What Is IT Project Estimation?

What Is IT Project Estimation?

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What Is IT Project Estimation?

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Estimating a project, regardless of its size or cost, can be a challenging task. An organization needs to understand the employees, company goals, and procedures to generate a viable estimate.

A proper estimation process can help avoid the hassle, waste of time and money. We at Selleo practice project estimate techniques by asking inquiries to discover what an organization doesn't know.

This post discusses the best practices for estimating projects and being ready for when a change order arises. Prepare to acquire an entirely new set of abilities because you will become the greatest project estimator in the market.

Table of Contents

What are the 5 Phases of the Project Management Cycle?


When a project estimation is required, it is important to understand the Project Management Cycle first. It gets easier for companies and organizations to control the project and the quality of the output by dividing the project into manageable stages, each with its own goals and deliverables.

Here are the five most common phases of the project management cycle.

Phase 1: Project initiation

The project initiation is the initial step in transforming a vague concept into a concrete objective. It helps build a business case and characterize the project on a general level at this stage. To accomplish so, a company must first establish the project's requirement and then develop a project charter.

The project charter is a document that contains information such as project constraints, goals, the project manager's appointment, budget, and projected schedule.

Phase 2: Project planning

The project planning step necessitates meticulous attention to detail since it sets out the project's detailed plan. Unless an organization is utilizing a current project management approach like agile project management, the second phase of project management is likely to consume over half of the project's total duration.

Determining technical specifications, generating a comprehensive project schedule, designing a communication plan, and establishing goals/deliverables are the main activities in this phase.

S.M.A.R.T. and C.L.E.A.R. are two of the most famous methods of setting up the goals for an organization. Let's have a look at both of them in detail.

S.M.A.R.T Goals:


The SMART criteria guarantee that the objectives established for any project are evaluated rigorously. It's a tried-and-true approach for reducing risk and allowing managers to set clear, attainable targets.

The acronym SMART stands for:

S = Specific

M = Measurable

A = Attainable

R = Realistic

T = Timely

C.L.E.A.R. Goals:


The 'CLEAR' approach of goal-setting is meant to accommodate the fast-paced environment of today's business. CLEAR can assist organizations in meeting the demands of today's fast-paced enterprises, which include flexibility and rapid outcomes.

C = Collaborative

L = Limited

E = Emotional

A = Appreciable

R = Refineable

Phase 3: Project execution

The main task is mostly done by the project team during the project execution stage. A project manager must set up effective procedures and keep a close eye on team's development.

Keeping excellent collaboration amongst project stakeholders is another job of the project manager throughout this stage.

Phase 4: Project monitoring and controlling

The 3rd and 4th phases of the project management process do not follow one another. The project monitoring and control phase runs concurrently with the project execution phase, ensuring that the project's objectives and deliverables are met.

It is important for organizations to define clear Critical Success Factors (CSF) and Key Performance Indicators (KPI).

Phase 5: Project closing

The project management plan has now reached its conclusion. The project closing stage occurs after the final delivery and marks the conclusion of the project. External expertise is occasionally engaged on a contract basis, particularly for a project.

After the project is completed, most teams conduct a reflective meeting to discuss their accomplishments and shortcomings. This is a good way to guarantee that the company is always improving to boost the team's total output in the long term.

What is project estimation?

Estimating a project requires breaking it down into individual tasks and figuring out which team members will be doing what.

The process of  Project Estimation has been distributed along with five steps.

  • First, you need to gather a list of tasks and the resources required to complete them
  • Determine and assign resources to projects depending on your team's capabilities.
  • Create a project schedule by estimating the length of each job (with some buffer)
  • Calculate the project cost using the estimating technique you've chosen.
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Step 1: Gathering a list of tasks and the resources required to complete them

In the initial step, it is essential to determine what tasks are needed to be performed and who will perform them. It can be done by the simplest way of breaking down the task list into smaller chunks such as:

  • Research/planning
  • Design
  • Front-end/back-end development
  • Copywriting
  • Testing/Bug fixes
  • Launch

Each project's work list will, of course, be unique. However, the first stage will break down the project into separate tasks, allowing to readily evaluate the time and money spent on these activities to the ultimate result when they are assigned to team members.

Step 2: Identifying and Dedicate the Tasks to the Team Members

It all boils down to team size. It will be a hard task to figure out whether the team has time on their calendars to take on additional responsibilities. This is most likely due to a lack of capacity planning, which determines enough personnel to complete a project based on accessibility and performance levels. The organization must also learn the following things by utilizing capacity planning:

  • If you want to postpone or cancel a project in your pipeline because you don't have enough personnel or the necessary skill sets, you should do it as soon as possible.
  • If you need to hire contractors or freelancers to bridge a talent or availability gap, keep a project on schedule.

Step 3: Estimating the task length to create a project schedule

It's normal for team leaders to misjudge the time it will take to complete projects. However, when it comes to project cost estimation, it's critical to be realistic - both for the project and, more significantly, for the team's sake.

