How binding is your estimate? What’s the difference between sales quote and offer? And what is retention of title? Learn to write unbeatable estimates and quotes from A to Z.
A for Ask Price
A client is asking your price. Great! You get to write an estimate! Nothing easier than that. All you need is a suitable template, fill in the details, and you’re done. Right? Wrong. Your estimate decides whether you win or lose a project – or even a client. It’s not only about the ask price: A professional offer is realistic in terms of price and effort, friendly in tone as well as legally correct. And that’s not always easy. But do not worry: Creating unbeatable estimates takes time, brainpower and knowledge. It’s time to get educated from A to Z.
B for Branding
Your estimate is often the first professional contact with your customers. Seize the opportunity and make a professional appearance. Logo, design and tone of language: your corporate identity begins in detail. Personalize your quotes and make sure you use a tool that allows personal branding. Show your customers how much you appreciate them – right from the start.
C for Components of an Estimate
For an estimate to be legally effective, identification (such as names and addresses) of sender and recipient is mandatory. In addition, you need to include the following components (unless they are already specified in Terms & Conditions).
- Detailed description of goods and services
- Quantity and price as well as any discounts and perks
- Delivery charges, packaging and taxes
- Delivery time
- Payment terms
- Arrangements for delays in delivery or acceptance, inadequate delivery or payment disturbances
- Validity date (see E for Expiry date)
- Place of fulfillment, court of jurisdiction and, if requested, retention of title (see R for Retention of title)
D for Disclaimers
Unlike a sales quote, your estimate is not legally binding (see Quote vs Estimate). To avoid any complications, you can use disclaimers and additions such as “the estimate’s price is subject to change”. If such changes arise, it is best practice to contact your client in advance and notify him of such changes.
E for Expiry Date of your Quote
Your estimate should have a clearly defined validity period. If no such period is defined, it is valid for at least 12 months. This means your clients could refer to the conditions of your estimate more than a year later, regardless of changes in price policy, terms of delivery or the product itself.
F for Friendliness
For most buyers, the overall package is more important than the price alone. A successful offer should be polite and professional. Adding a few friendly, personal words will work miracles. Be sure to check the spelling: The language you use needs to be as accurate as the numbers you quote.
G for Generate Automated Quotes
Granted, creating a winning sales quote takes time. Using the right tools will help you save some of that time. If your offer is part of an integrated business solution (see I for Integrate your Estimate), for example, you’ll see how accurate your estimates have been in the past – and where you should make adjustments. Having the numbers at your fingertips might even allow you the generate automated quotes; but always make sure to add a personal touch (see F for Friendliness).
H for How Binding is Your Estimate?
Basically, an estimate is not more than an educated guess. Therefore, it is not legally binding – unlike the sales quote (see Q for Quote vs estimate). Once your client agrees to it, though, it becomes a mutual contract. To avoid fights and problems, always make sure your estimate is as accurate as possible. And if any changes arise, contact your client in advance.
I for Integrate your Estimate
Once an estimate has been accepted, you need to get to work. Project management, team time tracking, accounting and reporting: With a smart tool that integrates your estimate into all your business processes, you’ll save yourself a lot of time and work. Turn an estimate into a project, specify tasks and define goals, track the time and invoice it right away. Working smarter is fun!
J for Job Evaluation
To make your estimate as accurate as possible, you need to evaluate the job you’ve been asked to do. What does it entail? What are the fixed costs, like material you need, and where do you need to take variables into account? Walk yourself through all the processes and write them down, step by step. And don’t forget to calculate the incalculable Factor X (see X for Factor X).
K for Knock-off Pricing
What’s the best way to win a job? Offer the lowest price? Surely not. A low pricing strategy is almost never a good idea – and it’ll have long-term consequences for you and your business. A better idea is to add variations in service and pricing to your estimate, to let your clients decide how much the want to spend (see V for Variations).
L for Legal Statements of Sales Quotes
Especially for a sales quote, legal statements can help you to avoid misunderstandings and disputes. Make sure that your proposal covers all the essential points such as delivery time and methods, validity or terms of payments (see C for Components of an Estimate). It also a good idea to limit your liability, for example to the amount of the quoted price.
