How To Do Project Estimation: Extensive Guide

08 Nov 2022

15 Min




What do you understand by software project estimation? Software cost estimation in project management is a valuable, or to be exact, a must-have stage. It's essential, as in the real business world, timing, ROI, and revenue are able to either advance your business, keep it at the same level or destroy it. Software development is known as the hardest to predict, so it is essential to clarify all project aspects in great detail.

How to do that? What software project estimation models and techniques are typically used by software development companies? We'll give the answer to all these (and related questions) in our extensive guide. Let's start reading!

What is Software Project Estimation, and Why is It Important?

Before talking about the rough or detailed estimate peculiarities, we’ll start with the basics of software development estimates.

Software development estimate implies a flow during which the people (typically qualified IT specialists) can identify how much effort the particular project will require, as well as time and budget expenses for giving a proper embodiment to a project idea.

The usual steps for estimation the software project are the following:

  • Defining a scope
  • Making an app decomposition
  • Components sizing
  • Professional review
  • Assessment finalization

We’ll further talk more about them.

The software estimation can be divided into several techniques depending on the peculiarities of the activities performed during the process:

The techniques for estimation software engineering activities

The techniques for estimation software engineering activities

  • Analogy-based estimation entails reviewing and contrasting the production costs of previous projects that are comparable to the one at hand. When you just have a little knowledge about the project that has to be estimated, you can use this estimation type.
  • Bottom-up estimation means the project is broken down into a number of manageable tasks and subtasks. The final estimates are then calculated by individually estimating each job and adding up the totals from the bottom to the top.
  • Planning (Scrum) poker implies segmenting the project into distinct features with further discussion of the development team as to the time needed for each feature creation. Additionally, the team discusses the most controversial estimates.
  • Comparison to the prior project is used when your current project is comparable to an already finished one, making it simpler for the IT team to generate an accurate time estimate. This process takes into account the new app's complexity and multiplies it by the number of projected man-hours.

All these approaches of software project estimation in software engineering are intended to accomplish a particular purpose, which is described differently by various researchers. However, Steve McConnell defines the main of them in the following way:

Steve McConnell

Steve McConnell

American IT developer and books author

The primary purpose of software estimation is not to predict a project's outcome; it is to determine whether a project's targets are realistic enough to allow the project to be controlled to meet them.

In order to gain this major purpose, the clients can perform estimates themselves and after choosing a tech partner, with the help of their specialists. The first way requires using specialized tools for project estimation in software engineering and extensive experience in making such an assessment and preventing possible risks. But if you want to simplify your job and save time needed for other tasks’ accomplishment, you should better start cooperation with a skilled software development vendor.

Below, we’ve gathered some of the most common reasons when starting a client-vendor collaboration will positively influence your project matters.

Start making a software estimate

Contact an experienced vendor to obtain a precise project estimate helpful for further development

Software Development Estimate: Why Should You Apply to It?

The estimation of software project is a powerful tool for you to clarify the exact timeframes and budget for the project. Moreover, it’s critical to use it for the reasons outlined below.

You need to accurately find out the exact cost of your project

Generating a thorough estimate may be like putting together a jigsaw and matching together the appropriate parts. You may acquire a realistic and precise cost of creating an app, letting you know what to expect for every area of your project.

You require to boost the project cost assessment

You must be aware of the expenses associated with each component of the project as well as the most accurate method for estimating the total cost. However, there are cases when you have to work without having immediate access to details (e.g., size) of your project. You have the propensity to depend on outmoded and suspect data, which can cause the project to be delayed.

However, if you apply to a competent software development vendor, you won't need to spend hours laboriously assessing every project's cost. The vendor's specialists are able to conduct necessary research as soon as possible. This opportunity provides you with the time and money savings as well as the assurance you need to make wise business decisions.

Your clients/other stakeholders need an accurate estimate on the spot

In order to accurately estimate a project, it's critical to have the information you need as soon as feasible. Nevertheless, despite the fact that the project may frequently be divided into logical sections, the time and effort needed to do so are sometimes overestimated, which leads to a lot of back and forth in the relationships with the customer.

