Whether you flat-bid or bill hourly, the ability to accurately estimate projects is crucial for delivering within budget and avoiding client disappointments. While completing over 300 projects for more than 100 clients at Pelago, we’ve spent the last nine years honing our estimating skills into an art form. Follow these four steps to create accurate estimates when quoting your next project.

1. How to Accurately Estimate a Web Design Project
Whether you flat-bid or bill hourly, the ability to accurately estimate
projects is crucial for delivering within budget and avoiding client
disappointments. While completing over 300 projects for more than
100 clients at Pelago, we’ve spent the last nine years honing our
estimating skills into an art form. Follow these four steps to create
accurate estimates when quoting your next project.

2. 1. Break it down
The more you can break down a project into its basic components, the
easier it will be for you to estimate. By estimating the hours needed on
a granular level, you will have more precision in your estimate. There
are a few ways you can break down the project, how you choose to do it
is up to you.
We usually try to break a project down into modules, and then further
down into the types of work required for each module. For example, an
ecommerce site could be broken down into modules like Product
Admin, Order Admin, Customer Accounts, Store Front, and so on. Each
of those modules can be further articulated by work type; Engineering,
Production, and Database.

3. If the project is a simpler one and you are designing and building pages
using HTML & CSS, break it down by the number of pages you’ll be
building. A good formula for HTML production is to estimate several
hours for the first page, and then an hour or two to build each
additional page.
Breaking down the requirements like this gives you smaller chunks of
functionality that you can easily wrap your mind around and estimate
accurately. When you’ve estimated each piece, add them all up for your
total.

4. 2. Add time for project management
Now that you have an idea of how many hours the project will require,
it’s time to make your first adjustment. Add 10% to 20% more hours to
accommodate for project management. These are hours that will be
used to compensate you for the time you spend corresponding,
meeting, and emailing with the client. It will also cover the time you
spend managing any subcontractors or team members. Freelancers
can get away with a smaller markup, while design teams should use a
higher percentage.

5. 3. Mark it up, again
In an ideal world, our estimate would be complete. But it’s not an ideal
world. There will always be unforeseen events and circumstances that
are going to increase the original estimate. So we might as well
account for them in the beginning. Mark up your estimate by another
25% to 33% to account for the fluctuations that are certain to occur. If
the project includes any type of web-based software, it is highly
recommended that you do this.

6. 4. Add a margin of error
Some times you will come in under budget, some times you will come
in over. Including a margin of error in your estimate gives you some
wiggle room if conditions change during the project, and gives the
client a realistic range of what the final project will cost. We usually use
a margin of +/- 15%. For example, if our final estimate was $10,000,
our estimate will show a final total of $8,500 – $11,500.
And that’s it, really. Now you have a number that will accurately
account for the time needed to complete a project. Your estimate may
seem high with all these markups, but it is far better to come in with a
high estimate and deliver under budget, than it is to bid low and hit up
the client for more money, or worse, pay for the overages out of your
own pocket.

7. In addition, developers have expectations of one another. Some
developers may be working their asses off while others are hitting up
the ping-pong table every hour. If developers are tracking their time,
you are one report away from knowing who is doing their job and who
isn’t. Disparity in effort among developers may not have any effect on
the quality of code, but it will kill morale and may ultimately take the
product down with it.

8. Accurate Flat Bids
Just because agile development makes us faster at web development
doesn’t mean we are immune to inaccurate estimates and scope
creep. Having estimated over 300 projects in the last 10 years, we
strongly believe in the predict, track and learn cycle of estimating
projects. We’ve honed down our estimating skills to the point we can
estimate a project to within 10% of it’s final outcome. We could not
have done this if we did not track our time. The win-some-lose-some
mentality behind flat bidding is not a very sound business practice. It
leaves you open to underestimating projects and scope creep.
Disciplining developers to track their time gives your business a much
higher probability of accurately estimating future projects and takes the
guess work out of flat bidding.

9. Billing Hourly
In our case, we are a web development agency that does agile
development and bills clients at an hourly rate. We gave up on flat
bidding long ago because they required too much work up front;
defining a bulletproof scope when neither the client nor ourselves had
a clear picture of what the finished product looked like. Billing hourly
allows us to quickly develop a web application that will inevitably
change as the client watches it come to life. Changes in scope are
easily tracked and billed without interrupting the agile development
process.

10. Short-term gain, long-term loss
Lightning McQueen learned this lesson the hard way. He was all gas-n-
go’s and was positioned to win the Piston Cup when his two back tires
blew out. He didn’t win the race. If an agile software development
business decides not to track their time, they will likely not suffer any
consequences in the short-term. However, they will experience long-
term repercussions as a result of their decision. Developers will burn
out while cramming to complete poorly planned sprints, managers will
struggle to quantify why a given feature is taking longer than it should,
and shareholders will start making uncomfortable inquiries. Had a time
tracking system been in place, many of these problems go away.

11. The discipline of accurate time tracking is getting more and more
simple to accomplish with the advent of so many great online time
tracking apps. Intervals, for example, will let you toggle timers on and
off whenever you start or stop a task. You don’t have to recollect your
workday at 5pm because the app has already done it for you. It also
seems that other online agile project management tools are beginning
to come around and add time tracking as a feature.
Meanwhile, there are some additional conversations on this subject
over at StackOverflow.com:
Time Tracking and Agile Methodology
Time Tracking in Scrum

12. Check out the Intervals blog for more articles…
The Intervals Blog
A collection of useful tips, tales and opinions based on decades of
collective experience designing and developing web sites and web-
based applications.
www.myintervals.com/blog