This is a question that keeps many software house managers awake, and the more complex the project, the harder it is to provide a good estimation. And by good, I mean accurate.
Preparing a comprehensive and realistic estimation is a big deal and, as many studies have shown, failing to do it properly can undermine even the most promising deal. PMI’s Pulse of the Profession, after interviewing 5,402 professionals, reported that 52% of projects completed within organisations in the past 12 months experienced scope creep or uncontrolled changes to the project’s scope.
It’s something to think about, isn’t it? And this only makes this part all the more crucial, especially since the client needs to first approve and accept the project estimation before you can even start to carry out any tasks. However, like anything else – this part also gets easier with time and experience. And in order to help you get started, I’ve prepared some helpful hints on how to approach project estimation.
A short guide to estimating software projects – top 8 rules
- Focus on collecting – and really understanding – all the project requirements
You need to take the time to truly understand both the project itself and the client’s needs. Some additional meetings and calls may be necessary, but don’t be afraid to ask questions. There’s no room for any guesswork here, as it may backfire later on and result in inadequate estimation.
- First estimate the scope, then the time and cost
Get to know the functional scope of the project and break it down into time-boxed iterations or other measurable units of requirements. Having a detailed view of all the tasks you need to complete will help you grasp the bigger picture, and allow you to provide a specific time frame along with corresponding costs.
- Take a data-based approach instead of guessing and making assumptions
Every estimation that you prepare has to be data-driven and based on professional experience – either yours or your team’s. You can use similar projects as points of reference but don’t just bet on your gut feelings, especially since you have to be able to justify every part of your offer.
- Get input and second opinions from the people who will actually be working on the project
No one knows more about the details of the processes involved than the specialists who will be doing the actual work. Collect any feedback and input from project experts or team leaders; this will keep your project estimation in line with reality, and away from any wishful thinking.
- Always define risks and search for opportunities
Defining and voicing the risks of a project is important in terms of being transparent and reliable. You may even want to add some buffers to your estimation and share the risks with your client, but this must be well-argued and equally well-substantiated. However, the responsibility may also lie entirely on your shoulders, depending on the specific arrangements you come to with the client. And searching for opportunities is just as significant as looking for potential threats during the estimation process: how to make something better, and how to do it faster, in a more efficient way. Don’t overlook this part, as it may lead to opportunities that will give you that extra edge among your potential clients.
- Don’t lowball any estimation just to make it look more appealing to the client
Credibility is everything. Don’t undermine it by lowballing a bid. Instead, if the estimation exceeds your client’s original budget, you may want to prepare different options for them to choose from. For example, you can offer to cut the project down a bit at the beginning and develop it fully in the future, when they are able to invest some more.
- Don’t take any preliminary estimation for granted – be flexible and be ready for the unpredictable
Remember – agile is not just a buzzword these days. It’s a valid methodology which is expressed by constant collaboration with a client and being able to smoothly respond to changes. You have to first realize (and then make sure your client is also aware of this fact), that a preliminary estimation may change according to any shifts in the project requirements, or any external conditions (like the pricing of third-party services).
- Measure, make adjustments and keep your client informed
This is strongly correlated with the point above. Keeping your finger on the pulse (in project management) refers to measuring the effectiveness of your work, tracking the progress, adjusting to the current situation and, first and foremost, keeping the client posted. This way, your client won’t be too shocked by any changes you need to make, and you’ll both be better prepared for things that cannot be predicted beforehand.
Benefits of taking this approach
If you are able to prepare an estimation that is both comprehensive and realistic – you are already halfway on the road to success and acquiring new clients. This shows them that you and your team are dependable and responsive, which lays the foundation for a stable, fluctuation-resistant work environment. Plus, it goes side-by-side with other benefits of cooperation that are harder to measure, like:
- enhanced transparency,
- increased trust,
- better reputation in the industry,
- less stress which is usually correlated with uncertainty,
- increased satisfaction of customers and stakeholders,
- higher probability of a successful project and continued cooperation.
It’s totally worth it to keep learning about how to prepare precise estimations, so you can keep optimising the process for greater accuracy. This simply translates to increased profits and also helps you maintain a competitive advantage on the market.