Even the richest person on Earth wouldn’t shy away from haggling for a discount. It’s just human nature to want to make sure we’re paying a fair price for the value we’re getting.
For those of us in PreSales, chatting with customers means being ready for this sort of conversation at any time. To respond with confidence, we need a solid grasp of the value we’re offering. And to get that, we must peek behind the scenes to see how project estimations are made.
An estimation should give us visibility on the following aspects.
- Scope Coverage
- Effort required to complete a project
- Cost involved
- Resource loading
- Timeline
Several different estimation models are used to arrive at accurate project estimates. Among the most commonly employed ones are:
- Parametric models: These rely on historical data to predict the time and resources needed for a new project.
- Work breakdown structure (WBS): A technique that divides a project into smaller, more manageable pieces. By estimating each piece separately and then combining these estimates, we get a comprehensive view of the entire project’s demands. This detailed approach not only clarifies the effort required for each segment but also aids in negotiations over costs and features from a sales standpoint.
- 3-point estimates: This strategy uses three distinct figures to gauge the necessary time and resources for a project: the best-case, most likely, and worst-case scenarios. A weighted average of these figures provides the final estimate, offering the adaptability to adjust numbers based on complexity and current knowledge.
Other models, such as Delphi, Planning Poker, and PERT, are also widely used. Given the abundance of information available online about these methods, I’ll not delve deeper into them here.
In the PreSales world, what really matters is having a broad understanding of estimation models. Let’s explore how this knowledge benefits us:
- It allows for optimization in terms of cost, timeline, resources, and scope.
- We can add extra buffers when necessary.
- It enables cost realignment based on customer needs.
- We have the leverage to expand the scope for additional revenue.
We’ll encounter various situations:
- Sometimes, the risk factor estimated might be too high, leading to increased costs.
- At times, we might overestimate complexities, resulting in higher expenses and longer timelines.
- There might be instances where our safety buffer is too small, risking the project’s success.
- Occasionally, our resource estimates may not be spot-on, causing budget overruns or delays.
- Sometimes, our scope estimation may not be accurate, leading to unrealistic projections.
In PreSales discussions about pricing with customers, we’re often prompted to delve deeply into estimates to uncover every possible optimization.
Moreover, a good grasp of estimation techniques opens up more opportunities with clients. For example, identifying a feature with significant business impact that’s only been considered at a basic level could allow us to advocate for an advanced version or even a separate project, thus presenting a more substantial proposal to the client.
From my experience, understanding estimations is key to engaging in meaningful dialogues.
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