How to Create a Professional Estimate for Your Small Business

No one likes surprise fees. A well-written estimate can help manage expectations for both you and your customer. Another added benefit is showing you as a business owner what your costs could be. You may decide after creating the estimate that the job is not a fit for your business.

If a potential customer asks for an estimate, you’ll need to create something quickly that is  as accurate as possible to help you win the business.

Should Your Provide a Written Estimate or Quote? 

A written estimate can appear more formal and professional.

Typically, a quote is a legally binding document. If there is a disagreement between you and a customer, it helps to have something in writing to refer to that outlines the services, price, and expected timeline.

A printed estimate or quote on company letterhead with your contact information looks more trustworthy than a handwritten note.

What to Include in an Estimate 

• Your business name and logo
• Your contact information
• Name and address of customer
• The date the estimate was done, and how long the estimate is good for (ex. 30 days)
• Material or supply costs, if applicable
• A well-written description of the products or services being offered
• If this is for a service, the amount of time you expect the job to take
• Price range (ex. $1,500-$2,000)
• Terms and Conditions

What is the Difference Between an Estimate, a Quote, and an Invoice? 

Job Estimate – This is an approximate figure, not a formal quote.

Quote  –  A quote states a precise figure, and is legally binding once the customer accepts and signs off on it.

Invoice –  an invoice is a formal request for payment provided to the customer after you have been hired.

Common Pricing Strategies   

As a business owner, many factors such as the industry you are in will contribute to how you price your services. Below are three common strategies.  

Hourly 

For some services and industries, hourly pricing makes the most sense. If you truly do not know how long a project will take, and there are no other factors to consider, quoting an hourly rate may make sense for you.

Be aware that with an hourly quote, customers may be reluctant to commit since the final cost could vary dramatically.   

Project Based 

A project based approach can provide potential customers with a more dialed-in estimate and can help you avoid any surprises. You will want to consider all components of the job so that you can be compensated properly, from travel time to all products or inventory you may need to use.

For some experienced entrepreneurs, project based pricing is their go-to. That being said, it may take longer to create an estimate with this strategy. You may have to do a site visit or initial consultation first, or rely on the potential customer to provide details, measurements, or photographs.

Flat Rate 

Flat rate pricing is optimal if the project will be short and is well-defined. If you have experience with similar projects, you may be able to accurately calculate how much you will spend in time, materials, and other costs.

Pricing Factors to Not Overlook 

• Travel Distance & Time – Travelling costs you more than just gas. There is the wear and tear on your vehicle, and your time that you spend travelling. Not accounting for travel time can cost your business.
• How Difficult the Job is – Certain jobs may require more time or resources, or experience.
• Customers Requesting More than Average – Be clear about what is included in your estimate. If a customer would like additional services, add them on to your estimate.

Why Should You Include a Date in an Estimate or Quote?  

As a business owner, you are all too familiar with the fact that things change. Vendors could go out of business. Inflation could strike. Your rates could change.

Because of this, you want to protect your business when providing quotes and estimates by setting a validity period. You want to specify when you provide a quote or estimate how long it is good for.

How to Create an Estimate  

1. Learn the Scope of the Project 

To avoid surprises, care should be taken to really know the scope of the project. This could mean setting up a call with the customer, doing a site visit, reviewing specs, or all of the above and more.

2. Determine What Your Costs Will Be  

• Materials
• Labor
• Travel
• Overhead costs (such as website costs, insurance, etc.)
• Contingency buffer

3. Put the Estimate in Writing 

Include details like your name & contact information, and send it to the potential customer.

Does Your Business Need Insurance? 

At Cross Insurance, we work with many different insurance carriers ranging from local companies to nationally recognized names. To get a picture of what it could cost to insure your business, you can request a quote from us, or if you prefer to call someone to start the quoting process, you can find a list of phone numbers for all of our offices here.

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This article is for general informational purposes only and is not to be relied upon or used for any particular purpose. Cross Insurance shall not be held responsible in any way for, and specifically disclaims any liability arising out of or in any way connected to, reliance on or use of any of the information contained in this article. The information contained or referenced in this article is not intended to constitute and should not be considered legal, insurance, accounting or other professional advice, nor shall it serve as a substitute for the recipient obtaining such advice. The views expressed in this article are that of its author and do not necessarily represent the views of Cross Financial Corp. and its subsidiaries and affiliates (“Cross Insurance”) or Cross Insurance’s management or shareholders.