The Art of Accurate Estimation…And Why The Heck It Matters

We all love signing up that new client or getting a deal done. But often there's a whole lot pressure and not a lot of time to get that all important proposal on the table. You want to keep the momentum going and you especially don't want a potential client to sign-up elsewhere while they're waiting on your quote.

In the pressure to get the deal done, one of the areas that can suffer, or simply get over looked, is accurate time estimation.

It's more important to get the deal done than to worry about ensuring the accuracy of the time estimate, right?

Well, yes and no.

There are definitely situations where the time it would take to do proper “due-diligence” and get a fully specc’d up estimate might eliminate any chance of getting the deal in the first place. I get that.

BUT if you don't know how long something is going take you can't know how much it's going to cost YOU to deliver it, let alone how much to charge the client for it.

And if you're consistently under-estimating your projects, and therefore under-charging the client and not recovering your costs, you’re going to struggle to make the profit you need to grow your business.

Hiring more staff and investing in systems and technology takes money. If your client work isn't generating the profit you need to expand your team, you're going to end up burning-out your people and frustrating your clients with poor service.

NOT the way to delight your clients and grow your empire.

Similarly, if you don't know how long it honestly takes to deliver your work you could also be OVER charging and losing deals that might otherwise lead to further work.

The point is, without a handle on accurate estimating, you’ll never know what is going on!

The ability to accurately estimate how long a task or project will take is a fundamental element in delivering profitable work and sustainably growing your business

I’m talking about ‘accurate’ estimates here for a reason. Almost anyone can give you a ‘finger in the air’ estimate. But what can revolutionise your business is the ability to quickly produce a time estimate that accurately reflects how long it will take to deliver, whilst talking into consideration all the requirements and complexities.

Being able to do THAT is a skill.

It's a skill that's part science, part art.

But there are things you can start doing TODAY that will make a fundamental difference in your and your teams ability to quickly produce accurate estimates.

Here are my top tips for developing the Art Of Accurate Estimations

1. Be honest, even when it hurts.

Sometimes you know there's a certain price point you need to hit in order to get the deal, and yet when you do all the math you just can't get the numbers to go round.

It can be so tempting to just keep cutting back the estimates hours until you get to that magic number in order to seal the deal. But if you can't actually deliver the product or service you're selling for this number you are doing yourself a massive disservice and forcing yourself to operate blind.

This is a big one.

And I've seen this happen in almost every agency I've worked with. There's this idea that if you say/hope/demand something will take less time, then somehow, magically, it will take less time.

If only it was that easy!

While I'm all for challenging a time estimate that appears unjustifiably high, being honest with yourselves about how long a project will genuinely take, and therefore what it will really cost your business, has a number of important benefits:

• It gives you an opportunity to find alternative, creative or clever ways of delivering that will genuinely save you time. Sometimes there are changes you can only make in the very beginning of a project that can have a huge impact on the overall cost. By pretending or insisting everything can get done for less you can miss this opportunity to ultimately produce a better end result.

• You can understand what the real cost to your business is likely to be, in advance. This gives you the ability to make an informed business decision about whether to go ahead or how much you’re going to charge.

2. Discount the Rate, NOT the time.

If you do decide to go ahead with the project even though you know it can't be delivered at the full cost (which, let's be honest, happens), then offer a discount on the RATE not the time. Clients need to understand how much effort is really going in to produce their work. Plus, by offering a project discount (because we’re so excited about doing this project with you!) they see what the real value is. And who doesn't love a discount?!

It's also important that YOU to understand the impact running this project is going to have on your margin.

Sometimes taking a hit on your margin in order to secure a new deal is strategically sound. But make it an informed business decision up front - not a ‘WFT happened there?!’ realisation after the fact.

3. So Who Does What?

Accurate estimation is the responsibility of both Project Management and the Subject Matter Experts (think designers, developers, strategists etc here). Your experts are ultimately responsible for the quality delivery of their discipline within a reasonable timeframe. Project Management is responsible for coordinating all the various aspects of the project and ensuring everyone has everything they need at the right time to deliver efficiently. It is this close-working partnership that combines to deliver quality work in the right time.

However if you’re a solopreneur or part of a small team, then it’s probably going to be all your bag baby.

4. Expert Estimations.

If you're a solopreneur then you’re likely to be doing everything, however if you’ve built up a team of specialists they should do the estimation for the components they are responsible for.

The reason for this is twofold:

• They are your experts. They should be best placed to understand any hidden complexities in a project as well identify the most effective way to deliver it.

• Ultimately you need to be able to hold them accountable for delivering their component within the given estimate. However, you can only reasonably do this if they, or someone more senior in their team, was responsible for producing the estimates in the first place. Otherwise if something goes wrong, the ability to ‘pass the buck’ becomes very high leaving you with a tangled mess to figure out what actually happened and more importantly, how to prevent it happening again.

It is however worth sense-checking these estimates to ensure everyone has understood the brief and the requirements correctly and that there aren’t any misunderstanding or oversight that may be affecting the estimate. This estimate sense-check should be built in to your delivery processes.

5. Record your time.

Okay, so this technically doesn't involve time estimation directly, but it's something I'll keep coming back to as it's one of the most important hygiene factors for running a profitable, well-staffed agency.

If you want to know how long something takes to deliver, look back at how long it took last time.

Recording your time allows you to learn from past projects and to identify problem areas that need attention. It also helps you evaluate and improve the accuracy of your initial time estimates.

You don't have to get fancy or expensive about this. It could be as simple as a Google Sheet or Excel Spreadsheet that lists your current projects, who's working on it and how much time they spend each day. Or alternatively you could download any one of a number of free, time recording smartphone apps so you and your team and record and report right from your phone.

Whatever system you use to get started, recording the time you spend on client projects will become an invaluable resource for streamlining your business.

6. Review and Reflect.

All the best sports teams and athletes do a full play-by-play examination of their previous performance to identify areas of strength and areas for improvement. These learnings are then fed into their next training session and onto their next game. There’s a reason for this exercise, it’s called Continuous Improvement. And those that don’t do it, get left behind.

Believe it or not, it’s no different with your project delivery.

Taking the time to examine and understand what worked well and what you could do differently next time is incredibly valuable…IF you make sure you apply those learnings.

Comparing your original time estimates with the actual time recorded will provide you with great insights into both the accuracy of your estimates and the functioning of your business.

So where to next…?

I know, that’s a whole lot to digest in one sitting. And most likely you’ll forget about half of it before your next email has come in.

Was there one idea that stood out for you?

If there was then do that!

And when you’ve got that down, come back and add in another.

All of these actions stack together to make big changes in the accuracy of your estimates, and ultimately the profitability of your projects and your business.

#Profit #Projects #ProjectProfitability #Estimations #ProjectManagement