What is project appraisal

The best tips for accurately estimating a project

Project management has been around for a long time, and so has project appraisal. However, nowadays it is more important than ever to be able to assess projects as precisely as possible. There are various reasons for this: Significantly more projects are being carried out than twenty years ago, and so project management has become massively more important at the same time. What makes it more difficult is that project-relevant parameters often change often and quickly during a project. Suddenly, decisions have to be made quickly, which inevitably leads to poor results in poorly valued projects.

So do you want to know:

  • What is a project estimate and why is it critical to project success?
  • What are the most important elements of a project estimate? -
  • What are the best tips for an accurate project estimate?
  • You have valued a project - what needs to be done next?

What is a project estimate?

Project estimation is the process of predicting and approximating the project parameters such as cost, time, effort, etc. for the successful completion of the project. At the same time, it is an integral part of project planning. As the definition suggests, the estimation begins before the start of the project and ends regularly with the project. You should also update your estimates regularly throughout the project to ensure that your planning is still correct.

Why is the project estimate so important?

You can't start planning your project without knowing the basics. How can you plan tasks if you don't know how much time you have available and how much time it will take to process the tasks? The estimate is therefore an essential part of project planning. It prevents your expectations from being too high or too low and helps significantly to organize the work for your entire team more efficiently and effectively.

What should you guess?

There are 3 components of the project estimate: 1) Effort and time, 2) resources and 3) costs. The three estimates together form the project estimate as a whole.

Appreciating a large project can be a complex task. It is helpful to break the project down into smaller parts. This makes the estimate much easier and more accurate. In addition, the estimation of effort and resources also throws a whole new light on the cost calculation of a project.

Estimation of effort and time

You can do the effort and time estimate in a few simple steps. First of all, ask yourself what do you want to achieve with the project, what are its objectives? After that, you can start thinking about the subtasks that need to be completed. This approach is called "top-down" because you start by defining your desired result and then breaking it down into smaller parts, called tasks or work packages. This is a good technique if you know the big picture of the project.

However, sometimes you don't have all of the information you need to imagine what the end result should be. But you know what to do and organize the smaller tasks into larger work packages. This technique is known as a “bottom-up approach”.

Once you have some insight into the scope of the project, you need to estimate how long it will take. Of course, you can't know for sure, that's why it's called an "estimate". But there are good ways to make a more accurate prediction. One of the best for this is the "analog estimate".

With the analog estimate, you only have to keep an eye on the working hours of the individual team members and evaluate them regularly. If you have accurate data on the time spent on a project, you can also make more accurate forecasts and thus make better decisions.

Tip # 1: Use professional software for the estimation. Your team members have already worked a lot, which allows you to draw useful conclusions for future projects. Therefore, complete time recording with flexible evaluation options is a must if you want more accurate estimates.

Resource estimate

Your company's value creation resources consist of time, knowledge, people, materials and equipment. Another very important aspect of resource estimation is the estimation of the workload for the whole team and for each individual team member.

Tip # 2: Also, work closely with your team on project and resource estimates to estimate the effort for each resource assigned to the task. This ensures that your team is fully behind the project and is not close to burnout in the end.

Tip # 3: Use software and technology to your advantage. In proles, for example, you can create projects that divide the projects into smaller portions (sub-projects, work packages, tasks, etc.), assign employees and a team to the project, etc. This makes the work more flexible and you have the team and the project under control at all times.

Cost estimate

The cost estimate is another crucial element of the project estimate. It is the process of predicting the cost of completing a project. There are several types of costs to keep in mind:

  1. Fixed costs: They don't change throughout the life of a project. This can be, for example, renting your office or equipment, insurance premiums, leasing fees for vehicles or machines, etc.
  2. Variable costs: Variable costs are the opposite of fixed costs, i.e. costs that change over the entire duration of the project. Examples are the fee for freelancers, costs for fuel and consumables, etc.
  3. Direct costs: The costs that arise directly and immediately from your project are direct costs. For example, if your project is to build a computerized machine tool, then the direct cost will be the cost of buying tools and parts, hiring an engineer and a programmer, etc.
  4. Indirect costs: The indirect costs cannot be assigned to a specific project. If your employees use computers for their work, but use them for all projects and also for their general activities and not just for a specific project, then these are indirect costs.
  5. "Sunk Costs": These are the least popular, but unfortunately unavoidable costs. They were created in a project, but did not provide any value for the project goal. Back to the machine tool example: All the screws that you have lost are “sunk costs”. They paid for it but never used it to build the machine.

What is the difference between cost estimation and cost calculation?

The cost estimate is made before the project is complete. Estimating therefore means calculating and evaluating the likely costs of the end result of the project. To come back to the machine tool example again: The cost of the end result of your machine tool project is estimated before the project begins. You have to estimate how much time your employees will work on the project, what costs will arise and how much the required materials will cost. You should also keep track of any unexpected costs that can arise during the life cycle of a project.

The cost calculation, on the other hand, is simpler. It is the process, the cost of a project to determine its completion. By adding up the expenses from different areas of a project. All of the cost types that I have described above under “Cost estimate”.

Tip # 4: Also plan with inflation. Even your theoretically fixed costs (e.g. rent) can vary depending on the duration of your project.

Tip # 5: Use professional project management software with budgeting functionalities. E.g. proles can help you keep the budget of your project under control. You can set a time and money budget for each task, and notifications will automatically report you when you are about to go over your budget.

You have appreciated and have a plan. What now?

Your estimation process does not end when the project starts. You should regularly revise your project estimate to adjust budget, deadlines, and workload. Without the necessary data about the project, your revisions to the estimate, as well as future project estimates, may not be as accurate as they could be. It is therefore essential to use software for your project management.

All in all…

It is not easy to estimate a project as precisely as possible. However, the more information and data you have about past projects, the more accurate future estimates will be. However, estimates don't have to be 100% accurate. However, they should be so precise that they are a valid basis for making good decisions about the future of the project in the course of the project.