True confessions of a PM here on this unseasonably warm Saturday morning: cost estimating scares me. I'm an international economist and have never exceeded a project budget in my 9-year career, but something about the idea of predicting what a project will cost and managing to that budget terrifies me. I know I dread it because I'm not a procrastinator, and it's the one task on my to do list that I find myself postponing.
For those who find this task similarly daunting, I've learned a few things that I hope will alleviate concerns:
Trust your intuition. For more seasoned PMs, you're likely able to read a scope and come up with a ballpark figure in your head. In my experience, this number ends up being eerily close to the final project cost. Don't ignore the little voice telling you that the project will be more costly than what your client thinks or what the formulas in your spreadsheet are telling you.
Get the right tools. A back of the envelope estimate is all well and good, but I strongly urge all PMs to codify their estimates in some kind of cost estimating tool. This could range from an Excel spreadsheet to a more advanced commercial off-the-shelf product. The benefits are twofold: 1) you get to play around with different scenarios as your variables change, e.g., the dynamite yet cost-effective analyst you had pegged is no longer available and 2) you have a consistent means of tracking financials once the project starts.
Validate with a trusted colleague or mentor. Even more seasoned PMs can benefit from having another person review. I'm an extrovert and an auditory learner, so it is essential that I talk through my logic as part of the development process. I'd argue that an introverted math whiz would also benefit from a sanity check. Better to miss something now, while it's still a theoretical exercise, than later, when your project (and potentially your career), is on the line.
Set it but don't forget it. Once you have your thoroughly vetted estimate set up in your snazzy tool, you are prepared for success. But that success may never materialize if you proceed to randomly check financials whenever you think about it. Set up regular times to check in on your plan. I'd suggest monthly for larger projects and biweekly for smaller projects with less flexible budgets. Adjust your plan as more information becomes available to you.
Communicate. Check in with your client at regular intervals via their requested communication channel (e-mail, status meeting, etc.). This gives you enough lead time to request additional funding to process that new change request that just came through. Better planning = better execution = better business development.