The Complete Guide to Accurate Agile Estimation

By Poonam Lata Madabhushi, Senior Product Manager, Engagement Management at Material

Accurate planning and time estimation is important for any project, especially when working within an Agile framework. Agile estimation helps measure the effort needed to complete a task in your product backlog, allowing for more accurate sprint planning. Agile estimation techniques – the story point approach for instance – stand out as some of the most reliable for making accurate predictions. In contrast to traditional person-hours estimation, agile techniques provide more consistency and precision.

There are a number of concepts, techniques and best practices important to understanding and implementing agile estimation – beginning with three defining principles.

The Defining Principles of Agile Estimation

Quick and Efficient

Traditional software development requires precise estimations. But, because estimates aren’t client deliverables, you shouldn’t spend too much time on them. To that end, Agile teams prioritize quick estimations and keep their focus on delivering software.

Relative and Flexible

In agile estimation, we don’t estimate in terms of dollars or person-hours. Instead, we use relative units like story points or labels to more easily compare tasks or stories to each other. This relative approach helps teams assess the complexity and effort needed for tasks without getting bogged down in precise calculations. This makes it easier to adapt estimates as new information becomes available.

Inclusive and Collaborative

All agile estimation techniques are collaborative. Everyone should be included in the estimation process. This helps build a cooperative, supportive atmosphere and reinforces shared responsibility. Having the whole team contribute also creates a comprehensive understanding of the effort required to complete a user story.

The Benefits of Agile Estimation

Estimation helps teams plan, prioritize and manage resources efficiently. It improves risk mitigation and overall execution. But in Agile methodologies, estimation goes a step further. It enhances collaboration, guides sprint planning and drives better decision-making.

The key benefits of Agile estimation

• Smarter decision-making. Agile estimation helps teams prioritize tasks more effectively. They’re able to make better decisions on deadlines, resources, sprint planning and client deliveries.

• Better coordination and clarity. Input from everyone creates a shared understanding of project scope – including the time and effort needed for each task. This enhances communication, clarifies individual roles and improves teamwork.

• Effective risk management. Accurate work-sizing helps you identify potential risks early. This reduces the chances of budget overruns, missed deadlines or compromised quality and scope.

• Improved accountability. Having clear goals for the project and each team member promotes accountability and discipline.

• Higher productivity. Better coordination, planning and clarity lead to improved productivity.

Agile Estimation Best Practices

Start with small stories first.

Focus on smaller tasks before attempting larger, more complex ones. Estimating smaller stories is easier; it helps your team get comfortable with the process and leads to more accurate estimates over time.

Break big tasks into smaller pieces.

If a task feels too big to estimate, break it down into more manageable parts. This makes estimation simpler and helps you plan sprints more effectively.

Review and adjust estimates regularly.

Unlike traditional project estimation, Agile estimation works best when it’s iterative. Revisit and refine estimates during each sprint and adjust for new insights.

Work together as a team.

Agile estimation is a group effort. Involve everyone on the team to get better estimates and foster collaboration. Bring in experts when needed to guide the team and improve processes.

Use past data for guidance.

Refer to historical data or industry benchmarks when estimating. Even older examples can provide valuable insights and spark ideas for better planning and estimation.

Agile Estimation Techniques 

1. Story Points. This technique is used to estimate the effort needed to complete a task in your product backlog, typically before a sprint planning meeting. This method considers three main factors.

   • Risk – the uncertainty involved

   • Repetition – how familiar the team is with similar tasks

   • Complexity – the difficulty and clarity of the task

Story points are relative, meaning their value is based on comparison to other tasks rather than an exact number. This approach helps teams gauge how much work they can handle in a sprint more accurately.

2. Planning Poker. This is a gamified technique where participants estimate the story using Fibonacci series, usually with the help of cards (or a similar tool in a virtual setting). These individual estimates are then discussed to arrive at a consensus on the estimation.

3. The Bucket System. This technique places stories in pre-defined buckets where each buckets represents an amount of effort. Buckets are typically assigned Fibonacci series-based numbers like 1, 2, 3, 5, 8, etc. This method is faster than one-by-one estimation and particularly efficient for large backlogs and teams.

4. Dot Voting. Each team member assigns dots to represent the relative size. The more dots, the higher the estimate. This is helpful where there are multiple stakeholders involved.

5. Affinity Mapping. Stories are estimated collaboratively on a scale of least to most effort. These relative estimates are then used to group and arrange the stories. This technique is particularly helpful when large backlogs need quick estimates and teams have some prior familiarity with the tasks.

6. T-Shirt Sizing. Stories are estimated using typical T-shirt sizes like XS, S, M, L, XL, etc. This is a quick technique that’s useful in the early stages of the project. The sizes can be converted to a numerical scale in later stages to allow for prioritization and velocity calculation. This technique is particularly helpful when you don’t have a lot of project or task details yet.

7. Ordering Method. This method involves aligning the stories in order of size. The sizes are collaboratively decided by the team, often using a predetermined benchmark story that represents a medium level of effort. Then, stories are estimated relative to the benchmarked story and are lined up according to increasing order of the effort. Once this, each of story is assigned a numerical value using a scale like the Fibonacci sequence.

How to Implement Agile Estimation Techniques

1. Choose a baseline story. Select a simple, well-understood task that everyone on the team can relate to, like the development of a basic feature. This will serve as a baseline and will be assigned a point value, typically 2 story points.

2. Estimate tasks relatively. Compare each user story to the baseline story. Consider the complexity, effort and any potential risks associated with the task. Assign points relative to how much more or less effort the task will require than the baseline.

3. Pick a scale. Use a standard scale to make estimates more consistent and easier to compare.

   • Fibonacci sequence (1, 2, 3, 5, 8, 13, 21) – This scale reflects increasing uncertainty with larger tasks.

   • Power of 2 (1, 2, 4, 8, 16) – This scale is less common but can be used for tasks with exponentially increasing effort.

   • Linear scale (1, 2, 3, 4, 5) – This scale is simpler but less commonly used because it doesn’t adequately account for uncertainty.

4. Reach team consensus. To ensure everyone is aligned, involve the entire team in the estimation process. A technique like Planning Poker can help, where each team member selects a card representing their estimate, and then everyone discusses the reasoning behind their choices. The process repeats until consensus is reached.

5. Record the estimates. Once the team agrees on the story points for each user story, document them clearly. This will help you track progress and adjust your sprint planning accordingly. Use estimation tools in Agile to assign and review story points easily.

6. Refine with experience. As you complete more sprints, revisit the accuracy of your earlier estimates. Learn from discrepancies and adjust estimates moving forward. This process of continuous improvement helps your team get better at predicting effort and managing workloads.

Learn Agile Estimation with Material

Agile estimation techniques can help you manage complex projects, promote collaboration, foster team spirit and improve the accuracy of your estimates. You can also reduce uncertainty, avoid scope creep and ensure timely deliveries. You’ll make better-informed decisions about which tasks to tackle next and how to efficiently allocate resources.

To learn more about agile estimation and its benefits, reach out to Material’s experts today.