5 Project Estimation Techniques That Works for All Kinds of Businesses

Is project estimation really hard? You never know it precisely until it is done. And again, it’s a process of analyzing available data, resources, and money from the start to completion of the project. And typically, project estimation includes scope, risks, time-frame, budget — almost everything.

Now, imagine how sturdy it is to predict the whole thing accurately. But project managers have to do it to estimate and stick to the resources available considering the availability of the resources.

And again, if you’re a PMP certified professional, you already have the frameworks with you that help to predict and extract the complete resources eyeing the risk factors and their consequences.

But what if you’re looking for PMP Certification? Then check these handy tips on how to crack your PMP certification and start implementing these five project estimation techniques to get the complete blueprint of how project estimation works on all kinds of businesses.

Five Project Estimation Techniques That Works for All Kinds of Businesses

Top-Down Estimation (Straight Pyramid)

How many of you have remembered the pyramid structure? The top-down project estimation works entirely on that process. Where the overall project estimation is estimated on priority, and individual tasks are allocated from it.

You start with the top of the pyramid and work downward to make the whole process concrete, filled with rich data and stats, one step after another. These types of budgets and funding generally occur when there is a fixed budget, or the project’s scope fits the predefined budget.

Bottom-Up Estimation (Inverse Pyramid)

The bottom-up estimation is opposite to top-down analysis that involves the work estimation at the lowest possible level of detail and works on an inverted pyramid structure. And then, these estimations are aggregated to the whole and then calculated on it.

Creating the detailed cost and budget and optimizing for the projects increases the probability of meeting the deadlines accurately. It’s a slow process, and you have to invest a lot of time collectively; the process is more accurate and reliable than parametric or analogous estimates.

Three-Point Estimation (Triangular and PERT Estimation)

Three-point estimation is an advanced version that involves professional people to estimate in this technique. A three-point estimation is initially based on prior experience or best guesses and produces three figures for every distribution.

The three guesses are:

The first estimation is (M/BG) – the most likely guess or the best guess. It lets you know how much work you might need to do if you and your team completed the task 100 times.

The second estimation is Pessimist (P) – It estimates which of the work will include negative risk factors when they occur.

The third estimation is Optimistic (O) – it estimates which of the work will include positive risk factors when they occur.

This estimation has two best applications: one is the triangular distribution, the second one is the PERT distribution.

Triangular distribution:

E= (𝝈+m+p)/3

𝝈 = optimistic estimation m = most likely estimation, and p = pessimistic estimation. E = estimation.

PERT distribution:

E = (𝝈+4m+p)/6

𝝈 = optimistic estimation m = most likely estimation, and p = pessimistic estimation. E = estimation.

Parametric Estimation (Quantitative Model)

When estimating the project costs or parts, you always need a quantitative approach for estimating the cost-based historical or market data. In other words, it’s a statistical-based approach to calculate the expected amount of financial resources or the time required to complete the whole project or a part of it.

But according to PMI standards, there are two types of output possible:

● Deterministic estimates

● Probabilistic estimates

Analogous Estimation (Historical Model)

This technique captures the data from all the previous available projects of the same kind to estimate the project’s cost. Again, analogous estimation requires expert guidance for data usability because of the limited data sources available.

The best part is it uses broad similarities with data resources. Estimating the cost, scope, and other things with the available resources needed to deliver the new work becomes easy. Sometimes, even if the historical data is not available, then the data related to previous projects comes into play for analogous estimation.

Final Words

Estimation is an art; what matters is how well you can craft it? What data you have with you and how accurately you estimate with the available information, no matter how abundant or limited data are available.

So the next time you want to estimate for your next project with the available data and resources for any businesses you want to do, follow any of the five methods above and do your estimation for accurate estimation as per PMI standards.

The five methods for estimating are a top-down, bottom-up, three-point, parametric, analogous estimation. Although each estimation has its characteristics, they are best in their way with accurate estimations. And that’s what matters to successful project managers.

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