Estimations techniques

Top-Down Estimation

This estimation technique involves setting a project budget and then dividing it up between different stages or tasks. Then you can guess whether there’s enough money allocated to each section and make adjustments as needed, according to The Digital Project Manager.

Businesses use this technique early in a project to see if the amount a client’s willing to pay is not only enough to cover costs but make a profit.

Advantages: Quick and easy. It’s a simple technique that will help you let a client know whether their budget will work for the project and what tasks can reasonably be completed with said budget. Good for single-owner businesses or small teams without many resources.

Disadvantages: Not accurate at all. You’re allocating the budget based on guesses. This estimating method also doesn’t account for possible changes in the project and its budget.

Bottom-Up Estimation

Bottom-up estimation is similar to top-down estimation in that you’re estimating a project according to stages or tasks.

But in this technique, you’re doing so with a lot more information on hand. You also have a full understanding of the requirements of the job.

Each section is estimated individually and then summed up to determine the total cost of the project. Bottom-up estimation is done late in the estimation process when the scope and components of a project are clear.

Advantages: The most accurate project cost estimation technique. And because it’s very detailed, you can easily check project costs against the estimate later on to make sure you’re on a budget. You can also check against estimated timelines to ensure everything’s on track. A bottom-up estimate will help you manage your project when it’s in progress and complete it on time and on budget.

Disadvantages: Time intensive to prepare for staff and requires plenty of resources like gas to do site visits. You also need plenty of information about every stage and task in the project, which can be difficult to obtain. Costs can also be overestimated using this technique because it’s so detailed. Use analogous estimation to check your work for accuracy.

Analogous Estimation

This is a type of estimation where you base a new project budget off an old one. If you did a roofing job on a similar house three months ago and it cost $2000, you could reasonably assume your new roofing project would cost about the same.

It’s a ballpark type of estimating similar to the top-down technique.

This estimation technique only works if your previous projects are similar to your new one or the estimate won’t be accurate.

Advantages: Quick and simple to do and doesn’t require a ton of information about the current project. A great technique when all you need is a rough number.

Disadvantages: Not very accurate. Two projects might be similar but never alike, making it difficult to transpose one set of figures to another. Plus, the data from your old project needs to be accurate, which isn’t always the case.

Parametric Estimation

This is a slightly more accurate technique than top-down or analogous estimation if you want a ballpark project cost. Parametric estimation is a project management estimation technique that bases a new project on a previous project, but adjusts for variables.

• For example, you wrote a 500 word blog post on accounting in the past for $100. Your new project involves writing a 1500 word blog post on accounting. 1500 is three times more words. So $100 x 3 = $300 total project cost.

Advantages: It’s the most accurate ballparking technique as it accounts for different requirements in a new project.

Disadvantages: It may be hard to find data to manipulate for digital projects. For example, one website project has 10 pages, another similar one has 20. Do you simply double the project cost? Will this be accurate?

Three-Point Estimation (PERT)

Three-point estimation moves away from ballpark estimating techniques and into establishing more accurate, realistic costs. This method involves taking an average of three scenarios: best-case scenario, worst-case scenario and most likely scenario.

Here’s a simple formula:

(Best + Worst + Most Likely Estimates) / 3 = Expected Estimate

• For example, a lawyer believes a project will cost $1000 in the best-case scenario and $1500 in the worst-case scenario, with $1200 being the most likely figure.

  • ($1000 + $1500 + $1200) / 3 = $1233.33 expected estimate

You can adjust the formula to weigh different scenarios, as well.

• For example, the lawyer actually believes that the project is more likely to end up with the worst-case scenario. She wants to give more weight to the worst-case scenario estimate in the formula.

  • Assign weights and multiply by estimate: $1000(1) + $1500(2) + $1200(1) = 5200

  • Add together your weights: 1 + 2 + 1 = 4

  • Divide first number by second: 5200 / 4 = $1300 expected estimate

Advantages: Delivers a more accurate estimate as it allows for unexpected problems in the project, which reduces your risk as a small company.

Disadvantages: Takes more time and is a more complicated technique to learn.

Planning Poker

Planning Poker is the most popular technique of gross level estimation. It usually uses the Fibonacci sequence to assign a point value to a feature or item. For agile estimation purposes, some of the numbers have been changed, resulting in the following series: 1, 2, 3, 5, 8, 13, 20, 40, 100.

These numbers are represented in a set of playing cards. Team members play “Planning Poker” to provide an estimate in the form of a point value for each item.

Here are the steps:

• Each team member gets a set of cards.

• The business owner (who does NOT get to estimate) presents the item to be estimated.

• The item is discussed.

• Each team member privately selects a card representing his/her estimate.

• When everyone is ready, all selected cards are revealed at the same time.

• If all team members selected the same card, then that point value is the estimate.

• If the cards are not the same, the team discusses the estimate with emphasis placed on the outlying values:

  • The member who selected the lowest value explains why he/she selected the value.

  • The member who selected the highest value explains why he/she selected the value.

• Select again until estimates converge.

• Should lengthy or “in-the-weeds” conversations result, team members may use a two-minute timer to timebox the discussion, selecting again each time the timer runs out, until conversion.

• Repeat for each item.

There are several reasons Fibonacci numbers are used, and used in this format:

• First is the notion that once teams eliminate time as the estimate base, they are less likely to demand more detail and pad estimates. These numbers instead represent relative size, not time. As a result, the estimation exercise goes quite quickly.

• The sequence also provides the right level of detail for smaller and better-understood features, while avoiding a false sense of accuracy for higher estimates. For example, an item with a high estimate (20 or higher) means the item is large and not yet well understood. Once the item gets closer to the iteration in which the item will be worked, it can be broken down into smaller pieces and estimated in more granular numbers (1–13). Items with point estimates from 1–13 can generally be completed within a single iteration (1–4 weeks).

It is important to note that points do not have the same meaning across teams; for example, one team's “five” does not equal another team's “five.” Thus team velocity, which is derived from points, should not be used to compare productivity across teams.

Affinity Grouping

Affinity grouping is a fast way to estimate, and one used when the number of items to estimate is large. Team members simply group items together that are like-sized.

Here are the steps:

• The first item is read to the team members and placed on the wall.

• The second item is read and the team is asked if it is smaller or larger than the first item; placement on the wall corresponds to the team's response (larger is to the right, smaller is to the left).

• The third item is read and the team is asked if it is smaller or larger than the first and/or second items; the item is placed on the wall accordingly.

• Control is then turned over to the team to finish the affinity grouping for the remainder of the items.

Teams may choose to continue in the same fashion, placing one item at a time on the wall after group discussion. However, a faster way is to have each team member select an item and place it based on their own best understanding. This is done with all team members working in parallel until all items have been assessed and placed on the wall. Several hundred items can be estimated in a relatively short time. Once all items are on the wall, the team reviews the groupings. Items that a team member believes to be in the wrong group are discussed and moved if appropriate.

Once affinity grouping is complete, estimation unit values such as points can be assigned. Affinity grouping can also be done for other estimation units, such as T-shirt sizes.