Cost Estimation in Project Management: The Key to a Successful Project
Some people find cost estimation to be one of the hardest parts of planning a project. There are so many things to take into account, including how other people work and allowing a margin for unexpected hold-ups and expenses. But it is important to get it right for a number of reasons. Accurate cost estimation makes the project go more smoothly for you and your client.
The problem with overestimating costs
If you set your price too high you might lose the job. The client may well find someone else who will do it for a more reasonable price.
Or they might accept your price but feel resentful that they have been overcharged. This can create a bad relationship with the client. It can lead to the client scrutinising the work and looking for faults so that they can get some of their fee refunded. Even if they don’t do that they are unlikely to recommend you. And today so much depends on the recommendations of previous clients either by word of mouth or through online feedback.
It may well be a genuine mistake because you over-estimated the complexity of the job or how long you thought it would take. You might think you can sort the problem by charging less for the final job. But that doesn’t do your reputation any good either. Admitting you overestimated it could make your business look less professional
The problem with underestimating costs
The most obvious issue here is that you might put in a lot of effort for little reward. You still have to pay your contractors and others involved in the project. By the time you have finished, there might be little profit left – or worse, you could even end up making a loss.
Another problem is that the client might be put off and think your work is poor quality if the estimate is too low. They might think you are unprofessional and trying to undercut the competition.
Even if the client is happy with the job, there is still the problem they might recommend you to others who will expect you to work for the same low price.
Accurate cost estimation is good project management
Many people gain skills in estimation for their own line of work by trial and error and experience. But although experience is no doubt one of the most valuable assets in any business it takes time to acquire it. And if you are a relatively new business you want your estimates to be correct right from the start.
Accurate estimation is a key part of good project management. So here are some suggestion to help you estimate accurately and keep your clients happy while still making the profit you need. To make things easier, check out some of the project management software that is available.
Good communication with the client is essential. You need to know exactly what they are looking for. If unsure ask questions. If possible get everything in writing to avoid any confusion later on. Once the project is underway check in regularly with your client. They usually appreciate being kept in the loop.
Good team communication is also important. Involve your team right from the start. Each member brings their own skills to the job. They are best placed to estimate their own work.
Break the job into milestones. Sometimes it is hard to get an overall view. If you work out an estimate for each different part of the project, the final figure it is more likely to be accurate.
There are plenty of apps available to help you keep track of what everyone is doing and how the job is progressing. Time tracking gives you an overview and also lets you run reports which you can share with the client show how things are progressing at any stage. It will also alert you and let you know if certain tasks are taking longer than expected. You might want to use a time tracker that integrates with you chosen project management software to get the most benefit.
It is also a good idea to track your expenses, including staff costs and other spending. That way you will quickly realise if you are running over – or under budget. The sooner you know something is wrong the sooner you can fix it.
Learn from experience
Keep accurate records of past projects so that you can refer to them in future. Time and expense tracking apps allow you to look back and base future estimates on actual previous jobs. In a short space of time, you can build up a database of knowledge about your own working practices.
If you keep these in mind, you should be able to provide accurate estimates for all your work. This will keep your client happy and also ensure that your business also makes a suitable profit.
Why people choose Everhour
Teams of different sizes and industries choose Everhour to track time and expenses, properly bill their clients and better understand how long specific jobs took for future quotes and estimates for a reason. But don’t just take our word for it. Here’s what some real people say (taken from Capterra, G2Crowd and TrustRadius):
“We are using Everhour as a core business software, because our business is to sell our time. When you use such software, what you care the most is speed, flexibility, ability to integrate with all major project management software. And Everhour is exactly that kind of software” – Ivan M., Owner, 1-10 employees
“The most important gain from using Everhour is that we can track our tasks in real time without having to leave the browser. The Chrome add-on helps us initiate the time for a specific task. If we are already on Asana a simple click does the job” – Dimitris R., Partner, 11-50 employees
“Everhour helps me manage/plan my weekly activities a lot more effectively, since I know how much time I have to work on things each day, and can quickly update estimated times to reallocate tasks as needed”. – Dan S., Team Lead, 501-1000 employees
“Everhour’s integration with Asana is wonderful for a remote team. We track all activities in Asana, but before Everhour I often wondered how long it was taking to do a task, now I know exactly. I can see who is working right now and a summary each day” – Doug H., Principal Laboratory Informatics Scientist, 11-50 employees
“With Everhour, time reporting and project follow-up is so much easier and faster. We have total visibility of the estimated time and reported time. One plus feature that would be great to have would be a gantt view that would receive the information of the estimated times and calculate the available time for the resources depending on their allocated tasks/time” – João V., Head of Digital Communication & Lead Motion Designer, 11-50 employees
“Everhour has already paid for itself for the year by helping me track time I was missing in client projects. It is easy to use, has friendly customer service people and the reports make it easy to invoice clients and track projects” – Jenifer D., Owner
“We are a 15 people team working remotely from different cities of Latin America and Europe, and time tracking for each client, project and task has been always a major issue. We’ve been using Everhour for the past year or so, and it has become an essential tool for our team. Is not just that gives us the ability to track how much time we have dedicated to a project, but also to estimate how much time a particular task will need in order to be completed next time and by who. Easily create sand save reports with just a few clicks” – Daniel Y., Creative Director, 11-50 employees
“Love Everhour’s integration with Asana. It allows my team to record time against the tasks so that I can review their effort – all within Asana. Reporting and monitoring is in Everhour itself. My contractors support their invoices with reports from Everhour” – Trevor K., CEO / CTO, 1-10 employees
“We looked at a lot of software to integrate with Asana and Xero to track our project time and Everhour one was the only one that ticked all the boxes. The feature set is great at achieving what we need and helping us better understand how we spend time on projects. It works seamlessly with our other apps! The support is also really responsive, answering any questions we’ve had and taking our recommendations into account on product updates” – Kim H., Creative Director, 1-10 employees
“Everhour is bar-none the best software for time tracking I’ve used. I needed to capture our team’s hours in Asana, but didn’t want to slow them down too much. Everhour makes it easy to start time tracking in a task, your browser or in their app. It feels native to asana. It’s a well-built app too. The user interface is simple yet smart. It works like you expect it too. And it seems like every time I go to their online app there is some small, smart, new functionality. Lastly, the support has been spot on and responsive. So there you go. I don’t often write reviews but felt these folks deserved one” – Steve C., CD, 501-1000 employees
Interested to see if it works for your business? Everhour comes with a Free Trial for 14 days with all the features unlocked. Give it a try today!