10 Best Practices For Project Estimation

Running a service or contractor business calls for an accurate estimation of project costs, time, and resource requirements to ensure all your contracts turn out profitable. According to the Project Management Institute (PMI), time and cost overruns can always be traced back to inaccurate estimates. Oftentimes, such erroneous projections can have disastrous consequences to a business, including monetary losses and fallouts with the client.

Thus, it’s critical to predict your project requirements as accurately as possible. Here are 10 best practices for project estimation that will help you to quote accurately and win the right business.

1. Understand the requirements

1. Understand the requirements

Using the example of a lawn care business, it’s never enough for a client to tell you they want their compound lawn mown and then you rush to give a quotation per square meter. Be shrewd enough as a seasoned entrepreneur and request to see the site in person. This is what is known as a reconnaissance survey.

Take this time to get the actual dimensions of the job site. Accurately measure the length and breadth of the piece of land to be mowed. That’s better than merely estimating the size of the plot in terms of acreage.

Also, try to see if there are any obstacles that might make your job more challenging. For instance, if the lawn is filled with boulders and other debris, you wouldn’t want to charge the same amount you charge for a perfect lawn with grass only.

While at the site, it’s also advisable to ask the client whether there are any special requirements for the job. Such unique specifications may cost you a bit more, so remember to factor them in when making your quotation.

2. Use project estimation software

Sticking to manual estimation approaches, where you use a pen and paper for calculations, maybe unbecoming, especially at this stage of technological advancements where your competitors will likely be digitally savvy. More traditional methods tend to be more time-consuming, energy-draining, and prone to errors. Technology also makes you appear more professional and organized.

Use industry-specific project estimation tools to do this, such as this free fully customizable job estimate template from Jobber which prompts you to list everyday line items for various field service jobs. Whether you run a cleaning, construction, painting, lawn care, tree trimming business, or anything else – research the market to find the right technology for you.

Presenting professional quotes to your clients portrays you as a focused entrepreneur who means business. And that goes a long way in building your trust and credibility with your customers.

3. Borrow ideas from past projects

3. Borrow ideas from past projects

If you’ve handled similar projects in the past, you will be in a stronger position to make informed estimates moving forward. Hindsight is a great thing if you can learn from it and use it to your advantage.

However, don’t lift figures blindly without considering other factors such as inflation, location, and discounts. A raw material you purchased some five or so years ago may not have the same price now. Also, if you got discounts from a previous supplier, don’t use that price for your present estimations. It’s also crucial to understand that prices vary from region to region.

While checking your past projects, ensure you effectively apply the lessons you learned. Perhaps you previously underestimated the time requirements for carrying out a specific activity. Now that you know better from experience, let your current estimate be more accurate.

4. Have some margin

It’s no coincidence that some dictionaries define an estimate to be an educated guess. The term “guess” tells you there’s no guarantee that the results are 100% correct. For instance, when you estimate that a given landscaping job will take you 40 hours, you may fail to complete the actual job within this set time. That’s why it’s critical to have some decent margin on your estimates.

However, take care not to misapply risk and contingency. Failure to determine the correct level of risk may lead to an inaccurate contingency factor being applied to an estimate. In the example above, you wouldn’t want to estimate the required time to be 80 hours. Setting such a high contingency may cause you not to win the job.

On the other hand, setting the contingency too low may lead to a loss of money on the project. So aim to apply an appropriate margin to your estimates without unnecessary exaggerations.

5. Break it down

5. Break it down

Creating a work breakdown structure (WBS) helps you get your estimates more accurately. WBS is a deliverable-oriented hierarchical decomposition of the task to be done by team members. In other words, it involves breaking down a large project into smaller tasks. The more itemized and specific the individual tasks are, the more accurate the project estimate would be.

For this reason, always divide any given project into distinct line items. For example, if you’re contracted to build a house, you’d want to split the project into the following subparts and sub-subparts:

  • Foundation
    • Earthworks
    • Retaining wall
    • Backfilling
    • Reinforcements
    • Slab
  • Superstructure
    • Walls
    • Windows
    • Doors
    • Exterior finishes
    • Interior finishes
  • Roofing
    • Trusses and other structural components
    • Roofing material
    • Ceiling
  • Electrical work
  • Plumbing
  • Drainage

Breaking it down this way sets you up for more authentic estimates since you’ll not only be generalizing issues.

