Estimating your project is one of the most important stages in the project planning process. In order to create decent project plan budgeting, estimating and financial analysis is critical for success.
This is important for the success of the project as well as for getting support on the project from various stakeholders within your company. After all, one of the first things most people ask after they hear about a new / potential project is – How much will the project cost?
You as a project manager might think – wait a minute there is no way to create an accurate estimate for this project because there are so many unknowns and variables…. Well this is true for each and every project so let’s step back and review thesesimple and useful tips about estimating projects:
Any project estimate will involve estimating the time to complete the project from start to finish, estimating the costs at each stage and milestone, estimating the potential benefits of the project in financial terms (for example how much money will the organization save after the project is completed), estimate the potential risks at each stage of the project, estimate of people needed both internal and external team members….
How do I get the numbers I need for my project estimate?
By defining the steps required for your project you are able to split the activities and tasks for your plan and simply ask the people who are in charge of doing the particular tasks for their input. Most of them will be able to give quickly give you an estimate.
In case the particular task is new to the company or you are facing very specific job then get in touch with a professional, consultant or specialist in that line of work or ask for offers from various vendors.
For projects where the activities have already been performed within the company you should get the facts, info and data on those projects and use those numbers – remember these are real costs figures which have been managed by your organization so this is a good source for your estimation.
In most projects variety of approaches will be used because for some work you’ll have historical information, for others you will have experts internally who will guide you and you will also ask for help externally. There is no a single best approach for project planning and budgeting since every project is unique in a way and different from previous projects you have managed.
Here are some examples where things can go wrong so keep those in mind:
When the project plan doesn’t cover all the required activities your project estimate will be not accurate. This happens from variety of reasons including forgetting about certain activity or lack of expertise about certain tasks.
In addition, experienced managers can easily be optimistic about certain jobs and they underestimate the potential risks and job requirements. Lack of time and resources can also be a cause for inaccurate forecasts and financial plans.
You’ll also face many situations where the project estimate includes substantial component of safety in each step and activity so the numbers will be way off from the actual numbers.
Risk management plays a critical role as well because by not managing the risks appropriately the actual activities may change significantly from the actual project plan. It is crucial to outline and quantify the risk and use appropriate metrics to monitor the progress throughout each stage.
Finally project managers who fail to involve the right team members in this process will most likely miss important details and therefore create poor project estimates.