How To Estimate Costs and Construct a Quote

Learning How To Estimate Costs and Construct a Quote

Every trade job starts by estimating the money, time and materials required to carry out the work.

Tradespeople must therefore learn to estimate costs and build well-defined quotes to:

💲 Ensure profitability.

💲 Build customer trust.

💲 Win more work by being competitive.

Knowing how to prepare realistic quotes protects your business from disputes by setting clear expectations for scope, cost, and timeline. Detailing all labour, material, and overhead expenses builds trust, leading to stronger, repeat business and prevents misunderstandings. This ultimately ensures business sustainability and growth.

Many things can vary and change of course but those variables can be considered as you progress with building your estimate. Once you build your knowledge of what the likely costs are, you can then produce a quote and if a job is secured, you can proceed to manage it effectively.

These processes involve:

💲 Accurately assessing project costs.

💲 Presenting competitive bids.

💲 Navigating the tendering process to win contracts. 

Why is estimating and quoting crucial to a business?

Successful estimating work directly affects a business’s ability to acquire new work and maintain profitability. Tradespeople who can produce realistic quotes can be more reliably profitable in their work than those who don’t calculate costs well or factor in variables properly.

Profitability – when you accurately know how to factor in ALL costs e.g. materials, labour and over-head margins, it prevents you from underquoting or overquoting. Underquoting directly impacts your profitability – if you produce accurate quotes it ensures that each job you quote for contributes to your business growth – not just to your business’s survival.

Customer trust - overquoting can also impact on your business’s profitability by losing customer trust and ultimately losing business. A well-detailed quote sets clear expectations and reduces misunderstandings as well as preventing ‘scope creep’ this can lead to happy clients you who tend to give you positive referrals and feedback. (Scope creep is when a job’s requirements, features, or goals expand uncontrollably beyond the original plan.)

Competitiveness - being competitive helps to win you more jobs – but you can only price competitively if you know your ‘true’ costs, while still making a profit.

Risk management - a detailed quote that clearly defines the work and payment terms, is your business's protection against disputes and late payments.

Business growth - accurate and consistent quoting helps you to later identify jobs that were profitable and successful – this help you to make more informed decisions in the future.

The key elements of a strong quote!

💲 A detailed scope - inclusions and exclusions are clearly defined, this helps to manage client expectations.

💲 An accurate breakdown of costs - this must include realistic estimates for materials, all labour costs including time for preparation and cleanups and your overheads.

💲 A realistic timeline - taking into account the complexity of the job and potential delays e.g. due to weather or material shortages/delays.

💲 Clear terms and conditions - include payment terms, contract variations and guarantees. 

Why Clients Choose One Quote over Another

Don’t assume that you need to quote lower than your competitors to get the work. Some people may tend to choose the cheapest quote; but statistically that is under 30%. Quality of work and timing as well as terms and conditions can be just as important. Successful businesses are reliable ones with a proven track records of doing quality work in a timely fashion.

This Relates to all Industries

Estimating and quoting work is something that happens in every industry. It is the basis of commercial transactions both in the public and private sectors. It is a relevant process whenever and wherever money changes hands in exchange for services or goods.

Any type of project from construction to mining or manufacturing requires determining costs to build an estimate then presenting and agreeing on a quote in order to establish a contractual agreement.