Write an Estimate

If you work as an independent contractor, knowing how to properly write an estimate is crucial to acquiring a steady stream of customers. You must first thoroughly evaluate the job they want you to do. From that point, you can give them an estimate, which is a non-binding, ballpark figure of how much you'll charge to do the job. A potential customer also may seek a quotation, which is a binding, exact figure of how much you'll charge. Unlike an estimate, a quote cannot change once accepted by the customer.

Steps

Estimate Template and Sample Estimate

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Evaluating the Job

1. Review what needs to be done. Before you can provide a customer with either an estimate or a quotation, you need to know exactly what they want you to do. Expect to ask a lot of questions, as people often can be vague about their needs.
   • Keep in mind that sometimes a customer won't actually know what goes into a job – they just know what they want the final outcome to be. In many professions, this means you must actually visit the customer's work site to evaluate the job properly.
   • For example, if you are in construction and the customer wants to add a new deck onto the back of their house, you'll need to look at the state of the ground below where they want the deck to be, as well as evaluate how they want to attach it to the house and how the house itself is built.
2. Determine how long the job will take you. For the purposes of an estimate, you only need a rough ballpark. However, it's important to be realistic in your assessment of time to complete the project because this will determine the ultimate price you give the customer.
   • If there will be outside work involved, you'll need to make allowances for possible weather delays depending on the season in which the work will be done.
3. Decide if you'll need additional help. If you already have a crew that normally works with you, additional labor may not be as big of a deal for you. However, if you typically work alone, you must assess the job realistically and decide whether you'll have additional expenses for sub-contractors or specialists.
   • The date by which the customer wants the job done also factors into this. For example, it may be possible for you to complete the job on your own, but it would take you three weeks to complete it. However, the customer needs to have the job completed by the end of the week, which means you would need help to meet that deadline.
   • You also want to keep other commitments in mind. If you know it would take you 20 hours to complete a job on your own, but you've already committed to projects that will take 40 hours of your time during the period the customer wants the job completed, you may need extra help so you don't over-extend yourself.
4. Figure out what materials you'll need. Any estimate should include at least a ballpark figure of what the costs will be to you to complete the project. If the job requires tools that you don't own or have available to you, find out the cost for purchasing or renting those tools.
   • Purchasing new tools may be preferable if you anticipate you will need them for other jobs in the future. You typically can deduct these purchases as business expenses on your taxes. Keep in mind that if you decide to do that, you can't pass on the full purchase price to your customer.
   • If you have basic materials that you frequently use for different jobs, keep price lists for reference so you can save some time when you're calculating an estimate.
5. Research your competition. You want your estimate to be competitive, but at the same time you don't want to charge so little that you end up not making any money. Find out what similar professionals in your area are charging and stay in that range.
   • Keep in mind that "competitive" does not mean that you should aim to underbid the competition. You won't make any money that way, and potential customers or clients may be suspicious if your estimate seems too low. Have confidence in your skills and your work product.
   • However, you do want to have a general idea of the skill level and experience of similar professionals in your area. For example, if you have 20 years experience, you would want your estimate to be considerably higher than someone who's only been in business a year, because you have more to bring to the table.
   • To find out what similar professionals in your area are charging, check listings on websites where professionals can advertise or promote their services. If there is a professional or trade organization in your area, they also may have information on project prices based on survey results.

Maintaining Positive Customer Relations

1. Adopt a warm professional tone. A warm, friendly tone will put the potential customer at ease and help them see you as a person, not just a business transaction. If they like and feel comfortable with you as a person, they'll be more interested in doing business with you.
   • Be sure to thank them for their offer, and speak positively about their project. Avoid making negative statements or implying that their job will be challenging or difficult for you.
2. Focus on the benefit to the customer. The customer typically isn't interested in the exact process or things you need to do to achieve their objective – they're only interested in the finished product. Keep your language focused on the result, not the process.
   • This is important when you're describing the work to be done. To continue the previous example, you might describe the deck-building work as "materials for new deck" and "installation of new deck." This keeps your potential customer's attention on the final product, not the work that will go into it.
3. Deliver your estimate quickly. Typically potential clients want the work done sooner rather than later. Since many clients end up working with the first contractor they hear back from, you want to get your estimate into their hands as soon as possible.
4. Schedule a follow-up. After you've delivered your estimate to the potential client, you may hear back from them immediately. However, you should plan to call them within two or three days after they've received the estimate to find out if they've made a decision.
   • Keep in mind that often people who hire one contractor won't bother to call any others and tell them they've decided to go with someone else. So this follow-up is as much for you as it is for them. Knowing whether you've got the job can help you plan your work time and manage your staff efficiently.

