How to Use Bottom-up Estimating: A Step-by-Step Guide


Projects go wrong for many reasons. One of the big ones is when you don’t arrive at an accurate projection and find that by the end of the project, you’re very late and way over budget. That’s not a good feeling for any manager.

If you want a project to go well, roll up your sleeves during the planning phase and do a thorough estimation. And one of the best ways to ensure you’ve dotted your I’s and crossed your T’s is with bottom-up estimating.

Bottom-up estimating allows you to break a project into its parts, examine each part to come up with a detailed estimate, and then delegate the completion of those tasks to your team. This ensures a more accurate project, and it empowers your team to get the job done.

Here’s more about bottom-up estimating and what it looks like in an organization.


Overview: What is bottom-up estimating?

Bottom-up estimating is a management technique for determining the overall cost or timeline for a project by examining the work at the most granular level of detail, compiling all this information, and then coming up with an overall budget and timeline for a project that can be delegated to team members.

This contrasts with a top-down approach, where management estimates a project based on the performance of a previous, similar project. Bottom-up analysis is one of the key project management methodologies to obtain accurate estimations for a project. It considers all factors, as compared to a top-down analysis that may leave key elements out and doesn’t empower employees to take ownership of a project.


Benefits of utilizing bottom-up estimating

Bottom-up estimating is a popular method for estimating projects for four fundamental reasons.

1. Accuracy

Laying out the project scope is often the most difficult part of the project. It’s difficult to accurately determine what kind of expenditures, timeline, personnel, and other factors will be needed to accomplish the project.

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Bottom-up estimating presents a clearer picture of project components, allowing team members to take ownership of segments and ensuring you’ve considered all factors in your project. And you’re more likely to end up with an accurate estimate.

Bottom-up estimating helps a manager understand the work package more comprehensively and anticipate potential roadblocks along the way. Contrast this with a top-down approach where management may miss key elements of a project not present in previous projects, or encounter obstacles that prior managers did not have to deal with.

2. Error mitigation

If the manager makes errors in the estimates, a bottom-up estimate provides the manager with mitigation options. They can conduct a cost-benefit analysis and come up with alternate solutions, giving them more flexibility to address errors over the life of the project.

There’s also greater balance through the components of the project. In other words, underestimation of one component can be offset with adjustments to another. Ultimately, this means errors don’t significantly impact delivery, reducing impact on the budget.

3. Versatility

A bottom-up analysis allows managers to be more versatile, implementing strategies such as project crashing or empowering team members to assume control if need be.

Bottom-up estimating can be integrated with other estimation approaches, such as three-point estimating, to further enhance the manager’s effectiveness. This technique is more egalitarian than a hierarchical command structure, making it an efficient strategy for teams that work well together.

4. Reduction in overall risk

With a thorough bottom-up analysis, a manager reduces overall risk to each of the project phases. The manager anticipates challenges from the ground up and leverages the specialized expertise of team members, enabling them to be flexible enough to adjust mid-stream during a project if needed.

Power and control are dispersed through the team rather than to one person, resulting in more responsiveness, greater efficiency, and, therefore, increased value to the client.

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How to use bottom-up estimating

Bottom-up estimating sounds intimidating, and it does require a lot of homework on the manager’s part — but it’s also a relatively straightforward process defined by these steps.

1. List all the tasks for a project

First, lay out every single task involved in the project. No task is too small — leave nothing out. Create a work breakdown structure (WBS) and assign tasks to individual team members, who take responsibility for that task. Break down tasks to their most granular level, so you can determine the time and cost it will take to execute each.

2. Determine resources and timeline

Next, lay out the exact resources and timeline of the project. Bottom-up budgeting and cost estimation are critical to getting the project budget right and setting a realistic time frame to make it all happen. Use project management software, as many platforms allow you to break these projects down to the great detail you will need.

Determine the number of people and skillsets best suited for executing each task, and identify any equipment they will need. Consult with the team to refine the approach and ensure you’re making accurate assumptions.

3. Delegate to the team

The next step is to ensure responsibility is shared across the team, rather than having everything filter back to you. The project manager doesn’t need to know every detail in this system or even be familiar with all the technology used. Instead, the manager obtains feedback from all team members, seeking buy-in from everyone involved, including key stakeholders.

The manager empowers each team member to be responsible for the success of their assigned tasks, doing what it takes to get it done regardless of the roadblocks they face.

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Example of bottom-up estimating

Here’s a hypothetical example of bottom-up estimating to show you what this process looks like.

Imagine an IT department with 64 computer workstations that must be converted to a cloud services contract. The manager is tempted to do a top-down approach and just come up with an estimate based on similar projects in the past, but he knows some workstations are obsolete and will require a special process. As a result, he conducts a bottom-up analysis.

During this process, he finds 10 computers are obsolete and must be replaced. He further finds another five computers are current but require extra permissions and aren’t a good fit for the project. In his analysis, he describes what must be done to each computer, estimates the cost of each task and how long it will take, and then assigns it to an IT employee with a deadline based on this analysis.

Had he conducted a top-down approach, the project would have been delayed and there would have been cost overruns as IT employees discovered problems setting up the new cloud system.


Start small and see if bottom-up estimating works for you

Is bottom-up estimating the right choice for your projects? It depends — for some managerial styles, it doesn’t work. But it can be a powerful way to execute projects for those who are good at delegating and inspiring their team to take ownership of a project.

Try implementing it on a small scale. Choose a simple project, come up with a budgetary estimate and a timeline, assign it to one or two people, and see how the project progresses. Then compare results with those you’d accomplish if you took a hierarchical approach. It might open up a world of possibilities for you and your business.


View more information: https://www.fool.com/the-blueprint/bottom-up-estimating/

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