Common Cost Estimating Mistakes and How to Avoid Them

Most of the software projects fail because either they are not delivered on time or budget is tough to meet. Conclusively, businesses worldwide losses billions of dollars, that’s embarrassing. It indicates cost estimation at the initial stage is vital that paves the way for success; however, still businesses fail due to inaccurate cost estimation. It necessitates to know issues that increases the project development cost unexpectedly.

At the same time, leveraging different technologies, methodologies, and practices makes it more difficult to accurately estimate development costs. So, what businesses should do to avoid common mistakes. Realizing this need, the project management experts and key business stakeholders highlighted a couple of errors that increases cost, which should be prevented for better cost calculation.

Below are some pitfalls that you should look out for when describing credible cost estimation:

Farsighted predictions

The cost estimation of software, web, and mobile app development project is often made during the proposal phase before the project starts. At this point, there is limited information about the project’s goals, needs, or possible risks. Estimates can be wrong when there isn’t enough thorough information. Before a project starts, business owners often guess how much it will cost based on ideas and statements that might not come true.

Shortage of expertise on similar projects

In cases with no or few similar projects, it may be difficult for a project cost estimator to get the relevant information about these projects. Experience in similar projects leads a developer to understand how to scope specific elements, emerging individual elements, and the stages’ duration.

Accurate estimates of cost and time can only be achieved if one knows the extent of the project well. It is difficult to establish a proper border for the scope of a project when one lacks experience in such kinds of projects, which might lead to ignoring or underestimating important areas.

Lack of requirements

It is important to fully understand what all are good ideas for the work needed. Misunderstanding this all could lead to mistakes and changes in the software project’s scope. When project needs aren’t spelled out in full, it’s easy to miss things the client might want. This can lead to missed project deadlines, which will cost more once the client’s needs are made clear.

Splitting one task across multiple resources

It takes more time to plan and handle when more than one person is working on the same job because different rules need to be set up. But this is often forgotten. This delays the job and makes it more likely that budget and dates will not be met. Ultimately, you will discover that assigning tasks to multiple team members costs more than you thought.

Expecting that resources will work at full charge

When you believe that resources for software development project will operate at maximum capacity, you may overestimate the work that can be completed in a given period. This might result in unrealistic project timelines and unsustainable productivity targets. Overestimating productivity may also lead to underestimation of expenses since the real-time resources required may be more than originally projected.

Difficult to estimate features

In any project, there will be features that would be difficult to estimate. Deep research is required to estimate the value of these features. A good idea would be to keep a higher buffer limit for such features both in terms of cost and time. For instance, if the project requires the developers to include tricky third-party services that are not well documented, a significant amount of time is lost in integrating such a service into the project.

Forgotten features

Many times the project owners forget to include certain must-have features into the specification list. For example, features like the Contact Us button, the ‘Buy’ button, and the FAQ section. However obvious it may seem if the business owners do not add these features into the specification sheet, the developers won’t consider them in the final estimation sheet. This is why the project owners need to do proper documentation to ensure that they do not miss any important features.

Inexperienced developers

The lack of experience in developing IT projects can result in missed deadlines and grave errors. To ensure that the project is completed smoothly, as planned, and within budget, the business owners must hire expert developer teams with a proven track record of executing IT projects.

Improper requirement specification

Businesses have to understand that there is no place for guesswork when it comes to cost estimation. When the requirements are not described in the correct order, software development companies are left with no choice but to do a lot of guesswork. This can lead to incorrect cost estimates.

The development team would charge extra for those requirements that were not in the original scope of work as they would have to allocate resources to include these requirements. One should understand that precise requirements will lead to accurate cost estimates, and hence it is necessary to spend time researching the requirements of the project. If in doubt, the best way forward would be to drop a particular feature for now and include it in a later version.

What is Requirement Analysis Phase of SDLC?

Different types of pricing

The two most prominent pricing methods that are used for cost are hourly rate and fixed price. Depending upon their requirements, the project owners can opt for either of the two methods.

For example, if the project has an estimated completion time of 1000 hours, the IT service providers can charge either, let’s say $20/hr or $18000-$20000 fixed for an entire project.

Therefore, the project owners would first understand how many alterations you would require in your project and decide the costing method accordingly. The project cost also depends a lot on whether the business chooses to outsource the project to developers based in another country or decides to give it to developers based in their own country. Usually, outsourcing to developing nations like India is much cheaper than the first-world countries such as the USA, the UK, and the like.

Estimate the project cost precisely

Any mistake during project development is disastrous, but inaccurate cost estimation is completely non-negotiable. As an entrepreneur, you should keep the common pitfalls in mind to prevent them before they lead to budget overruns or negatively impact project deadlines. The solutions to fix such cost estimation mistakes for your project development can help you prepare for them as well as to get rid of them. Also, Ensure these mistakes are not repeated in your future project for wonderful results.

My two cents: If you are looking for ways to gauge project development costs despite having uncertainties, the project cost estimation techniques will help you. It helps entrepreneurs know the amount they need to keep aside for project development proactively, which further ensures everything keeps going smoothly without a financial crunch.