“We have already hired someone. Thank You!” – How many times have you faced this situation? If not much then you are blessed, but if you have been hearing this for a while, then you need to investigate. After putting in a lot of effort, walking around the job site, and writing an estimate for the potential customer, hearing a “no” is a terrible feeling. Many contractors, self-employed people, and most small business owners give job estimates to their potential clients with price details. An estimate helps the client to understand the approximate expenses for a project, and hence, it helps them to decide whether to move forward with this or not. Therefore it is essential to master the science of writing estimates to win more jobs.
But before we talk about how to write an estimate, let’s figure out the basic terms ‘estimation’!
What is estimation?
Estimation is the process of finding an approximate or ballpark figure which is unstable yet usable for some purpose even though the data is incomplete. Though the data is uncertain, the value is useful as it is derived from the best information available.
Similarly, a job estimate highlights what services will be provided by the supplier and the approximate cost for a particular project. This document helps the client in budgeting as it provides timelines and costs. While it also guides the vendor/supplier to chalk out the expenses for the project.
If you are in a dilemma, whether a quote is the same as a written estimate or not, then do check out the next section.
Difference between a Quote and a Written Estimate
A quote and a written estimate are completely different from each other. A quote is an exact price that you will charge your clients for a particular project. Moreover, the amount that you mention in the quote is not changeable unless the client orders for an additional task or you find out an extra input is required in the job. This is more legally binding, and the customer can opt for a legal standpoint in case any price dispute comes up.
On the other hand, a written estimate is a rough budget or an approximate cost that you can offer your clients before taking up the project. Small business owners make an estimate, which helps both parties to have an idea of the project expenses. The estimated amount is never fixed and is liable for any changes for which the client cannot claim to take any legal action.
Estimate making is one of the most important parts of a business to-do list. So, let’s understand what all you need to add in an estimate.
What to include in an estimate?
The content of the estimate depends upon the type of services being provided by the vendor to the customer. Here are some of the basic information that you must include:
- Company info- name, address, contact details, concerned person name, etc
- Project overview
- Itemized list of material or services with the cost of each
- Total cost
- Payment terms
- Terms and conditions
Correct and accurate pricing helps to win a job. Learn how to make an estimate to convince your potential customers to consider you for the project.
To make a noticeable impression and to stand out in cut-throat competition it is important to know the details of estimating. In the business world every second counts, know how to send an estimate in less than 60 seconds and how it helps to meet your customer deadlines, thereby improving sales.
How to write an estimate:
Correct and accurate pricing helps to win a job. Convincing the customers to consider you for the project is the biggest challenge. Hence, you need to know the art of writing a professional estimate for your small business to stand out from others. Here’s what you need to include.
1. Examine the project
Establish ultimate clarity about the project scope before you jump onto estimate making. You need to understand what your potential clients expect, and you need to explain to them what services you provide. Questionnaire sessions with your clients would help you to know what they are looking for. The biggest hurdle in writing estimates is to figure out what the client is exactly looking for. Get all your doubts answered before you start estimating. Ask them about the project timeline, services they want, etc. Even clarify if they are looking for cost breakups and itemized service lists in the estimate so that you can write it up accordingly.
The more you discuss with your clients, you will come to know what kinds of products they want and their budget range. Some people look for reliable products at reasonable prices. and for them, you need to price competitively. For some, prices hardly matter, and they look for quality materials. An on-site visit will also help you know what you need to work on after you take up the project.
2. Estimate the time
Establishing project details is not just enough, you need to have an idea of the project timeline as well. This will help you to charge your clients according to the time taken to complete the work. Ask your client to provide you a rough completion date so that you can make your arrangements and write the estimate accordingly. If you are an experienced professional then you can refer to your previous similar assignments to estimate the time for the current project. Beginners can split up the work and make separate estimates and sum it up altogether to get the total estimated time. You must mention to your clients the possible factors that could delay your project to avoid disputes later.
3. Calculate the material cost
Familiarise yourself with the required materials and equipment for the project. Research a bit about the current market to chalk out the cost list of the required materials. This will not only help your clients to have an idea of the budget, but it will also help you to understand whether the project is worth taking. Make sure you inform your clients about the probable factors that can bring about a change in the material cost. Moreover, if you find any item is required quite often in various projects try not to charge your clients for that. Rather, you can deduct these as business expenses while filing your taxes.
