Most entrepreneurs tend to underestimate the time and effort required for projects (come on - fess up - when was the last time you overestimated a project?). Why is that?I believe that one reason is because entrepreneurs are, by nature, optimistic. You almost have to be an optimist to be an entrepreneur. If you had listened to everyone who ever told you to “be realistic”, you probably wouldn’t be running your own business. That optimism carries over into our project estimates, where we tend to lean toward the best-case scenario.
A second reason is that we believe the optimistic estimate will help us get the deal: the client will hire the firm that can get it done sooner, the investors are more likely to invest if you get the product to market quicker, etc.
On the one hand, that’s probably true. On the other hand, it doesn’t create a sustainable business. What happens when you’ve bid something on a fixed price and you start going 25% or even 50% over your estimate? Your profit is gone and the customer becomes a liability.
Photo by J. McPherson.
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