![]() Companies usually have tables with cost rates for their staff, broken down by department.įor external resources like freelance developers or consultants, you usually have a fee agreement which states the rate charged per hour. Now you probably ask yourself: “How do I know what to charge for each day?” That’s a question either HR or your internal accounting team can answer. ![]() Labor cost = # effort in days x $ cost per day How do you get from effort (measured in days) to currency values? You have to put a price tag behind each day and make a simple multiplication: From labor effort to labor cost: how to make the calculation Recommended article: Read my guide on estimating effort hours in projects. Then you multiply that number by 1000 and you have the total time required for the entire production cycle. Instead of trying to estimate total effort in one go, you estimate the time required to produce a single car. Here’s another estimation method which works well for repetitive tasks: Assume you want to manufacture 1000 cars. In those cases you need to break those tasks into pieces and estimate each piece separately. Some tasks are too complex to make a quick estimate. ![]() I like to challenge people when my gut tells me the numbers are unrealistic.Īsking people for an estimate doesn’t always work. Some people tend to overestimate while others underestimate the amount of time required. So, how do you figure out the effort for each member of your team? You talk to each person and ask: “What will be your effort for completing X?” Your team members usually know best how much time they need (read also: how to set deadlines in a project).Ī word of warning: Be skeptical about estimations. If you don’t have an appropriate template, I recommend you get my project budget template. What you need to prepare is a spreadsheet with the number of days per month each resource works on the project. The major part of every project budget will be labor cost.įirst you need to estimate the effort of every person involved in the project, both for internal and external resources.
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