In this article we take a look at one of the most important aspects of a business: that of an estimate or quotation.
There is little or no difference between an estimate or quotation. It is the information provided by your potential client to prepare the estimate or quotation that counts.
In general, an estimate is a guide to what the price might be, whereas a quotation is a fixed price for the work.
If a detailed description is given for a job such as: ‘prepare, prime bare timber, apply two undercoats and one full coat of gloss to timber external door, frame, stop and architrave’, it does not matter if you call it an estimate or a quotation. The information is there to price the work accurately.
There are several different elements to pricing the work, as follows:
Some thought and consideration needs to go into working out an estimate or quotation.
Arrange to visit the premises where the work is to be carried out. A visit will confirm if you:
All the above aspects have a cost implication and should be included in your estimate or quotation.
For the purpose of this exercise we are going to prepare an estimate or quotation. The job is to redecorate 2 external softwood doors:
The estimate or quotation should include a full breakdown of the work involved. It should take into account the items mentioned under ‘Procedure’ as well as those set out below.
All for the sum of £633.23 plus VAT at 20%
This estimate does not include the following:
The overall work will take approximately 2.5 days. This estimate or quotation remains available for 30 days.
As far as the profit margin is concerned, it is your decision what percentage profit you require.
Do not forget to include your Terms of Payment.
Remember to include within your estimate or quotation a clause providing for a 14-day cooling off period. During this period your possible client can withdraw from having the work carried out.
Also include a form on your estimate or quotation if your client wants to proceed within the 14 days. Ask them to sign and date their agreement on that form.
This Act indicates that the work must be to a reasonable standard and fit for purpose, carried out within a reasonable time, and at a reasonable cost.
For further information on either of the above Regulations and Acts, please visit the website: www.citizensadvice.org.uk.
We trust that this has been a useful article for our members to understand the importance of estimates and quotations.