In a contract business, there are thousands of things to tackle every day, yet the most difficult part will be having accurate estimates. For an accurate estimate, a contractor has to pay attention to every detail.
However, there are successful contract businesses in the existing industries that know how to make an accurate estimate. But do you know what’s the one common factor of a successful contract business? They have adopted a threepoint estimation technique for estimation.
If you are reading this blog, you are curious and want to learn about threepoint estimation. Well, we are more than happy to enlighten you with the threepoint estimation techniques and also discuss the benefits and formulas with examples in detail.
Let’s first start with the definition of the threepoint estimation
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What is a ThreePoint Estimation?
As a project manager, it is essential to know about the threepoint estimates because it helps you to get estimates that match reality. The threepoint estimate allows you to know the probable outcome of available information on future events.
A company can figure out the estimation of time and cost by using a threepoint estimation.
The term classified into threepoint estimation is:
O – O indicates an optimistic estimate, also known as a bestcase scenario. The value you get when you assume that everything will go well and the chances of facing hurdles are less. Optimistic estimate means when everything goes right.
P – P indicates a pessimistic estimate, also known as a worstcase scenario. The value you get when you assume that nothing goes as planned and the outcome will be more negative than expected.
M – M indicates the most likely estimate. It falls between optimistic and pessimistic, where you have determined a middle ground and expect not entire things will go right or wrong. The value means comes between two extremes.
By summing all threepoint calculates we get calculated estimates, also known as standard deviation. We will learn more about this calculation and formula in this blog ahead.
The threepoint estimate will help you to bring the estimate which is nearest to reality. Also, adopting an estimate generator can help you to get the most accurate estimate within a few clicks. The estimating technique is crucial to project management as it allows to plan more efficiently.
Do you know there are two types of threepoint estimates? One is triangular distribution and beta distribution. Both of them help to get insightful guidance.
Example of ThreePoint Estimates
Let us understand threepoint estimates in a simpler manner with a hypothetical example. For instance, you own construction business and you do 12 hours of work daily.
Now, you have planned to expand because you have started getting more contracts. You are planning to do 14 hours of work to complete more tasks, that is your optimistic estimate (O).
One day, while you are finishing your task and out of nowhere it started raining; so, you have to stop working until it stops raining. Now, that is a pessimistic estimate (P), a worstcase scenario, and a negative outcome.
You are having a normal day and successfully achieving your target by finishing 12 hours working, well that is most likely an estimate (M). It indicates that there are chances of everything going well like normal and nothing goes wrong.
Reliable estimation is essential for the project development team to plan future and present outcomes. With threepoint estimates you can get average outcomes, it is called standard deviation.
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The Formula of ThreePoint Estimating
Project managers uses threepoint estimate formulas to calculate the most likely estimate. To calculate threepoint estimating: estimate (E), optimistic estimate (O), Pessimistic estimate (P), and Most Likely estimate (M).
The equations of triangular distribution look like this:
Beta Distribution and PERT
The Project Evaluation and Review Technique (PERT) is based on beta distribution. PERT estimate is the approximation of the beta distribution equation.
The equation of beta distribution is divided by 6, so you know what will the expanded point of estimation. The formula for beta distribution is:
The concept of threepoint estimating originated from the Program Evaluation and Review Technique and was initially developed by the US Navy. The formula of PERT is based on probability statistics and theory.
The final outcome will give you a final estimate and provide you with the value for your project estimates.
That was the method and formula on how to calculate threepoint estimation; now let’s jump to the benefits and see how threepoint estimating helps to shape the business.
Benefits of the ThreePoint Estimating Technique

Lesser Risk
By adopting a threepoint estimate, the chances of risk decrease as the technique will help you to identify the risk. The threepoint estimate will assist you to provide a nearly accurate estimate and allow you to analyze and prioritize work.
For instance, the optimistic estimates signify no risk and the most likely estimate signifies less risk.

Enhance Task
The threepoint estimation technique can be used to schedule tasks. The technique allows you to manage tasks more efficiently and thus increase the productivity of business work.
And that was everything you need to know about threepoint techniques. The method is quite helpful for businesses, so do not miss out. Now, let’s jump to the most frequently asked question regarding the threepoint estimation.
 How do you calculate a 3 point estimate?
The formula to calculate a 3 point estimate is :
 E = (O + M + P) / 3.
 E Estimate, O Optimistic value, M Most likely value, and P Pessimistic value.
 What are the three phases of estimation?
In the first initial phase, the estimation is planned, the second phase is tracking the estimate against the actual number and the third phase is scheduling the estimate in the project.
 What are the 3time estimates used in PERT?
The 3time estimates used in PERT to obtain the weighted average are
the Optimistic estimate (to), modal estimate ™, and pessimistic estimate (tp).  Which types of estimates are used in threepoint estimating?
There are three types of estimates in threepoint estimating is:
 Optimistic estimate
 Mostlikely estimate
 Pessimistic estimate
Conclusion
The estimates need to be as accurate as possible, thus it is essential to choose the appropriate technique. Threepoint estimation technique will improve the prediction and estimation method of your business.
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