Some businesses simply cannot give standard prices for goods and services. This may be because the skills, time and materials required for each job vary depending on different customers' needs.
This situation is common in trades such as building work or producing custom products, where no two jobs are exactly the same. When it's not possible to work from a standard price list, you have to give a quotation or an estimate instead.
The main difference between a quotation and an estimate is that:
- a quotation is an agreed fixed price
- an estimate is approximate price that may change
What is a price quotation?
A quotation is a fixed price offer that can't be changed once accepted by the customer. You must adhere to the quotation price even if you carry out more work than you expected. If you think this is likely to happen, it makes more sense to give an estimate. You can also specify in the quotation precisely what it covers, and situations that will lead to additional charges.
What is a price estimate?
An estimate is an educated guess at what a job may cost. It isn't binding. To account for possible unforeseen developments, you should provide several estimates based on various circumstances, including the worst-case scenario. This will prevent your customer from being surprised by the costs.
How to give a price quotation or estimate
To work out a quote or estimate you need to know your fixed and variable costs. These include the cost-per-hour of manual labour and the cost of the materials you'll need. You can then calculate your quote or estimate based on what you think the job will involve.
You should provide all your quotes and estimates in writing, including a detailed breakdown. This will help to avoid any disputes about what work is included in your overall price. Be sure to state clearly whether it is a quotation or an estimate.
You could also set an expiry date, after which quote or estimate will no longer be valid.
Know your legal responsibilities
- Do you need a licence?
- Get the right business insurance
- Comply with the law when providing goods and services
- Know your customers' rights
- Distance and online selling rules
- Understand pricing legislation
- Buying goods from outside NI
- Selling goods outside NI
- GDPR compliance checklist
- Pay your business rates
- Understand staff contracts and your responsibilities
- Taking on contractors and subcontractors
- Health and safety basics for business
- Know your legal obligations on pensions
Understand tax and VAT
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