Guides
Part of Quotes and estimates: a dated, sourced directory (2027 update)
How to build quotes and estimates that survive a clients follow-up
How to create a quote or estimate: six steps from deciding whether to price it at all, through building the number up, to pricing named risks and following up.
What to take away
- A quote fixes the price and holds you to it. An estimate leaves the risk of being wrong with the customer. Choose at the point where you know most, not when the question arrives.
- Build every price from a written internal build up: hours, materials, bought-in costs, named risks, overhead recovery, margin.
- Contingency is priced against a named risk. Padding is a number you cannot explain, and it is the first thing a customer cuts.
- Put your follow-up date in the covering note, then keep it on that day.
Quote or estimate: choose by information
The choice is not about how confident you feel. It is about how much you know.
Ask whether you could write down every assumption the price depends on. Then ask whether you would still be comfortable if all of them turned out false. If yes, issue a quote. If no, issue an estimate, or spend an hour removing an unknown and then quote.
Information is usually cheaper to buy than risk. A site visit, a call to a supplier, or a look at the original files can turn an estimate into a quote. The quotes and estimates directory sets out which document fits which situation.
Four things to establish before you price
Quoting is unpaid work. Doing it for everyone is how a small business spends its best hours on documents for people who were never going to buy.
- Who decides, and who signs. Get the name and the role before you price anything. A price sent to someone who cannot approve it is a leaflet.
- The date the work has to be finished. Not the date they hope to start. A deadline changes the labour plan.
- The budget band, asked directly. "What range were you expecting?" is a fair question and saves an hour of guessing.
- Whether a competing quote already exists. A tender needs a different document from a single-source job.
If three of the four come back blank, send a short reply asking for them. A price written against an unclear brief gets compared with somebody else's price for a different job.
Qualify the enquiry before quoting
What triggered the enquiry?
Is there a budget and who holds it?
When do they need it done?
Scope in the customer's words
The gap between what a customer asks for and what they need is where quoting fails. Ask about the outcome, not the task.
Write the answers down in their words, then use those words as the scope section. A scope in the customer's language is much harder to dispute than one in yours. The field-by-field layout, including validity dates and exclusions, is covered in quotes and estimates format.
Example: a deck rebuild priced from the build up
The figures below are a typical example, not a client file. They are kept round so you can check the arithmetic.
Deck rebuild build up
| Build up line | Amount |
|---|---|
| Labour, 22 hours at $75 | $1,650 |
| Setup, travel, clean up and admin, 4 hours at $75 | $300 |
| Materials | $1,150 |
| Waste allowance, 8% of materials | $92 |
| Permit and disposal | $300 |
| Direct cost subtotal | $3,492 |
| Named risks | $400 |
| Overhead recovery, 12% of direct cost | $419 |
| Margin, 15% of the running total | $647 |
| Price | $4,958 |
Internal job build up
- Labortask hours x your rate
- Setup, travel, clean up, admin
- Materialsqty x cost plus waste
- Bought insubcontractor, permits, hire
- Direct cost subtotal
- Named risks, overhead recovery, margin
- Checkprice per hour or unit
Two lines do most of the work. The four hours of setup, travel, clean up and admin are the hours nobody counts. Travel and mileage belong in that row, and the IRS standard mileage rate and car expense rules are in Publication 463.
Then the check. $4,958 over 26 hours on site is $191 an hour of revenue. If easy work does not recover that, a hard job is priced worse than an easy one.
Track quoted hours against actual hours on every job. That variance is the fastest correction to your pricing, and it belongs alongside the rest of your job costing, which the guide to profit and loss forms explains.
Name the risks instead of padding
Padding is a number added because a job feels uncertain. Nobody can explain it, so it is the first thing cut when the customer pushes back. The risk it was meant to cover then sits uncovered.
Price named risks instead, and keep the logic in your own file.
Name the risks
| Risk | How it is handled |
|---|---|
| Rot behind the existing frame | A capped allowance of four hours at the labour rate, with anything beyond on a signed variation. |
| Rain stopping work | Three weather days priced in. Beyond that the client gets time, not money. |
| Specification changed mid-job | An agreed day rate plus materials at cost. |
| Supplier price rise before the order | Quote valid 14 days, after which materials are re-priced. |
| Access worse than described | A site visit before quoting, or an access condition written into the scope. |
Anything left after the named risks is uncertainty about your own performance. That is what margin covers. Overhead recovery is a separate line, and the IRS guidance on business expenses helps separate genuine running costs from job costs.
Payment terms, the covering note and the follow up
In the United States, what an invoice must show and how you handle a late payer come from state law, with federal tax rules behind them. The SBA guide to managing business finances covers invoicing and tracking what you are owed. Canadian businesses settle the tax treatment of deposits with the Canada Revenue Agency.
Send the document with a short covering note. Say what is attached, how long the price holds, and the day you will follow up. Then follow up on that day. The chase becomes a kept promise.
When a quote is declined, ask one question. Was it the price, the scope, or the timing? Honest answers are not guaranteed, but the pattern across twenty declines is the best pricing information you will get.
Turning the same numbers into a bill is a separate task. The fields that survive a disputed invoice are set out in invoices and receipts.
