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What is Three-Point Estimating? Master This PMP Estimating Technique
Jul 20, 2025
Have you ever wondered how to estimate time or cost more accurately in project management? This video simplifies Three-Point Estimating so you can build more realistic project schedules and budgets. This technique considers three possible outcomes - optimistic, pessimistic, and most likely - and combines them using either the Simple Average or PERT formula. By the end of this video, you’ll know how to calculate and apply Three-Point Estimates and interpret the range to understand risk and uncertainty. 🧠 Learn How To: • Understand the Optimistic, Pessimistic, and Most Likely estimates • Calculate estimates using both Triangular (Simple Average) and PERT methods • Apply this technique in cost estimating, scheduling, and risk management • Interpret estimate ranges to assess uncertainty • Reduce bias and improve estimate accuracy Chapters: 0:00 Intro 0:21 What is Three-Point Estimating? 1:17 Why Use Three-Point Estimating? 1:55 Formulas for Three-Point Estimating 2:38 PERT Formula Explained 3:31 Applications of Three-Point Estimating 4:15 How to Interpret Estimates 5:06 Benefits of Three-Point Estimating
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0:00
Have you ever had to estimate the
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duration or cost of a project activity
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and wondered what if things go wrong or
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what if they go better than expected?
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How do I factor in that uncertainty?
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Hi, I'm Andrew from PM Aspirant. If
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you're new to the channel, welcome and
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don't forget to subscribe for more
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project management tips. Today, we're
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going to cover an essential project
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management tool, threepoint estimating.
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Whether you're estimating costs,
0:29
durations, or resources, this technique
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allows you to account for uncertainty by
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considering multiple scenarios. At its
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core, threepoint estimating provides
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more realistic estimates by accounting
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for three possible outcomes. One,
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optimistic, the best case scenario where
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everything goes smoothly without any
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delays or issues. Two, pessimistic, the
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worst case scenario where significant
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challenges arise causing delays or
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increased costs.
1:00
Three, most likely the scenario that's
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most probable, assuming normal
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conditions with minor variations.
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By considering these three
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possibilities, you develop a more
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complete picture of what could happen,
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which helps in managing uncertainty and
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preparing more accurate estimates. You
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might be thinking, why bother with three
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estimates when I can just pick one?
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While singleoint estimates are quicker,
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they don't account for the
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unpredictability of real world projects.
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Threepoint estimating ensures you
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consider different potential outcomes.
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Reducing the risk of under or
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overestimating your project's needs. For
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instance, relying solely on an
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optimistic estimate could lead to a too
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tight schedule or budget, while focusing
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only on the pessimistic side may lead to
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unnecessary buffers that impact
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efficiency. Threepoint estimating helps
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you strike a balance. Now, let's talk
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about how to calculate threepoint
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estimates. There are two commonly used
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methods, the simple average and the per
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method. Both of these help you arrive at
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an expected estimate, but they weigh the
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different scenarios slightly
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differently. The simple average, also
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known as the triangular distribution
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method, gives equal weight to all three
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estimates: optimistic, most likely, and
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pessimistic. You simply add them up and
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divide by three. This method assumes
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that each outcome, whether optimistic,
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most likely, or pessimistic, has an
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equal chance of happening. It's
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straightforward and works well when you
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don't want to favor any particular
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scenario over the others. Now, let's
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dive into the per method. PER stands for
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program evaluation and review technique
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and it's a bit more refined. In this
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method, we recognize that the most
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likely estimate is usually more reliable
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and therefore should carry more weight.
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So instead of giving all three estimates
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equal weight, the per method gives the
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most likely estimate four times the
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weight of the other two. In this
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formula, the most likely estimate has a
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higher influence on the final result
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because it's assumed that it's the
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outcome that will happen most
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frequently. This approach leads to a
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more balanced estimate that's closer to
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what is expected in reality. So why use
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the per formula? The per method is
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especially helpful when there's more
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confidence in the most likely scenario,
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but you still want to account for risk
3:29
and uncertainty on either end. You can
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apply threepoint estimating in various
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aspects of project management, such as
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cost estimating. Use it when you need to
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estimate how much a project will cost
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while accounting for potential
3:45
fluctuations in price or scope. Schedule
3:48
estimating is also useful for estimating
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activity durations where there could be
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delays or faster than expected progress.
