New Product Development

6. Cost Control

Without planning and monitoring, costs can spiral out of control.

6.1 Use top-down cost estimating if you have done a comparable project before.

• Using the previous project as a benchmark, you might double the cost (if the new project will take twice as long, using the same number of people), then add in an inflation factor.

6.2 Use bottom-up cost estimating if there is no comparable project.

• Each team member calculates the cost of his or her part of the project. These costings are agreed with the team leader. Add up these costings and add in a contingency factor to estimate the total cost. This is the budget for the project.
• Bottom-up estimates often seriously underestimate the costs, because tasks take much longer than people expect.