Step 4: Calculating the project cost based on a chosen estimation method

Remember to be honest about estimates and how long each item on the list will take to complete. If an organization doesn't give each assignment adequate time, it will bite into the project's profit margins!

Step 5: Tracking budgets in real-time

Finally, after a project has begun, it is critical to maintain track of it.

It's natural for a project to face roadblocks, and if a company doesn't stay on top of them as they occur, the project might entirely stall and put the budget out of sync!


Key Components of Project Estimation

Now it is time to discuss the key components of the Project Estimation process:


A thorough overview of all project components, including all relevant activities, resources, timeframes, and deliverables, as well as the project's limits, is defined as project scope by C.I.O. The project scope also includes information on important stakeholders, procedures, hypotheses, and limits. A scope declaration contains all of this important information.


A comprehensive timetable estimate that considers all aspects of the project will indicate how much time will be spent on different components, interdependent deliverables, and when each key target will be met.

Meetings, holidays, disruptions of all kinds, and rejections from Quality Assurance can all slow the process down. The duties should be prioritized to recognize which ones must be finished first.


It is simpler to comprehend what resources the project needs when the scope of work and timetable are defined. Personnel, vendors, contractors, and equipment are all examples of resources. For the duties in the area of work, a project manager should set aside resources. Before the project manager does so, he/she must first determine their availability and timetable. It will help improve a project's dependability this way.


A project's cost is an important consideration. Before diving into a project, it is the first question for any company to know how much it will cost to create it. Assess the scope, schedule, and resources when estimating project costs. A project manager can get an approximate estimate of the project once the required features and key components have already been drawn.


Every undertaking entails some level of risk. It is, nevertheless, feasible to recognize them and create ways for dealing with them. Potential risks are included in an ideal project estimating document as a kind of insurance against project hazards. After the risks have been identified, it is the job of a project manager to prioritize them and assess their likelihood and effect.

Why does an Organization need to Estimate the Time Accurately?

The crucial and most important factor in the Estimation Project is Time. Let’s have a look at the steps to calculate time accurately for a project.

Step 1: Understand What's Required

The first thing in estimating the accurate time duration is to make time for meetings, reporting, communications, testing, and other important activities to complete a project as part of this.

Step 2: List down the Activities in Order

The second phase is where all the tasks are listed down in order with a note of any crucial deadlines. For example, the financial department tasks need to be completed before the year-end.

Step 3: Make Decisions about Team Involvement

Enlist the support of the individuals who will be doing the task since they are more likely to have expertise in the field. They'll take more control of the time estimates they come up with if they're involved, and they'll work harder to fulfill them.

Step 4: Make Your Estimates

We've outlined a variety of methods below to help organizations estimate the time accurately.

  • To begin, estimate the time required for each job rather than the entire project.
  • The amount of information needed to go into is determined by the situation. For example, an organization may just want a broad outline of time estimates for future project phases, but comprehensive projections for the current phase will almost certainly be required.
  • Make a list of any important assumptions, exclusions, and restrictions, as well as any data sources the company relies on. This can come in handy if estimations are called into question, and it will also allow spotting any potential danger areas if conditions alter.
  • If any of the team members are only working part-time on the project, it should be noted that they may waste time switching between responsibilities.
  • Individuals are typically too optimistic, and they may grossly underestimate the time it will take them to accomplish tasks.

Apply the Estimates

An organization only starts planning a project schedule once it has estimated the time required for each job. In the second step above, add estimates to the draught activity list created.


Why is preparing a project estimate so hard?

Here are the common reasons:

Front-end developers

  • For the Design, they only get wireframes.
  • The drawings appear to be simple; however, there are no animation explanations.
  • They don't acquire any information about different devices or screen sizes.
  • Until the customer sees it, they have no idea what they want.
  • If they've seen it on another site, the customer believes it'll be simple to accomplish.

Back-end developers

  • The work description is insufficiently detailed.
  • New to the project; therefore, either missing the broad picture or don't grasp how the business works in general.
  • The project makes use of third-party services with which you are unfamiliar.
  • The project necessitates the usage of technologies with which you are unfamiliar.

As the project advances, the requirements alter (holds for front-end developers as well).

Furthermore, and this is true for both front-end and back-end engineers, we frequently have unrealistic ideas of our skills, which can cause issues when setting estimates and, more importantly, sticking to them.

Types of Project Estimation Techniques


There are several different project estimation processes. Here’re the details for the most common types:

Top-Down Estimation

This method of estimating entails establishing a project budget and then distributing it across several stages or activities. According to The Digital Project Manager, It helps predict if each area has enough money and make revisions as needed.

Bottom-Up Estimation

A bottom-up estimate is similar to a top-down estimation in that it is based on phases or tasks.

Each segment is estimated separately, then the entire cost of the project is calculated. When the scope and components are defined, bottom-up estimating is used late in the estimation phase.

