Project estimation can feel like the hardest part of the project and also the one that fails more often than not in most companies. When a new project offer comes in, there’s one thing clever management needs to do before quoting a price. That is to establish the cost of the project. It`s vital that enough information is presented by the client to be able to give even a basic estimate.
Project Estimation Tragic Mistake #1
The #1 tragic mistake often happens right here. If all requested features are not defined and designs are not provided or only part of them is provided, you’re not really making an estimate, you’re making a guess based on (very) limited information. In this case it’s extremely important to clarify that what you’re quoting is a ballpark estimate and in no way your final estimate. As such, it would be wise to avoid placing it on official documents communicated between the client and your company to prevent miscommunication. A stakeholder might read the number mentioned in a document and mistake it for the final estimate.
If you’re making a guess based on limited information it’s extremely important to clarify that what you’re quoting is a ballpark estimate and not your final estimate.
You might wonder why you would need such an estimate in the first place. Ballpark estimates do serve a good purpose. In the early stages of the project it can help inform the client of a rough cost of the project. In cases where the cost is too high for the client you can either reduce the scale (and cost) of the project to better fit the client’s budget or make a decision to drop the project completely on time. If the project cost fits the budget and all the documentation and designs come in, you’re ready to proceed with the actual estimate.
Project Estimation Tragic Mistake #2
Tragic mistake #2 that the project manager can make is to review the project documentation without consulting the development team and give a rough time estimate based on previous projects. This can be somewhat accurate since it at least uses some historic reference. However, the accuracy will often be off by 50% or more. It’s not a big deal if it’s a small 10 hour project. The mistake can prove especially painful for a complex 200 hour project where making a wrong assumption can lead to missing a deadline by more than a couple of weeks. It goes without saying that once you quote a price, the deal is sealed unless the client requests additional features so it’s extremely hard and unprofessional to renegotiate a price in the middle of the project. While this kind of estimate is better than nothing, a smarter solution is: leave the estimates to the people who will be doing the actual work – your development team.
Project managers can review the project documentation without consulting the development team and provide a client with a wrong estimate. A smarter solution is to leave the estimates to the people who will be doing the actual work – a development team.
Project Estimation Tragic Mistake #3
And yet, this is where tragic mistake #3 usually lurks. The development team will likely do a much better job at estimating. But, only if they have the knowledge of estimation techniques required to make the estimate. As the size and complexity of the project grow, so does the importance of using one or more of the proven techniques. If the development team gives their estimate by merely looking over a few JPEG mock-ups and a couple of pages of documentation for a few minutes, their estimate will likely be based on the time they “feel” it would take. This feeling will often be over-optimistic by failing to notice details that will take much longer to complete. Or it may be over-inflated if the developers are uncertain of their abilities. The uncertainty usually comes with a project which requires a new technology which needs to be learned first. It’s always a good idea to exclude the learning time from the price you quote to a client if you feel the knowledge might be beneficial on other projects as well. This will also make your quote look better than the competitor’s. On the other hand if it`s something you won’t be able to reuse, there’s not much point covering the education cost yourself.
The development team will likely do a much better job at estimating only if they have the knowledge of estimation techniques required to make the estimate.
This vital stage is where estimation techniques come in to replace feeling with logic and greatly improve the accuracy of the project estimation process. We will be discussing the 4 essential project estimation tools and techniques for web development in our next article. We will also be discussing ways to introduce these tools and build a culture of accurate project estimation in your company.
If you’d like to further improve your project estimation skill, we’ve prepared an extensive Ebook “The Ultimate Guide to Successful Project Estimation” that will teach you ins and outs of project estimation tools and techniques.