4. Calculate the cost of additional staff and subcontractors (if required)
You must be wondering why to count an additional expense in the estimate? Well, you start the project, and you realize you need extra manpower to complete it on time. Now surely, you are not going to pay the extra manpower cost from your pocket. But if you charge the clients of the additional staff after providing the estimate, it may lead to a huge misunderstanding. And you may end up losing a good standing with your client.
Therefore, you must keep a space for additional costs for staff or subcontractors (if required) so that you can complete the job on time and meet the deadline without burning out.
5. Analyze the market and research your competitors
Learning how to write an estimate involves a good amount of market research to be at par with trends. If you have just stepped into this business world and are stumped on what to charge your clients, then analyze the market trends and learn how your competitors charge their clients. The cost you charge is reflective of the service you offer. You need to get paid for your hard work so don’t be too generous to charge low as that might seem too cheap and unreliable. While some may take advantage of your hard work. Again if you charge higher, then do keep a solid reason to support your estimate.
To answer your question, how to make an estimate for a small business? We have researched and considered expert advice to round up the below list of additional tips. Take a look!
Are you into the construction business? Then you need a quantity estimate. Well if you are in landscaping or other business you need some other types of estimates. Just like invoice estimates vary as per business requirements.
Few tips to make your estimate win
Customer satisfaction is the biggest achievement for a business owner or any professional. What they look for is a quality product or service with clarity in pricing. But if it’s your first time you have to have a solid USP to convince your clients to make you their first choice. Here we are with a few tips on this.
1. Create a professional estimate
An old saying- “First impression is the last impression”. Well, your estimate is the first impression that might convince your clients about your professionalism. Use a professional template to write your estimates to make it a win-win deal. Your estimate would reflect your brand, and therefore, it must include your business name, address, logo, and other vital information.
2. Do not delay in sending your estimate
If you don’t want to lose a promising job then do not take much time to send your estimate. For some clients, the verbal agreement does not cut, and for those, you need to be quick in sending your estimate. Taking too much time to send an estimate would increase the likelihood of securing the job. Opt for online methods to send out your estimates, as it is the fastest and most professional way to get it done.
3. Make an effective estimate
An estimate should be written in such a way that it sells for you. It should have all the details so that clients need not have to ask for anything. Do you know what are the factors that most clients look for in an estimate that if you include can make you win the race? Check it out now!
There should not be any confusion at any part of the estimate. It should be extremely clear and should breed a high level of transparency to move the deal in a positive direction.
Payment terms should be mentioned along with payment modes. Easy payment methods are likely preferable by the clients. No one would like it if they have to implement a different payment route, which they are not used to. Hence keep your payment mode flexible and easy.
A small business owner can ask their clients for a deposit to help out with their pocket job expenses. This is the smartest move that would help them to reduce the risk of unpaid invoices and maintain a steady cash flow.
4. Give a detailed breakdown of the work
Clients must know where they are investing their dollars. Hence, a detailed breakdown of price with an itemized list of work is a must when you write an estimate.
5. Price your estimates to win the competitive market
Pricing is an art, and to survive in this competitive market it is essential to learn the techniques. Charge as per the market trends. Keep your prices low where you need to win over your competitors. And keep it high where you think low prices won’t fit your business budget.
Check out related articles on profession-specific estimation!
- Estimates for photography business
- Estimates for construction business
- Estimates for home repair business
- Estimates for moving business
- Estimates for painting business
- Estimates for catering business
- Estimates for delivery business
- Estimates for landscaping business
- Estimates for power washing business
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Billbooks is an accounting tool that suits the needs of both a seasoned business owner as well as a small business. It provides you with all the tools required to centralize your business finances. It helps in writing professional estimates, creating invoices, sends out immediately, keeps a track of both paid and unpaid invoices, and sends out reminders as well.
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Have you ever underestimated the power of job estimation? Hope your thoughts have turned out positive by now. If an invoice is for requesting payment, then a powerful estimate is for creating the path for cash flow. Therefore, learning to write estimates for small businesses is significant from the point of view of business financial growth.