Estimations

An estimate gives the client a general idea of the approximate costs incurred by a particular service, task, or project offered by the company or service provider. 

What Are Estimations Used For?

The estimation process, more commonly referred to as “creating an estimate,” is an important part of many business aspects. 

Budgeting

In budgeting, an estimation process is used to create a prediction of funds or assets required for the completion of a specific project or program. This prediction, or estimate, is later used to form an actual program or project budget.

Dealing With Clients

Before reaching a deal with a client, freelancers and companies typically estimate how much they should charge for their services. If a client has a set budget in mind, estimations help freelancers and companies assess whether the project profitability will be worth the manpower and time and materials needed to complete the project.

This allows both companies and freelancers to refuse to perform a service that would ultimately result in them losing money or ending up underpaid for the time spent performing a service or finishing a project as requested by a client.

Project Management 

Estimations are extremely important in project management. Without an estimate of how much time, labor, and equipment a specific project could require, planning a project would become almost impossible.

Project managers must have a rough idea of the people, resources, and tools they need to finish any given project successfully. By performing estimations, they can prepare in advance and ensure the resources they require are available at the beginning of the project instead of being caught off guard by the lack of manpower or tools mid-project.

Project Estimations

Successfully finishing a project requires certain types of estimations to be made in advance. The most common project areas where estimations are known to be particularly useful are:

Cost Estimations

Cost estimation is about creating an accurate forecast of how much money will be needed to finish a specific project. Apart from being an estimate of how much money is needed, a cost estimation also involves an estimate of when the money will be needed to effectively complete a project.

By receiving the cost estimate, clients will have certain expectations and will get a clearer picture of how to manage their own budgets to fit within the service provider’s initial cost estimate.

Resource Estimations

By performing a resource estimation, project managers can estimate what types of assets and how many of them they would require to finish a particular project. By creating an estimate, project managers can ensure they have enough manpower, supplies, equipment, or tools to finish a project.

Time Estimations

Creating a time estimation could help project managers or team leads to successfully plan a project timeline. Estimating a project's overall duration and the approximate time required to complete individual tasks is a significant and important part of project management.

By estimating a schedule for the project, managers or team leads can ensure that the necessary manpower and resources will be available at the time when they need them. It also gives the clients a ballpark estimate of when to expect deliverables.