The nature of some businesses can make it challenging to come up with a standard price list. For instance, for tradespeople and freelancers, what’s required in terms of time, labour, skill, and materials frequently vary. from job to job.
Offering a quote or estimate provides potential clients with an expectation for what they can expect to pay. This is based on what will be required to be done to complete a specific project.
Read on to learn the difference between quotes and estimates and tips on preparing them like a pro.
What is a Quote?
A quote is a legally binding fixed price that a company prepares for a client. It should always be in writing. A quote should summarise the work to be performed and include a detailed breakdown of all the costs and the final total.
Once a business gives a quote and a client signs off, the price should not change even if the job ends up costing more than initially anticipated. For this reason, it’s vital always to quote as accurately as possible. It’s also important to allow enough time to complete the job. So it’s important to carefully price for materials and labour (e.g., subcontractors).
To protect your business from “scope creep,” a quote should always specify extra charges for additional work beyond what the initial quote covers apply.
What is an Estimate?
Unlike a quote, an estimate isn’t legally binding. And it isn’t always a guarantee of what the actual work will cost. However, it’s recommended that estimates still be provided in writing. An estimate is offered as a projection figure. It is based on the information available about a project at that moment in time. It needs to be understood that an estimate is subject to a decrease or increase once the work begins.
Businesses should take just as much care when providing an estimate as they would when providing a quote. Ideally, an estimate should provide a figure within 20 per cent of the final price. It’s still good practice for businesses to provide more than one estimate, to offer various price points.
Tips for costing out jobs
For small businesses, it’s important to always appear as professional as your competitors whenever you communicate with clients. This is especially so when negotiating the finer details of a potential job.
Be sure when you’re preparing your estimate or quote that you include the following information:
- business contact info (phone, email, address);
- your business number;
- a detailed summary of all of the work to be done;
- a breakdown of costs (materials, time, subcontractors);
- a timeline for the job and expected completion date;
- the total cost;
- contract terms, including deposit and payment schedule
Another critical bit of information to provide your clients is when the quote or estimate expires. Many companies will choose an expiry date of 30 days. This is to help protect themselves from the possibility of rising costs for materials or other factors that may influence the job’s cost.
You should always take care to clearly state in writing the terms of your quote or estimate. You should offer a customer the opportunity to ask questions before approving the work. That way, both parties will avoid any misunderstandings about expectations and project costs before the work begins.
If you would like to discuss better job costing, get in touch with us today. Let us work out what will work best for you. Join the Conversation…