Businesses use this technique early in a project to see if the amount a client’s willing to pay is not only enough to cover costs but make a profit. By dividing it up between different stages or tasks.

Advantages: Quick and easy. Disadvantages: Not accurate at all.

You’re estimating a project according to stages or tasks. Each section is estimated individually and then summed up to determine the total cost of the project. Bottom-up estimation is done late in the estimation process when the scope and components of a project are clear.

Advantages: The most accurate project cost estimation technique. Disadvantages: Time intensive to prepare for staff and requires plenty of resources.

This is a type of estimation where you base a new project budget off an old one.

Advantages: Quick and simple. Disadvantages: Not very accurate.

Parametric estimation is a project management estimation technique that bases a new project on a previous project, but adjusts for variables.

Advantages: It’s the most accurate ballparking technique. Disadvantages: It may be hard to find data to manipulate for digital projects.

This method involves taking an average of three scenarios: best case scenario, worst case scenario and most likely scenario.

(Best + Worst + Most Likely Estimates) / 3 = Expected Estimate

Advantages: Delivers a more accurate estimate. Disadvantages: Takes more time and is a more complicated technique to learn.

1. Break down the project into activities and then further into smaller tasks, then estimate each task.
2. Take a look at similar projects you’ve done in the past and how many hours they took. Then calculate the average. For example, project one took 5 hours and project two took 10 hours. (5+10) / 2 = 7.5 average hours
3. Take past project timelines and adjust them for differences in the new project.
4. Use your judgement. Maybe you have significant experience in your field. Or you could consider hiring a specialist to do the estimation for you, says the Houston Chronicle.
5. Add labor time plus time required to get materials for the project, a useful method for general contractors and tradespeople.
6. Estimate based on unit. This could be words per blog post or pages per website or per product produced. Estimate how many hours it takes to produce each unit and multiply by how many units are required for the project.

The traditional method for estimating projects is a bottom-up method. It has severe drawbacks due to today's speed of change. The top-down method addresses this key issue.

Based on usage of the Fibonacci sequence (0, 1, 1, 2, 3, 5, 8, 13, 21, and so on). For agile it's more often simplified to: 1, 2, 3, 5, 8, 13, 20, 40, 100.

These numbers are represented in a set of playing cards.

• Each team member gets a set of cards.
• The business owner (who does NOT get to estimate) presents the item to be estimated.
• The item is discussed.
• Each team member privately selects a card representing his/her estimate.
• When everyone is ready, all selected cards are revealed at the same time.
• If all team members selected the same card, then that point value is the estimate.
• If the cards are not the same, the team discusses the estimate with emphasis placed on the outlying values:
• The member who selected the lowest value explains why he/she selected the value.
• The member who selected the highest value explains why he/she selected the value.
• Select again until estimates converge.
• Should lengthy or “in-the-weeds” conversations result, team members may use a two-minute timer to timebox the discussion, selecting again each time the timer runs out, until conversion.
• Repeat for each item

See more about the points Estimation units.

• The first item is read to the team members and placed on the wall.
• The second item is read and the team is asked if it is smaller or larger than the first item; placement on the wall corresponds to the team's response (larger is to the right, smaller is to the left).
• The third item is read and the team is asked if it is smaller or larger than the first and/or second items; the item is placed on the wall accordingly.
• Control is then turned over to the team to finish the affinity grouping for the remainder of the items.

Teams may choose to continue in the same fashion, placing one item at a time on the wall after group discussion. However, a faster way is to have each team member select an item in parallel and place it based on their own best understanding.

Once affinity grouping is complete, estimation unit values such as points can be assigned. In Exhibit 3, the first set on the far left would be labeled as having a value of 1 point, the second set would be 2 points, the third set 3 points, the fourth set 5 points, and the last set 8 points.

Because story point is comparative value it can raise during the time, especially when team is under a pressure.

To avoid this compare currently estimated task with more than one previously estimated tasks (generally two are enough).

• How to Estimate Projects: Top 5 Project Estimation Techniques for Small Businesses
• Agile estimation techniques