Preparing a business quote
Detailed, well-considered quotes win work. Knowing how to write winning quotes is an important part of growing your business. But getting your quotes right can be a big challenge. You want to win the job with a competitive price but you need to make sure your costs are covered and you make a decent profit.
Quotes showcase your approach to business and declare your costs and terms for providing your goods and services. While estimates ‘guess’ the costs involved in a job and are not binding, quotes offer a fixed price for products or services that — once your customer accepts — become legally binding contracts.
Learning how to master your quotes also helps protect your business from risks and losses. Quoting well involves:
- taking considered steps to arrive at a price that wins you work over your competitors
- allowing for a profitable return on your investment in the work
- describing job components clearly and accurately
- itemising any materials or resources required
- detailing your costing and taxes
- clearly defining the terms and conditions of your quote
- taking a professional, polished approach to presenting your quote.
This guide describes how to write winning quotes and estimates.
Before you quote
Giving quotes professionally, accurately and in a timely way makes a good impression on your customers and increases your chances of winning the work.
The first step to quoting well is carefully reviewing your job proposal. Paying close attention to your customer’s requests will allow you to make important decisions about whether to, and how to, quote for the work.
Things to consider before you quote
Here are some important questions to ask yourself before you decide to quote for a job:
- Can I provide the products or services asked for?
- Can I provide the products or services in the quantities and time frame requested?
- Can I charge an amount that is likely to be feasible for my customer and make a profit?
- Can I give my customer a competitive price?
If you choose to provide a quote after answering ‘no’ to any of these questions, make sure you clearly indicate any conditions and disclaimers in your quote and correspondence.
Naturally, the better your price and your terms are, the more appealing your quote will be. But take care you don’t undervalue your goods or services, or overestimate your ability to provide them. Once you’ve submitted your quote and your customer accepts it, it becomes a binding legal contract.
What to do before you prepare a quote
Before you prepare your quote, take some time to complete these important steps.
Consider your business’s requirements
Review your marketing plans and sales plans to determine whether the customer you are providing your quote to matches your target market segments. Look at your sales targets and calculate how much you need to make to break even and make a profit.
Set guidelines to help you price products and services — balance the competition, costs and profit. Consider your business’s policy on charging for quotes. Decide whether you’ll charge for your quote and, if so, whether you’ll deduct the fee if the job is accepted.
Understand the specifics of the job and quote
Get all the details of your customer’s request in writing. Ask your customer to provide them or set up a meeting to capture the details yourself. Make sure you’ve documented all the details so you and your customer can refer to them later.
Ask your customer to clarify details if you don’t understand some of the specific requirements. Your customer wants you to be clear on what they want just as much as you do.
Make a note of any details that remain unresolved so you can account for them in your quote — for example, by indicating that you haven’t allowed for that item or by providing a choice of options to address that issue.
Don’t rush your quotes
Make sure you don’t quote beyond your means to deliver, both in cost and time. Be confident in your ability to complete the tasks required. Research and review the proposal and consider your quote carefully before you commit to it.
Identify and quantify any hidden costs in the quoted activities. Ask yourself how much money you will have to spend to complete the project and then ensure you will make a profit at the quoted price.
What to include in a quote
A thorough, well-written quote demonstrates your professionalism, attracts new customers, meets your business’s trading and consumer obligations and protects your business from legal and financial risks.
A good quote will Include the following components:
Providing your ABN and contact information is a legal requirement.
Detail the specifics of the job and outline what the costs cover, making a note of what is not covered if you need to. For example, cost covers parts and labour but does not include delivery.
Breakdown of costs
Describe the job proposal, detailing the elements involved, and itemise costs for labour and materials.
Explain how different scenarios or variations will affect the cost. For example, ‘This quote covers lawn mowing. Taking away clippings costs an additional 15%.’ (Note: variations can be great opportunities to upsell.)
Give yourself an opportunity to revise the quote if you find the job changes substantially once you’ve begun work.
Schedule for work
Indicate when you will start the job and how long it will take. If you win the job you will be contractually obliged to finish it in this time so make sure it is reasonable. If your schedule is based on variables, such as good weather, make sure you indicate this.
Payment terms and conditions
Indicate when you require payments. For example, lump-sum, periodical payments, half up front and half on completion.
