6 Tried and Tested Project Estimation Techniques for Project Managers

If a large amount of the work you do as a business is broken up into distinct projects, you have a lot to gain from processes that help to make those projects as efficient and productive as possible.

One of the most important practices to work into your strategy is project estimation, which can help you come up with informed predictions about anything from how much a certain amount of work will cost to the potential risks that could hinder your progress.

A crucial part of this is finding estimation techniques that are well-matched to your wider planning process and the organization as a whole.

What are project estimation techniques and why are they vital?

You can use project estimation techniques to predict key aspects of the various tasks and initiatives you undertake as a business.

They’re most commonly used by businesses that want to forecast and plan for the following key areas of their projects:

• Cost: It's essential to have an idea of the costs involved in a project, so you can plan your budget and make sure you have the necessary funds in place to achieve your intended outcomes.
• Time: The ability to create a well-informed outlook of how long a project - and the various tasks it encompasses - is likely to take will make your planning much more effective.
• Scope: The work that needs to happen to bring a project to fruition. Understanding scope helps you ensure you have the right skills and resources in place to complete your most important tasks.
• Risk: There are many possible occurrences and obstacles that could affect every project you undertake, so it's wise to use methods that help you predict risk and plan how you will respond to adverse events.

If you understand project estimation techniques and you can find approaches that deliver positive results, you'll achieve higher standards of forecasting in all of these crucial areas.

6 estimation methods to use in project management

So what project estimation techniques do you have to choose from, and what are the defining features of each one?

1. Expert judgment

The expert judgment model can work well for businesses that are able to call on people with extensive experience and knowledge of past projects. It can be particularly effective if those individuals are also familiar with the key activities and business functions that will be crucial to complete the project you're planning.

These experts can use their insights and intuition to provide estimates relating to the most important elements of your forthcoming projects.

2. Top-down estimation

You can use the top-down model if you have an overall picture of the work involved in a project, your final deliverables and the budget you have available. Once you're clear on these all-encompassing ideas and figures, you can start to break them down into separate components, phases and activities.

This can be a useful way to get started on planning a project and making predictions, but it might lack the detail and specificity you'll need at later stages.

3. Bottom-up estimation

Effectively the opposite of the top-down method, bottom-up estimation requires you to make judgments about the various tasks or activities involved in a project one-by-one, and then combine these to come up with an overall forecast.

Evaluating the time required to complete each section of a project, for example, can give you a good idea of how long the entire process will take. This is useful when you need detail and accuracy, but it can be a time-consuming approach.

4. Comparative or analogous estimation

If you're embarking on a project that has key elements and goals in common with previous initiatives, it makes sense to apply what you learned from those past activities when formulating your estimates.

You might assume, for example, that planning and launching a marketing campaign to promote a new product will take the same amount of time as your last project of this kind. Make sure the past events you're using to provide guidelines were successful, so you're not modeling future projects on past failures.

5. Parametric estimation

The parametric model is a more scientific and slightly more complex approach that can give accurate results. It relies on the analysis and application of data from past projects to make your estimates more reliable.

A construction firm, for example, could analyze its previous jobs to calculate the time and costs involved in building one square foot of a typical home. The company could then use these base numbers to make estimates for future jobs.

6. Three-point estimation

The three-point method enables you to come up with three forecasts for key aspects of your forthcoming projects: optimistic, pessimistic and most likely. You can then take an average of these three predictions to generate a final estimate that reflects a range of possible scenarios and outcomes.

Finding a project estimation technique that works for you is likely to involve a certain amount of experimentation and a lot of consultation with internal stakeholders. But it's certainly worth dedicating sufficient time and energy to this process, since it could lay the foundations for your future success as a business.