When you collaborate with software experts on the software project estimation in software project management, you avoid guessing. You ensure that each estimate is precise and reasonable from the beginning. Additionally, you will be able to deliver the appropriate estimate at the proper time to avoid getting stuck and keep your clients satisfied if you need to.

Dive deeper into the estimation software engineering fundamentals with our comprehensive article! Check it out now to learn more!

The Crucial Benefits Software Estimate Brings to the Project

Trying to manually identify the price of your project is quite a risky thing for you. Only one miscalculation can cost you interrupted flows of cash, missed deadlines, and even a spoiled business reputation. But entrusting an estimation of a project (as well as the rest of it) to a reliable software provider will bring the following advantages reasonable for your company.

Cost-efficiency. Searching for reliable tech partners, many entrepreneurs choose programming outsourcing as the most effective collaboration model with their tech partners. It’s explicable because outsourcing offers businesses services of specialists even with rare qualifications and affordable hourly prices for these services.

Thus, we’ve studied the most popular outsourcing destinations and prices for IT experts’ services there, representing all this to you in the below table data that explain software project estimation component - hourly wages.

Average hourly wages for outsourcing IT services


Central Europe


Estonia, Poland, Romania, Hungary, Bulgaria

Latin America


Brasil, México, Argentina, Chile, Colombia, Peru



Morocco, Kenya, Nigeria, Egypt, South Africa



India, China, Philippines, Indonesia

More effective time management. Along with cost estimations, the software development vendor takes responsibility for the entrusted project part (or the entire project) for your company. It means you can devote your time to other necessary company activities while your project is in the reliable hands of your software vendor.

Planning accuracy. As we noted before, manual project assessment on your own may be risky. There are many aspects to assess and calculate, and making one mistake can be dangerous for all your project. However, entrusting the project to an outsourcing partner excludes such risks because the estimates will be made by experienced professionals.

Improved budgeting. Collaborating with an outsourcing vendor in terms of estimation issues means you’ll stay on a budget with careful estimates. As a result, you may make more precise bids and proactively change your sourcing and purchasing to stay inside your budget.

Accurate estimate for your concepts

Message Cleveroad to order software estimate that will enhance your further project flow!

We’ve represented to you the most practicable advantages of applying for software estimates to the outsourcing vendor. Let’s discuss the project development approach fitting best to software project assessment.

Why Agile Approach is Better for Software Project Estimation?

Conventional project management requires that the work scope and functionality be fixed, while the time and cost be changeable.

This approach has critical pitfalls that should be highlighted to think about:

  • The scope of your project may need to be modified at some point throughout the development lifecycle.
  • Variable time causes you to lose control over the competitive advantages of your product. It is conceivable because you can miss a crucial industry date or your competitors might release their solution faster.
  • Variable costs result in unforeseen hazards since the return on investment (ROI) cannot be controlled. It also changes your requirements because you'll need to add some more team members or maintain them for a longer period of time.

Agile, in its turn, allows you to easily adjust the project scope for software project estimates without worrying about the uncertainty of time and expenses.

Because of this, Cleveroad employs Agile software project estimate techniques. They successfully address all the aforementioned problems. So, applying to them, you may effortlessly adjust the scope of your project, define software project estimation techniques to use, and obtain a set team and amount of time.

Moreover, Agile has a bunch of pivotal features that make it the best for project estimation. We’ve gathered the most common ones for you to consider:

How to do software project estimation and what Agile brings in it

How to do software project estimation and what Agile brings in it

Dividing development into work sprints. The project is parted into sprints - smaller releases, each of which corresponds to a finished, usable portion of the final product. When a sprint is completed, the subsequent sprints are re-evaluated based on what we learnt from the prior one. It aids in the reduction of unforeseen expenditures and allows you the opportunity to immediately add new or updated features over the course of a project.

Extra functionality is simple to implement. Both the market environment and user demands are ever-changing. With the help of mobile development services, you could need to add more components or even move your app to a different mobile platform. That would not be practicable for a project with defined pricing, but for Agile, it will only be necessary to add more work sprints.

Adaptive adjustments. It implies that from the start of the project, we have been prepared for any adjustments needed to ensure the success of the final result. Just provide us with timely comments and pertinent information.