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Risk management. Since this technique
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inherently considers uncertainty, it's
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great for managing risks by providing a
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range of potential outcomes. You'll
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typically use threepoint estimating
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during processes like estimate activity
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durations, estimate costs, and estimate
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activity resources. So once you have
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your threepoint estimate, how do you
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interpret it? The key lies in the range
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between your optimistic and pessimistic
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estimates. This range tells you a lot
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about the level of uncertainty or risk
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involved in the task or activity. A wide
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range between the optimistic and
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pessimistic values indicates high
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uncertainty. This means you should be
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cautious as there is a greater chance
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that things could go wrong or there are
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unknown factors at play. A narrow range
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suggests that you have higher confidence
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in the estimate. The smaller gap between
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the best and worst case scenarios means
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there's less variability and less risk.
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This range is critical for project
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managers because it helps in decisionm.
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For example, if you see a wide range in
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your estimates, you might want to plan
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for additional contingency or
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investigate the risks further. Why is
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this technique so valuable? Let's cover
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a few of its main benefits. One,
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improved accuracy. By considering
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optimistic, pessimistic, and most likely
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outcomes, you get a more realistic
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estimate that's better suited for
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dealing with uncertainty. Two, risk
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identification. The range between the
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optimistic and pessimistic values gives
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insight into the level of risk. The
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wider the range, the more uncertain the
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task is likely to be. Three, reduce
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bias. This method forces you to think
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about both the best and worst case
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scenarios, reducing the likelihood of
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overly optimistic or pessimistic
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estimates. It helps in creating more
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balanced, unbiased project forecasts. As
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a project manager, your role in this
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process is critical. You're responsible
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for guiding the team in providing
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realistic estimates for all three
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scenarios: optimistic, pessimistic, and
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most likely. You also need to ensure
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that team members consider all relevant
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risks, assumptions, and constraints.
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This prevents the team from creating
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overly optimistic or unrealistic
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estimates, which can lead to project
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delays or budget overrun. Finally,
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you'll use these estimates to create a
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more reliable project schedule and
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budget, helping ensure that your project
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stays on track. As helpful as it is,
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threepoint estimating isn't perfect.
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One, subjectivity. The estimates for
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optimistic, pessimistic, and most likely
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scenarios can be subjective, relying
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heavily on the experience and judgment
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of the estimators. This can sometimes
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lead to inaccuracies.
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Two, time consuming since it requires
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the team to create three estimates for
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every task or activity. Threepoint
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estimating can be more timeconuming than
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simpler estimation methods. For large or
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complex projects, this added complexity
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might not always be practical. Let's
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take a look at an example. Here is the
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scenario. A project manager is
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estimating the duration of a task. The
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optimistic duration is 4 days. The
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pessimistic duration is 10 days and the
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most likely duration is 7 days. What is
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the expected duration using the per
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formula? Using the per method, the
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estimate is equal to 4 the optimistic
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duration plus 4 * 7 the likely duration
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+ 10 the pessimistic duration / 6. This
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becomes 4 + 28 + 10 / 6. This is equal
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to 42 / 6 and the result is 7 days. In
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summary, threepoint estimating is a
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powerful tool for project managers to
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account for uncertainty, improve
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accuracy, and manage risk in project
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estimates. Mastering this technique will
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help you create more reliable project
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plans. If you find this video helpful,
8:09
make sure to give it a thumbs up and
8:11
don't forget to subscribe to PM Aspirant
8:14
for more project management insights so
8:16
you will be updated when we release new
8:18
videos. Thanks for watching and I'll see
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you in the next video.