How to evaluate a project

Do you want to realize your new idea and do not know where to start? For the practical implementation of your idea, you will definitely need a project. However, in order to implement your project in practice and make a profit, you need to really assess the amount of required investments for its implementation. The main criterion for evaluating a project is its cost. It includes the probable total resource cost for performing all types of work provided for by your project.

Instruction manual

1

Cost calculations are performed for each phase of the project a. The first stage is the pre-project (preliminary) assessment of the project cost. It is necessary to evaluate the "order of magnitude" of costs, since it is still impossible to really determine all the necessary amount of work for the project. The difference from the real value here can be from? 25% to + 75%, a more accurate cost to determine at this stage is impractical.

2

Further, during the implementation of the project, you will need a more accurate estimate, the so-called estimated cost. You can accept this estimate with an error from? 10% to +25%.

3

The final step is to conduct the final valuation of the project, i.e. adoption of a base agreed price. This selling price cannot be reduced by more than 5% and exceeded by more than 10%.

4

There are several generally accepted methods for calculating the project cost, you can choose them depending on the required accuracy and your capabilities regarding the cost of the calculation. Let's consider them in more detail.

5

A preliminary method for assessing the project cost of work can be designated "top to bottom." You can use it for consolidated expert estimates of the costs required in the early stages of the project, when you do not yet have enough information about the project. Using this method, the project can be evaluated using one of the performance indicators, which will not require large expenditures, but it will not give a high degree of accuracy, which can be calculated only with a more detailed assessment.

6

It is possible to determine the final valuation of the project using the bottom-up method. The method allows you to estimate costs at the detailed levels of the project, and then summarize them at more generalized levels with the final stage - obtaining the total estimated cost of the entire project. When using this method, you will get the more accurate results, the more details added to the consideration. However, the costs of the above assessment will naturally be higher.

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A variation of the valuation of the "top down" is the "analog" method. The name speaks for itself, i.e. it is possible to use existing data on the cost of previously completed projects. Such an assessment will be more accurate, the higher the similarity between the projects.

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Another variation is the parametric method. It is necessary to find such a project parameter, which in the event of a change will entail a proportionally equal change in the cost and the entire project