Drawing Up an Estimate

1. Use official letterhead. Assume the potential customer has reached out to others for estimates as well. If you have letterhead for your business, it gives your estimate a more professional polish and makes it stand out.
   • If you don't yet have letterhead, you can create something basic on any word processing program. Make sure it includes your name, your business name, and contact information such as address, phone number, email address, and the URL of your website if you have one.
   • Include your logo in your letterhead if you have one. This is another way to make your estimate look professional and help it stand out from any others.
2. Label your estimate appropriately. If you're sending the potential customer an estimate, it must be labeled clearly as such. Try placing the word "ESTIMATE" at the top of the page (directly under the letterhead) in large red capital letters.
   • You might also include a disclaimer immediately under the word to the effect that the actual final cost may be higher or lower than the estimate you've given.
3. Describe the services to be provided. For an estimate, you don't have to go into extensive detail about the services you will provide. However, you should break down the steps of the job as much as possible.
   • You can group services into broad, general categories for an estimate. This can help you more easily find a ballpark price without having to spend too much time finding exact figures just for the purposes of an estimate.
   • For example, if you are building a deck for a homeowner, you may have cost breakdowns for "materials" and "labor."
4. Include information about your licenses or accreditations. If you're an independent contractor, you may be required by state or local law to carry certain licenses or to be bonded. Information about these should be included on your estimate.
   • Memberships in professional or trade organizations also make you appear more trustworthy and can set a potential customer at ease about doing business with you.
   • If you have badges from any review sites or social media platforms, such as Yelp, you might include those too so potential customers can see what other people have to say about your services.
5. Provide any necessary disclaimers. An estimate is never legally binding, and you should state this up front so that your potential customer is aware that the actual price may differ from the estimate you gave.
   • Make a statement at the end of your estimate even if you have something written under the word "ESTIMATE" at the top of the page. For example, you might say "The above price is a ballpark estimate, not an exact quote. Your actual price may be higher or lower depending on a variety of factors."
   • You can describe the factors that might contribute to a difference between the actual price and your estimate, but it isn't strictly necessary. If you do include reasons for a difference in prices, don't get too detailed or verbose in your explanation.
6. Give alternative estimates for different circumstances. In some cases, there may be significant factors that would result in a tremendous difference in the price. In these situations, it can be helpful for you to give your potential customer several estimates so they can make a more informed decision.
   • For example, suppose the customer said they want their new deck built as soon as possible, but at the latest they need it completed before a holiday gathering they have planned in three weeks. You might provide an estimate for getting the deck completed just by their deadline, and another for getting it done more quickly by hiring additional labor. It may be worth the extra cost for them to have the peace of mind of knowing that their deck will be completed before their party, even if there are weather delays.
7. Sign and date your estimate. Once you've finished your estimate, proofread it carefully before you print it off. Sign the letter and date your signature, then make a copy for your own records before delivering the estimate to the potential client.

Using a Quotation

1. Use a more formal business format. Since a quotation is a legally enforceable document, you want to be more formal with an exact quotation than you were with any previous estimates. However, you can still strike a warm, cordial tone – it shouldn't be overly formal or filled with too much legalese.
   • In some cases, a customer may ask for a quote rather than an estimate. Or, a customer to whom you've provided an estimate may request a more exact quote.
   • Thank the customer for the opportunity to work with them, and include a statement about how excited or interested you are in their project. If there is something specific about the project that sparks your interest, mention it briefly. You will give the customer the impression that you are personally invested in their project.
   • For example, you might write "Thank you so much for the opportunity to build your deck. I am especially excited to work on the fire pit at the center, which I think will be a lovely addition to the ambience of your backyard retreat."
2. Label your quotation. Just as with an estimate, a quotation should be clearly labeled as such so your customer knows it is an exact price that they can rely on when making a decision whether to hire you.
   • The same as with the estimate, you can put the word "QUOTATION" or "QUOTE" at the top of the page in all caps. If you used red for estimates, you might consider using a different color, such as green, to distinguish the quote from the estimate – particularly if you've given the customer both.
3. Break down how long it will take you to complete the job. A timeline for completion is important for the customer to know so they can decide which contractor to hire for their job. Include any deadlines provided by your customer, and make an effort to show completion of the work well before that deadline if possible.
4. Get total costs for materials and labor. For a quote, your prices for materials and labor need to be exact. This means you'll need to contact suppliers to find out about material costs. Be sure to ask how long those prices are good, because you'll need to factor this into how long the quote is valid.
   • Transportation, hired labor, and equipment rentals also should be included here.
   • Don't forget to include any administrative costs, licensing or inspection fees, and other expenses you will incur as a result of completing the project.
5. Determine your profit margin. Your profit margin is one part of your quote that typically will vary depending on the customer, their location, and the demands of the project they've offered to you.
   • For example, you may be willing to work for a limited profit if the customer is a church or nonprofit organization.
   • To calculate profit, decide on a percentage and then multiply the subtotal by that number. Then add that amount to get the total cost for the customer.
6. Describe the job in detail. On the quote itself, outline the specific steps of the job in more specific detail than you did for the estimate. Then you'll want to itemize the cost for each of those steps.
   • The more detailed you are, the more you'll inspire confidence in the customer that you're not hiding anything or trying to charge them for services they're not getting.
7. Provide a total cost for your services. Create a subtotal, then calculate any taxes that you'll have to charge the customer for your services. Add the taxes to the subtotal and provide the total on a separate line, bolded so the customer can see it clearly.
   • Specify that the price is legally binding if accepted by the customer. If there are specific conditions, such as a weather event, that could result in the quote being altered or rescinded, these should be stated specifically.
8. State how long the quote is valid. Because of the exact nature of a quote, it typically isn't going to be accurate indefinitely. Costs of materials may fluctuate over time. In most cases 30 days is a sufficient length of time, but you should never leave a quote valid for more than 60 days.
9. List any additional payment terms. If you require a deposit, or want partial payment before the work begins, this should be stated clearly on your quote. You also may want to include language that any payment constitutes acceptance of the quote.
   • For example, if you require cash on delivery, you should include the term "COD" at the end of your quote.
   • If you require a deposit, state exactly how much is required and the deadline by which you must receive it in order to start the project on the timeline specified.
10. Sign your quotation. The quotation should be signed by the person who ultimately has legal responsibility for it. If you are a small business owner, this typically is you. However, if you work as a manager for someone else, you may need to get the company owner to sign off on the quotation.
    • Make a copy of the signed quotes for your business records before delivering it to the customer.

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