Analogous Estimation

This is a form of estimating in which a new project budget is based on an existing one. If a company spends $2000 on a roofing job on a similar property three months ago, it might fairly expect a new roofing project to cost the same.

It's a form of estimating comparable to the top-down method in that it's an approximate estimate.

This method of estimating only works if your prior projects are similar to your current ones; otherwise, the estimate will be inaccurate.

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Parametric Estimation

If a ballpark project cost is needed, this is a somewhat more accurate approach than top-down or similar estimating. A parametric estimate is a project management estimation approach in which a new project is based on past projects but with variables adjusted.

Three-Point Estimation

Three-point estimation goes away from approximate estimating and toward more precise, realistic cost estimates. The best-case scenario, the worst-case scenario, and the most likely situation are all combined in this technique.

Here's a simple formula:

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

What is the cause of inaccurate project estimations?


On the other hand, poor raw data can derail cost estimates, as can presuming that all resources are fully utilized. The following are some of the most typical mistakes for cost estimators:

  1. Lack of experience with similar projects

As estimators, project teams, and organizations acquire experience working on comparable projects, their accuracy in cost estimation improves. Estimators and project teams who are inexperienced may not be familiar with the scope of a project, which can lead to errors.

  1. Length of the planning horizon and the project

Professional estimators emphasize the necessity of not producing too early estimates. As we've seen, accurate estimation is dependent on how well a project is specified. Approaches like rolling wave planning ensure that future work is less well specified for large, complicated projects. Cost estimation procedures must reflect this and that cost estimates are updated when new data becomes available.

  1. Human resources

As the quantity of human resources participating in a project grows, creating reliable estimations becomes increasingly challenging. While it is common to practice to anticipate that any resource would be productive only 80% of the time and develop estimates accordingly, it is more difficult to account for expenses associated with managing and organizing people. This is especially evident in project activities that require reaching a consensus or coordinating work among a large group of individuals.

  1. Not fully understanding the work involved in completing work packages

This can be an issue for novice project teams that have never worked on comparable projects before.

  1. Expecting that resources will work at maximum productivity

A better rule of thumb is anticipating an 80% production rate. Even if add up 100% workforce, there will still be glitches and disapproval during the process.

  1. Dividing tasks between multiple resources

Having more than one resource engaged on a job usually needs more strategic planning time, but this time is not often included.

  1. Failing to identify risks and prepare adequate contingency plans and reserves

Negative risks can raise costs and extend durations.

  1. Not updating cost estimates after  project scope changes

Because project scope changes render earlier estimates worthless, updated cost estimates are an essential element of scope change management methods.

  1. Creating hasty, inaccurate estimates because of stakeholder pressure

Because project managers are held accountable for their estimates, order of magnitude estimations are a far better option than numbers conjured up out of thin air.

  1. Stating estimates as fixed sums rather than ranges

Point estimates might be deceiving. All estimations have some level of uncertainty, and it's critical to express this through estimate ranges.

  1. Making a project fit a fixed budget amount

A project's budget should be determined by its scope, not the other way around.

Top questions to ask during project estimation


Before moving ahead with the project estimation process, the best thing is to ask questions regarding the goals and objectives, about the teams, their expertise and responsibilities, etc.

What are the Organization team's expertise and responsibilities?

It's simple to pull the spreadsheet out and focus on the formulas and figures when thinking about precise estimates and timeframes for the next project. The reality, on the other hand, does not neatly fit into a spreadsheet.

Project planning and estimating should always start with people, not numbers

It is not possible to estimate time for a project while hiding in a tower. It is important to know people in the organization, and grasp exactly what the job entails daily.

The more an organization knows about the team members, work, and procedures, the more precisely it can forecast the future output.

What is the team/company's project management process?

This process helps to understand how the system operates in a company. It is important to understand a company's project management process to understand its eccentricities. It also helps to understand the team's approach to the process.

How long have these projects taken in the past? What roadblocks did the team hit?

Looking at similar prior projects is the greatest method to acquire an accurate estimate for a prospective project.

What exactly is the Company building?

For a project estimator, it is important to know what the company is hoping to accomplish. Of course, no one will embark on a project without a clear concept of what they want to achieve. Most projects will require an S.O.W. or a project proposal before they can be approved, so now is an excellent time to write down project objectives.

What steps does a company need to take to hit milestones, goals, and O.K.R.s?

A project estimator can begin planning the journey after knowing the company’s goal. This entails breaking down each project component into specific jobs with detailed instructions that can be followed to the letter. Each step is written in the correct order and with all of the essential information.


You have already learned everything regarding the Project Estimation process. All of this may take a bit of time getting used to for those who are just getting started. With time, the more projects you do, the more intuitive it will all become, and soon you will start feeling much more confident in making accurate estimates.

If you are still looking for an expert team to handle your project development, including delivering a detailed estimation, you are at the right place. At Selleo, we have one of the best and highly skillful teams that will make your vision come true. Contact us for more details!

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