Analogous Estimating: Definition, Process, and Use Cases

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If you ask a project manager what the most challenging task in managing the project is, they would unanimously say estimating. It is an art to offer the most accurate and reliable estimate for a project and win the bid.

Following the right estimating process is the key to getting the right amount and defining the project scope appropriately. Most projects are shut down even before they start owing to assessing mistakes. Many face troubles midway, as the estimates are inaccurate and do not showcase the entire picture.

Estimating doesn’t focus on the dollar allocation alone; it also considers resources, timelines, and the entire scope of the work.

With several estimating techniques available for project managers, choosing the suitable method and apt design becomes difficult. We will take you through the analogous estimating process and use cases here.

Analogous Estimating Overview

Imagine you previously worked on a similar project a few months ago. You had worked on the quotes and the invoices. Moreover, you had also created the resource allocation sheet and worked on the scope of the project.

Instead of estimating ground up, you decided to use this previous project’s data to build your estimation. As a result, you could easily approximate the cost, project resources, and length of work for this new project.

You used the past data and studies to create variables that helped with the estimation. This technique is known as an analogous estimation. In this case, you are using all the past data and building an analogy for this current project.

In analogous estimating, you get the entire project’s cost first before breaking it down to granular form. You scope the whole project, decide the overall time you will take, and determine the costs.

You use an analogous estimation technique for

  • Absolute value
  • Ratio estimates
  • Three-point estimates
  • A range

When to Use Analogous Estimating?

The first thing you should keep in mind when using analogous estimates is that you need past data to get reliable results. If you don’t have sufficient data points or haven’t done any projects that can help with the analogy, you should avoid including this estimating technique.

We will now talk about all the places where analogous estimating best fits.

  1. Initial Phase

    When checking the project feasibility, even before you determine the resources or other aspects, you can use analogous estimation. It helps to know if you can work on the project. The estimate will tell you if the project will be profitable for your business or a cost overhead. You will have data from previous projects that will help you calculate this aspect faster than other techniques.

  2. No Access to Current Project

    How will you work on an estimate if you don’t have enough information for the current project? You will use past data and research-driven data to drive the estimation for the current project. You can use the analogous technique at such a time, as it helps analyze the cost and the overall timeline for your project.

  3. Approximate for the Project

    When you want to create a rough estimate for the project and share it with a business owner, you will always choose the analogous technique. It works faster and gives more accurate results. It is the handyman’s go-to choice for a quick guesstimate that can help convert a bid.

  4. Limited Resources Available

    When you are left with limited to no resources for the project, then you will work your estimation on analogy. You will find some projects from the past (either done by you or someone else) that can help you finalize the approximation.

    For instance, you ask someone who has recently completed a fencing project the overall timeline and the total cost. Based on your location and the price of resources here, you will estimate the overheads and length of your project.

  5. Expert Insight

    It is the only estimation technique that works on expertise. If you, as the project manager, have enough understanding of the projects and have been involved in similar cases, it helps build the estimate. You will immediately know which case to refer to for the particular project, and build estimations.

The Benefits of Using Analogous Estimation

If you want to use analogous estimation, you should be confident about the reasons. Here are all the advantages associated with this method.

  • When you are crunched for time and need a quick estimation, this proves helpful. It saves a lot of time and effort and improves productivity. It helps the key people in an organization make faster decisions and act quickly on the estimates.
  • When you take analogous estimation, you save a lot of money. In this estimation technique, you spend limited time and resources on documentation and processes. It is quick to get started and determine. If you want a cost-effective approach, then you should go for analogous.
  • It helps check feasibility and the best part of using this technique is that you can refine it throughout the project lifecycle. You don’t have to stick to the estimates you have made during the project lifecycle.
  • If you even have some data points that you can compare, this technique is used. The most significant advantage is that you can quickly estimate using fewer data points from past projects.
  • When you use a similar estimation technique, you don’t need a lot of resources or time on hand. It is faster. So, if you have to hand over an estimate immediately to the owner and get it passed, you can use this technique.

Challenges of Using Analogous Estimates

  • If you are looking for something more accurate and reliable, you should avoid using analogous. It is built using an analogy of past projects. It may not have all the data points necessary for estimating. It is a pure guesstimate.
  • In this case, the estimators’ assumptions and experience come to play. In case the assumption is wrong, the whole estimate becomes inaccurate. This is the biggest challenge of using this technique.
  • It is more of a top-down approach that can come with inaccuracies that disturb the project planning.
  • Lastly, in some cases, the top-down approach is maneuvered by political situations and other external pressures compared to the project specifications or expert assumptions. This can cause significant inaccuracies, making the estimate unreliable.

The 5-step Analogous Estimating Process

analogous estimating process

If you plan to use analogous estimating for your next project, here is the entire step-by-step process that you should follow.

  1. Assimilate Similar Projects

    You or your team may have estimated similar projects in the past. It is now time to bring out all the projects that appear similar or have the same scope out. You will need to pull out database references for timeline, scope, cost, and resources. In case you don’t have historical projects that appear similar to this one, you can rely on your team’s ability to run assumptions.

    For example, if they have expertise in a particular subject, they may be able to estimate the timeline and cost for the project without any analogy. It is very important to collect projects that are in some way similar to what you have right now.

  2. Collect Data

    The second step is to get all the data related to the project in one place. This could be data from the past projects, the current project’s data that the business owner has given, or your assumed data. You should have all details regarding the cost, resources, and timeline before you move ahead with the estimation process.

  3. Compare Variables

    While the two projects could be similar, they would differ on many levels. You will need to identify the ways in which the two projects can be compared. It is possible that the overall work to be done was the same or the resources allocated were the same.

    Basically, identify the comparable variables for both projects before going ahead with the estimation technique. It could be a vague factor like the complexity of the project, which would be similar in both cases.

  4. Estimate Type

    It is now important to determine the analogous estimating type that works best for your case. Do you want to approach it with a ratio estimate or a one-point estimate? The range estimate requires you to average out between the maximum and minimum. At one point, you will need to take a different approach to build the analogy.

  5. Determine the Values

    Once you have defined the analogous estimating approach, it is time to use it and determine the values. You should ideally use the values that are closest to your finding.

What is an Example of Analogous Estimating?

If you plan to use analogous estimating, it is important to note that you may not have experience in working on these projects. It is possible someone who has worked on similar projects has the data handy for you.

Say you were approached for a plumbing project for the 10 houses in a society. If you are working for an agency, you can ask people who have worked on similar projects for data. They will provide you with estimates, of the overall project scope, and requirements.
You can use this data to build your estimate. You can choose the variables that fit your requirement, and accordingly create accurate estimates.

If you are working on a project estimation which is your area of expertise you can use this technique to improve estimation, even when the requirements or scope is not mentioned. This technique works best when there is limited to no project data available for you as guidance.

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Conclusion

The analogous estimating technique is a top-down approach that works best in project validation, project scope optimization, and project scope building. It is a top-down approach, wherein the overall project cost is estimated before going granular.

The project estimation method is useful for many handymen who have not worked on a particular project or when they don’t get the necessary guidance for estimation. It helps build analogy through the variables from the past project that will guide for guesstimate for the new project.

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Author Bio
Jeel Patel
Jeel Patel
Founder

Jeel Patel is the Founder of InvoiceOwl and is the main curator & writer of the content found on this site. With ideals of quality, commitment, and perseverance, he believes in creating lasting business relationships with the clients.

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