How can you choose the best project estimation technique for your business?

Decomposition: The project is systematically broken down into its constituent parts, which can include major phases, milestones, or key deliverables. Each of these components is estimated individually.

Top-down estimation is a method that starts with an overall project estimate and then breaks it down into smaller components. It is useful during early stages of a project, providing quick estimates before detailed planning. However, it can sometimes lack accuracy, especially in complex projects or with limited information. The process involves establishing a high-level estimate, breaking it down into smaller tasks, and refining estimates over time. Top-down estimation is beneficial for quick estimates, higher-level decision making, and early project phases. However, it can be inaccurate, especially without detailed project information.

Bottom-up estimation is a method of estimating a project by breaking it down into smaller, manageable parts and summarizing them to determine the total project estimate. It involves estimating individual tasks and aggregating them to form the overall project estimate. This method offers higher accuracy and helps identify tasks and resource requirements. However, it is resource-intensive and may be difficult to apply in initial stages due to limited information. Combining top-down and bottom-up estimation techniques can improve accuracy and provide a more comprehensive view.

In my experience, when available, I have found the use of historical data as the most accurate and expedient way to estimate project resource demands. However, this data is not always available and a combination of top-down and bottom-up estimation is beneficial when both the larger overall strategy and the details of actual implementation requirements can be evaluated.

Analogous estimation is a project estimation technique that uses historical data from similar previous projects to predict the duration or costs of a new project. It involves making adjustments to the historical data based on similarities and differences between the two projects. The resulting estimates for time, cost, or resources are derived. Analogous estimation is quick and easy, useful for early estimation in limited information. However, it has limitations such as reliability and lack of detail.

Parametric estimation is a project estimation technique that uses historical data and statistical relationships to predict project characteristics like cost and duration. It involves identifying project parameters, collecting and analyzing historical data, and developing mathematical models to predict estimated values. While it offers efficiency and consistency, accuracy depends on the quality and relevance of historical data and may not be suitable for complex projects. It is commonly used in repetitive or standardized projects with established relationships between variables.

The choice of estimation technique for a project depends on several factors, including the project type, available data, project complexity, expertise, resource and time constraints, accuracy and precision, flexibility, and stakeholder expectations. Unique projects may benefit from analogous estimation or expert judgment, while repetitive projects may benefit from parametric estimation. Complex projects may require a combination of techniques or more detailed methods. Understanding these factors will guide the selection of the most suitable estimation technique.

Selecting the best project estimation technique for your business is a decision that requires careful consideration of various factors. Project type, data availability, scope, resource availability, risk tolerance, constraints & commitment to continuous improvement play crucial roles in this process. It's important to recognize that ideal estimation technique may vary from one project to another, and the ability to adapt to the specific circumstances is key to successful project management. Successful project estimation is an ongoing, evolving process that aligns with your business and project management needs. By making informed choices & learning from past experiences, your business can achieve more accurate estimates & better outcomes.