M for Messaging & Communication
Once you have sent out an estimate, the recipient might have questions or request changes. Ideally, you should document this communication for future reference. Smart estimate tools let your client add comments directly. This makes communication easier, faster and more efficient – and saves you the fuss of keeping track of all the e-mails or chat messages.
N for Non-binding Estimate
Even though an estimate is not binding by nature (see Q for Quote vs estimate), it can become binding using disclaimers such as “guaranteed price” or “final price will be within x% of the estimate”. A quote, on the other hand, can never be non-binding, almost regardless of your disclaimers.
O for Order Confirmation
If your customer agrees to the estimate, it becomes an order. Sending out an order confirmation is not mandatory, but it always recommended. This way, you ensure that all parties involved know what they are getting into – and you once again have the opportunity to present yourself to your customers a dedicated professional.
P for Pricing
The pricing is, of course, the most important part of writing an offer. You should not set the price too high so as not to deter the recipient. But it should be at least cost-effective for you (see K like Knock-off pricing). And that’s not easy. Unless you are experienced enough, you need to do research. Find out what market and competition demand – and then arrange yourself according to your skills and the quality of your product.
Q for Quote vs Estimate
A sales quote is a fixed price offer that can’t be changed once the customer has accepted it – even if you had to work much more than expected. An estimate, on the other hand, is a (hopefully precise) guess on costs and time. As such, it allows for changes and is not binding. However, if changes arise, always discuss them with your customers. This will help you gain their trust – and avoid angry disputes.
R for Retention / Reservation of Title
The purpose of a title retention clause is to make sure that the goods you sell remain legally in your possession until the buyer fulfills the obligations specified in the quote or invoice (usually payment). Title retention clauses are common on many countries. If you want to use one, it is recommended to add it to your quote or estimate.
S for Samples and Templates
There are many online templates for quotes and estimates out there. But remember: your offer is the business card of your company – just much more important. Make sure you use branded, personalized estimate templates. Or, best of all, a tool that integrates the cost estimate into the process (see I for Integrate your Estimate).
T for Taxes
Taxes are part of every offer. Please make sure that your VAT is correct, so that the customers know what to expect. And if you are using a smart business solution, you’ll already have the numbers at hand, once it is your turn to do the tax declaration.
U for Unforeseeable Expenses
Nobody is perfect – and sometimes it is impossible to estimate the actual effort. Be sure to talk to your customer if there are any deviations from the price offered. Let him know why and what changes are needed, and maybe even present him with a new estimate. Also factor in the factor X (see X for Factor X).
V for Variations
Adding variations to your estimate or sales quote will make it more flexible – and is a great tool for upselling. Think of different scenarios of a project, and then add options with additional costs.
W for Writing an Invoice
First comes the estimate – and then the invoice. With an intelligent tool, you can convert the estimate directly into an invoice (see I for Integrate your Estimate). This not only saves you time but allows you to review the quality of past offers: How accurate was your estimate? What can you improve next time? Smart reporting helps you to create your estimates better and faster.
X for Factor X
Life is unpredictable – and projects are, too. Protect yourself and your customers from bad surprises and the incalculable factor X into account from the start. Include 5-10% of the total amount for “additional expenses”. Ideally, you will surprise your customers with a lower invoice than estimated. In reality, though, Factor X will soon have a real name – and you will have it covered.
Yen & Yuan
It is difficult enough to create an estimate in your home currency. When foreign currencies need to be factored in, some capitulate. Not anymore: Smart tools to create your estimates allow you to jump between currencies, convert them according to the daily rate, and even invoice your client in another currency. It’s time to turn Yen and Yuan into Yin and Yang.
Z for Zen
Zen is the state of absolute and total bliss. The state you achieve when you’re totally immersed into a project, when work becomes passion. Writing a winning estimate is the starting point to get there. Integrating your estimate into the whole business process will give you the time and energy to not only get the work done, but do it with passion.