6. Master the major parts of project estimation

When talking about project estimation, you may think it’s all about costs. But that’s not entirely true. Project estimation comprises three major parts:

  • Cost estimation
  • Effort estimation
  • Resource estimation

It’s critical to strike a healthy balance between these three as they’re intertwined and can’t be completely isolated from one another. If you fail to do so, you may render your estimate ineffective.

For instance, when quoting for jobs, you must consider the prevailing hourly rates for the region you’re working in. The pay also depends on the level of expertise of the worker. Certified professionals usually demand higher wages than average workers. Regarding resource estimation, factor in items like transportation costs for the team of workers to the job site.

7. Consider task dependencies

In any given project, there are activities that can only be done after others have successfully been completed. For instance, you can’t roof a house until the columns and beams or walls are done, but you can pave the driveway before or after roofing. It’s such task dependencies that would help you determine the critical path for your project.

For the activities that fall within the critical path, you wouldn’t want to compromise your efforts. Otherwise, the project will surely fall behind schedule. But for those activities that aren’t part of the critical path, you can exercise some bit of flexibility in handling them.

8. Involve the actual workers

8. Involve the actual workers

One recipe for failure in your projects is failing to involve the relevant stakeholders in the planning phase. Don’t assume to know it all simply because you’re the business manager. The staff member who does the actual job may know a lot more than you do.

In this same sense, engage your team in preparing detailed estimates and take the time to detail what is within and out of the scope of the job. You may want to itemize optional extras that come at an additional charge if required.

Tracking the effectiveness of your quoting process should form an important part of your business strategy to ensure you are charging the right amount and achieving your target profit margin. You may decide to take on a bookkeeper or accountant to help you do this.

9. Use multiple approaches

The goal of project estimates is to come up with as accurate a figure as possible. On this account, make it a point to use multiple approaches to estimate the costs, time, and resource requirements for any given item.

Here are some of the most popular estimation techniques you can use:

  • Parametric estimates: This involves using independent measurable variables to quote for jobs, for example, stating the cost per square foot when building a house.
  • Three-point estimating: This includes finding the weighted average of the optimistic (most likely) and pessimistic estimates for a given piece of work.
  • Analogous estimates: This involves referring to a similar project done in the past and correlating the figures with the project at hand.
  • What-if analysis: This means hypothesizing possible outcomes of variables like time, costs, and resources and doing an impact analysis to develop the best estimate.

Using a combination of any of these techniques and other strategies helps you generate more informed estimates.