Simple termination. You may choose to put the project on hold if a substantial portion has been delivered but does not result in more ROI. Even though it is frequently allowed, it necessitates the development of close, trustworthy bonds between the project team and the client.

Discover comprehensively the Agile development methodology with our special client guide! Start reading to know more!

What Are the Steps Involved in Software Project Estimation? Everything You Need to Know

Doing a estimation software project requires, the professionals care about the product’s quality while defining a bunch of necessary aspects to understand whether the project is viable. We’ll view an estimate flow step-by-step as well as necessary hints that will show how to make this flow ordered.

Project Estimation Flow by Stages

The software estimate plays a key role in a proper start of a project as well as its finish. The steps needed to perform such a process are described below.

How to do software project estimation — step-by-step

How to do software project estimation — step-by-step

Defining a scope

Firstly, the specialists need to identify the project's scope. With this purpose, they arrange meetings with you to find out your preferences and requirements as to the future software product (e.g., collaboration model, budget, deadlines). Even if you don't know all the specific requirements, you may always state your assumptions or represent a raw project concept.

Making a software decomposition

This step is comparable to a work breakdown structure, but only for the software components, not all of the activities for the product. According to information received from you, or the researches conducted, the specialists will need to split your software down into smaller components and functions, and then classify them to a specific set of components. You may also gather additional information from the project team if you need so for a further project development.

Components sizing

Each component of estimation in software project management will receive its own individual estimate. You may study the various estimated outputs using multiple analytical approaches, and you can also combine these estimates taking an average.

Getting reviews

Following the initial estimate, you will need to seek an expert's opinion for certain new functions that you might not be aware of. You can also get feedback from your peers on whether you made the right estimate. In order to make sure you are on the right track, you might also need to use certain analogy-based strategies for earlier projects or comparable components or services that were created.

Assessment finalization

Since you have an initial estimate after combining all of the calculations from all components and functions, this step may be regarded as the last one. You can repeat the procedure till you arrive at the accurate estimate accepted by the project team and management.

We’ve outlined the basic information as to what are the steps involved in software project estimation conducted by an outsourcing vendor at the beginning of software development flow. Moreover, you should know that during this process the vendor’s specialists also make a composition of a team who will bring your product to life.

The rough costs to hire app developer, UI/UX designers, etc. represented in the below table depend on the complexity of the app and the time the staff needs to develop this solution.

Rough costs for team composition

SpecificationBasic appMedium appComplex app


4 months

6 months

10 months





UI/UX Designer




Project Manager




Business Analyst




QA Specialist




Solution Architect












The Hints to Enhance an Estimation Process

Since we’ve represented you the basics about the stages of estimation for software projects, you should also consider some advice helpful during the project estimation and having impact to further development.

Don’t guess — clarify. You'll can frequently find that important details are omitted from task descriptions. Even if you and the project team/stakeholder are on the same page, you may not comprehend something the same way. Additionally, certain activities can be done in a variety of ways.

Asking additional questions and digging further into the issue will almost certainly result in a considerably higher estimate than guessing, however the chance that the work will satisfy the client's demands will increase.

Don't try to cut costs — think about your project. According to our experience, commercial pressure should be maintained to a minimum when estimating software development costs. A consumer will only get the most precise estimate in this situation. It will completely account for the total amount of work, the rate of development, and any potential delays. If your project's long-term success depends on it, don't merely try to minimize costs!

Break the scope of work down. Estimating minor actions is significantly simpler than bigger ones. You'll have a better understanding of all the requirements if you divide the work up into smaller assignments. As a result, your estimate will likely be higher (read: more accurate), and you'll probably discover that you have more questions than you thought.

Think out the testing phase estimation. The testing stage in the creation of your app is crucial. It's the only way to launch your application under circumstances other than those intended by the developer. The more tests you conduct, the better your user experience will be. In terms of numbers, you should try to devote at least 25% of the total development process time to testing.

Moreover, estimating the project flow, you shouldn’t hesitate such things as initial setups, system debugging, deployment, and so on, as they are integral parts of every project.

Offer the requirements adjustments. The issue at hand could already have a solution, or it might even be a key component of the technology you're employing. Working on a feature that you don't think is essential to the project might take a lot of time — or even be time wasted.