Quote expiry date
Clearly note the date you need the quote accepted by, especially if prices change quickly in your industry.
Customer acceptance signature
Include a ‘sign here’ statement to fix the agreement, such as ‘I, [name] , accept the above terms and conditions. Signed ____________. Date ________.’
Indicate your preferred method of payment if you are taking a deposit at quote stage.
Tips for quoting
Quoting well means mastering the art of preparing your quote, presenting your quote and responding to your customer after your quote is accepted.
Developing these quoting skills will help you win work and build your customer base.
Quote in writing
Written quotes avoid confusion. Like written quotes, verbal quotes are legally binding but they can be prone to communication errors and misunderstandings.
Always make your quotes look professional by:
- using your company letterhead
- opening your quote with a greeting and thanking your customer for the opportunity to quote
- setting out a clear and logical structure
- carefully checking your spelling and punctuation.
Remember, customers tend to get at least 3 quotes for expensive products or services. Think about how you can distinguish yourself by creating a unique selling proposition.
Meet your customer’s needs
Your customer will know they can rely on the promises or guarantees in your quote if you:
- never quote unless you’re certain you can deliver to their satisfaction
- always ensure that the quoted price is sufficient to get the job done and return a profit
- assume nothing — make sure you’re very clear on your customer’s exact requirements, and make sure your customer is equally clear on what you’re offering.
Be guided by your quote’s expiry date when following up on a quote. Don’t be too pushy, but make sure you give your customer a friendly reminder before the expiry date.
If your quote is accepted, get your customer’s written confirmation before starting any work.
If the job changes substantially, provide a revised quote and ask your customer to confirm the quote before continuing work.
Identify your business risks
Consider your ability to manage the job. If you are concerned about the feasibility of the job, consider the impact of a worst case scenario and propose including a clause in the quote that protects both parties from any undesirable outcomes.
Know your obligations
Quotes are a legally binding statement of the terms and costs you commit to in providing goods and services. Seek recommendations from your industry association and information on preparing quotes and contracts from the Office of Fair Trading.
Quoting for products
If you’re quoting to supply products:
- check your quantities — ensure you can provide the requested quantity before you quote
- consider the logistics — check you can order, acquire, store and supply the products within the required time and without incurring prohibitive costs
- check delivery arrangements — check whether your customer wants the products delivered
- look for overhead costs — thoroughly scan the job and all logistics to check for costs that may shrink your profit margin.
Quoting for services
If you’re quoting to provide services:
- keep accurate records — log the time you spend on various tasks; the details will be invaluable when you’re quoting and budgeting in the future
- compare the job — use previous service contracts, or the advice and experiences of peers, as a precedent to cost your proposal
- be realistic — don’t underestimate the amount of time you will spend providing your services, and make sure any flat fees you quote are carefully considered and clearly state the scope of the work
- identify your additional costs — charge for additional costs (disbursements) that your business will incur in providing services (e.g. ‘Disbursements are charged at cost plus 10%’).
You may like to consider buying specialist quoting and estimating software; however, many businesses reliably use accounting and spreadsheet packages to produce quotes.
You can research software options on the internet or ask your industry association about software that could suit your business.
Giving an estimate instead of a quote
Understanding the difference between a quote and an estimate can save you time and money and protect you from legal risks and business losses.
Unlike quotes, estimates are not legally binding. Many businesses find estimates are an effective way to indicate the likely cost and scope of a job without committing to prices and terms.
When to use an estimate
Estimates are particularly valuable if you are initially engaging a customer’s interest in your products or services or waiting on clearer information about your customer’s requirements. Estimates are also useful if you are unable to guarantee prices of materials or labour or are unsure about the size of the job.
Estimates are not a substitute for effort. Don’t use an estimate just because you don’t know the details of the job. Try to find out the specifics and provide a quote instead.
What to include in an estimate
A well-prepared estimate will include:
- your ABN and business’s contact details
- a total cost
- a breakdown of the job or product components and cost
- a schedule outlining proposed service or delivery dates
- any assumptions on which the estimate is based
- your terms and conditions
- your preferred terms, means and schedule for payments
- an estimate expiry date.
Ensure that you title your document ‘Estimate’, and consider including a disclaimer stating that the price is subject to change.
For more involved jobs, good estimates often include prices and terms based on several different scenarios, including a worst-case scenario.