10. Clarify assumptions

We all know that Monday morning feeling. Your sleep cycle is well off course, if you had a good weekend there has been an uptake in fun beverages, possibly a lot of dancing that makes you feel like you’re 80 years old by Monday. Suddenly the sun sets on Sunday evening and the dread sets in; the heavy dragging out of bed, the chaotic commute, then the survival of work that feels like an uphill battle. It makes sense that you could have trouble trying to face Monday’s, we all do, but if you are looking for ways to handle it better, look no further. Read our guide to getting yourself up and out the door feeling fresh as a daisy. Prep the night before The best thing to help you feel alert on Monday morning is to effectively unwind on a Sunday evening – and get a decent night’s sleep. It will be the most effective way of dealing with your social jetlag, which is the idea of your body being out of sync due to staying up late and sleeping in over the weekend. For more information on social jet lag, read this blog. You will need to reset your body clock by trying to get to sleep at a reasonable time, but that will take some work now that your body has become accustomed to a later bedtime over the past two days. Luckily, there are a lot of things you can do to prep for a night of deep sleep. Throughout the day, stay in bright light. No gaming sessions with the curtains closed. You are trying to stay alert until you don’t have to again and light programs your brain into thinking that it should stay awake. We are not nocturnal creatures, and naturally will stay awake in the light and sleep in the dark, so emphasize that to your brain by keeping as much light as possible through the day. You don’t need to work, so omit the caffeine for once. It might be habit to have a hot cup of joe after dinner or in the evening, but at least keep it decaffeinated. Caffeine will do exactly what you want it to on Monday morning: stimulate your nervous system and stop you from relaxing. You can take a melatonin supplement to prep yourself for bed. This key hormone is the easiest way to fall asleep faster, and can bought over the counter, along with ginko biloba, glycine, valerian root, magnesium, L-theanine, and lavender. If you don’t fancy taking a supplement, you can use some lavender essential oils or a candle. Take a bath or shower an hour or two before bed to have a deeper sleep. The warm water will stimulate your hands and feel, encouraging blood flow and lowering your blood pressure, which should help you sleep. Save your favorite outfits for Mondays and have them set out on Sunday evening. You will instantly gain a boost in mood knowing you look your best, and you can take a leaf out of Steve Jobs book and not have to think about what you are going to wear, at least for one day. If you are having trouble sleeping, rethink your mattress, pillows, and bedding. Mattress comfort is so subjective that it cannot be commented on, but remember that if you are uncomfortable, you won’t sleep as well. Firmer pillows are important to keep your head comfortable elevated. If you are a side sleeper, you might want to look into firmer pillows that are hitting the market, designed for you. New bedding will always enhance sleep just for the experience of softer bedding. It is recommended that you replace them every 5-8 years. Start your morning right And then it comes. Well, that’s not the attitude to have. And here it comes! And you’re ready for it, right? You’ve had a great night’s sleep and you’re ready to take on any chaos the universe throws you. Blue Mondays are a myth, according to the New York Times, and like most myths, you probably won’t be affected by it if you don’t believe in it. Start your day by getting moving as soon as possible. If your lifestyle allows it, do your favorite form of exercise first thing in the morning. The release of endorphins can be more helpful than a cup of coffee, as it will boost your energy levels by 20% and boost your mood while they’re at it. It doesn’t have to be a full workout, but a quick 5 minutes of exercise will work wonders. Don’t skip breakfast. Get your metabolism going with a meal in the morning but load it with nutrients to get your mind and body working better, earlier. Try to incorporate avocado, watermelon, kale, bananas, and other nutritious foods to keep you fueled for the day. Get your commute started right with a good playlist. Keep away from the blues or acoustic guitar: you need Monday Motivation. If that comes with hardcore electric guitars or heavy bass beats, so be it, but you will need something high energy to wake you up and keep you moving. Once you’re in the office, get organized. Review your week so that you can, initially, get your head around what needs to get done, and then start to break it down into smaller pieces. You will keep your productivity up when you know what needs to be handled first and what will be easiest to handle. But take it easy. You have the whole week ahead of you. Make plans for hump day. If you are having trouble looking for things to look forward to, plan a catch-up with a friend or an evening activity for the midweek so that you have something to look forward to. You don’t need to cram all your social interactions into the two days provided a week. With jobs offering work hours all over the place, it might turn out to be more beneficial, or even necessary to see some friends during the week.

There’s no denying you’ll make several assumptions when estimating costs, time, and resources. To make the client trust you, even more, you’d want to clarify these assumptions in the quote you prepare.

For instance, to justify why you’re adding some time margin to the project activities, you can state it’s meant to cater for unforeseen delays in the delivery of materials and equipment needed for the job, unexpected traffic snarl-ups, or incidences of workers getting sick or just exhausted.

Such clarity portrays you as an honest entrepreneur, and that eventually leads to customer loyalty.

Conclusion

Accurate project estimation calls for a thorough analysis of the job at hand. So take your time to get all the details correct. As one of the initial phases of project management, it helps ensure you don’t chase away your potential client with exaggerated estimates. Also, it saves you from untold losses due to underestimates. For best results, consider using sophisticated project estimation tools that bring out your professionalism.

Tags: estimation of project costs , project estimation software
Sumona

Sumona is a persona, having a colossal interest in writing blogs and other jones of calligraphies. In terms of her professional commitments, she carries out sharing sentient blogs by maintaining top-to-toe SEO aspects. Follow more of her contributions at SmartBusinessDaily and FollowtheFashion

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