I’ve been doing a lot of cost estimations lately for the development effort. Being a developer, it does not lie in my comfort zone as there is always an anxiety of underestimating. After some practice, I realized that there isn’t any rocket science here.

Points to consider while estimating:

1. Figure out the problem scope first. It’s important to analyze how big the problem is or what the expectations are.
2. Figure out the budget scope. The feeling generally comes with the problem statement. Being aware of the expected cost directly changes the scope.
3. In case of doubt, provide alternatives. Propose different cost estimates based on the value they’ll add to the business. Reduce development scope and propose low-cost solutions. Increase the scope and propose long-term solutions. Very similar to choosing one of weekly/monthly/yearly subscription pack. Mention pros and cons in each.
4. Task breakdown and the 4-hour theory. Break down the requirements and proposed solution into chunks. For each subtask, estimate a high-level effort. If something will take more than 4 hours, that means it can be further broken down.
5. Don’t always need to mention the complete breakdown. While proposing, mention module and add it’s effort/cost (a module may consist of one or more tasks). But do save the breakdown somewhere else in case later asked for or can be used while execution.
6. Communicate if there is an abstraction or it is just a guesstimate. Be clear that upon some more insights, and after looking a bit deeper, a more precise estimate can be provided.
7. Follow a pattern. Varies from project to project, but having a basic structure in place will always help to put down the estimates faster.

We’re always improving our processes. Tuned in to stay updated.