Organize estimation flow the best

Apply to us to make an estimate positively influencing on development flow

You may still obtain the functionality they desire even if a requirement is changed. Instead, it can result in a solution that is even more in line with your business needs.

Software Project Estimation Process at Cleveroad

At Cleveroad, we conduct software project estimates, making a rough estimate and a detailed estimate. It’s the time to tell you more about how estimation in software projects is conducted.

Rough Estimate

After you provide us the app specifications, we break down the entire work into features and give a time assessment for each one to produce a rough estimate. Given that the project's details and potential problems are frequently hidden at this time, its accuracy is typically between 75 and 25%.

To gradually enhance the cost accuracy, we produce 2 rough estimates:

  • The initial one is created after the Solution Design Workshop. It is based on the project's "helicopter vision." We establish objectives, the primary task scope, the amount of complexity, containers, and limitations, as well as possible hazards and plans for mitigating them. We estimate and propose a price based on the information provided.
  • Following the conclusion of the Discovery Phase, we create the second one. We examine the specifics of the business processes, build a more exact feature list, identify the key development criteria, and produce non-functional requirements and architectural solutions. Thus, the second rough estimate is created more specifically than the previous; it improves the accuracy of all requirements and team composition.

Detailed Estimate

A detailed estimate is the most exact one in project management, with about 100% accuracy. The developers actively involved in the creation of the product take part in it.

This is an iterative process in which the business analyst creates user stories, which are specific requirements, for each sprint or two sprints in advance. They are examined by the solution architect, technical team leader, or a developer, based on the intricacies of the project. A detailed estimate may be created once each user story has been analyzed.

Creating this estimate, we take the following points into account:

  • All the data on quantities, prices, and rates required to finish the project
  • Preserving thorough records of the upcoming software solution (e.g., wireframes, requirements, and other docs)
  • Activities not related to development, integrations, or recommendations, etc.

All the price-driving aspects that should be considered during the estimate of cost of software development! Read it now!

Software Development and Estimation Services from Reliable Tech Partner

As we’ve mentioned above, a reliable tech partnership means a lot in software development estimate as well as in further project creation. Cleveroad is such a partner for your business knowing exactly what is project estimation in software engineering and how to make it in the best possible way.

This is an outsourcing software development company from the CEE region, existing for 10+ years on the market to develop the cutting-edge solutions for startups, SMBs and large enterprises according to the newest software development trends.

With 120+ in-house engineers, we’ve successfully implemented over 170 projects for the following business domains as:

  • Logistics software (e.g., WMS, TMS, SCM or ERP) created by our company assists in the enhancement of supply chain activities.
  • Healthcare solutions (e.g., EHR, EMR, or ERX) are available to be customized for your needs, along with other medical software.
  • FinTech software created by Cleveroad helps to boost the security of monetary operations, streamline them, and enhance overall productivity.
  • E-learning platforms and applications from our company allow entrepreneurs and educational institutions to digitize learning.
  • Retail-intended complex solutions from Cleveroad like CRM, POS, RMS, and others enhance workflow of the trading companies, etc.

We are also eager to build for you a profitable and modern software fully fitting the demands of your company starting from in-depth and accurate project estimates. All you need is to message us with the proposition to start a cooperation boosting your business to new heights!

Apply for help with estimates

Cleveroad is ready to guide your project from making an estimation to a modern product creation!

Frequently Asked Questions
What is meant by software project estimation?

Software development estimate implies a flow during which the people (typically qualified IT specialists) can identify how much effort the particular project will require, as well as time and budget expenses for giving a proper embodiment to a project idea.

What is the need of software project estimation?

The need and the purpose of estimation of software projects is described the best in the following quote of Steve McConnell, who mentions that “it is not to predict a project's outcome; it is to determine whether a project's targets are realistic enough to allow the project to be controlled to meet them.”

What are the five basic steps in software project estimation?
  • Defining a scope
  • Making an app decomposition
  • Components sizing
  • Professional review
  • Assessment finalization
Author avatar...
About author

Evgeniy Altynpara is a CTO and member of the Forbes Councils’ community of tech professionals. He is an expert in software development and technological entrepreneurship and has 10+years of experience in digital transformation consulting in Healthcare, FinTech, Supply Chain and Logistics

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