the duration of time is compared and estimated
  • A project of the same nature is considered and compared to make a good estimation
  • Tasks performed during the last project completion are preferred to get fruitful results

This type of estimation sounds like a top-down estimation and is not accurate all the time. It can be of advantage if you have dealt with the same nature of the project before.

3. Analytical estimation

It is more accurate than other techniques as it discusses auto calculations to make a more precise estimation of your project. Analytical estimation is more accurate as it allows you to estimate a more precise time frame and cost of the project.

You need to collect some basic information about the recent project and match them with the previous one and find out the similarities. After that, you set the strategies to work on it. You will be able to define units to achieve the goal.

By estimating the time, you are going to devote for each activity needs to be framed out and then take the unit with you as your helping hand. Units may be the tools, the machinery, the software, or the workers. Be very clear about the figure you are going to take for project completion.

After that align the previous project's to-dos and make a clear calculation about the cost and timeline so that you would be able to estimate it accurately for a recent project.

It does not depend on the previous data collected but it also depends on the recent project's demand and need to set a result oriented estimation that will develop trust between you and your client or boss.

This was a proper explanation to the question how to estimate projects.

Some important steps to make a successful estimation for the beginners:

You can also take some managerial steps to work in a unique and effective style like you can consider the following techniques

  • Have a thorough study of profile your team members

When you are going to work with teamwork like a leader and manage time to know about the work history of your team members. It will help you to find a suitable person for a specific task to perform.

You can direct your team to perform their tasks by asking them to organize their time according to their task. This will help you to keep your team on track and analyze the point where your project is lacking and what is the reason behind it. After that, you will be able to sort it out in an effective way.

  • Have a study on the company’s working style

Different companies do work in different styles. Some companies launch small-scale projects due to their financial status and some work on a large scale and expensive project as they can bear their expenses.

It will be better to know the company's history, how they work and what they planned in the past. It will help you to make a good estimate of project cost and time.

  • Split your project tasks into small chunks

After having good communication with your client and knowing the objectives of the projects you better know what task you have to perform to meet the demand of your client he is expecting from this project.

You need to divide the tasks into subtasks so that you can work in detail with your team by discussing the role and performance. When the tasks are divided and subdivide it is very clear for a person to understand the objective behind it.

After that, you will be able to know how many workers you need to perform these specific tasks, which type of tools and materials you need to do your job properly. By defining these things you can estimate the cost and time for project completion.

  • Make your estimation precise by developing a team Gantt chart

The most effective management skills demand to schedule your tasks properly to manage them on time. You can do this by developing a team Gantt chart. It will be helpful for you to estimate how many days or months your project will be completed and how much expense you should expect till the completion of the project.

Conclusion:

Different project estimation technologies have been introduced officially and can be of advantage for beginners to estimate for a small project. Previous experience plays an important role to deal with the same project nut there is no need to worry if you are new.

You can follow the steps discussed above at the end of the article to make a good estimation of your project and make your client or boss satisfied. You will know how to estimate projects by following above guidelines.

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