What is an estimate and what is a quote when giving a potential new client pricing? What is the best option?

The two are interchangeable but are two different types of transactions.  And one leads to a potential profit loss per job, so this is important to your business.  Although many buyers do not know the difference between an estimate or quote. More people know than not and this is a hinderance if the business owner gets into a sales offering process that does not work for them.

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A quote is a set price that you give for the service or product.  An estimate is a close guess and is subject to change.  The quote does not change whatever you offer, and the buyer accepts regardless of the outcome you must deliver at that price.  An estimate sets the expectation up front that the price may change depending on different variables to providing the service or the product.  There are websites that get people caught up in giving quotes instead of estimates and say for a service business like mine that is a problem. 

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We continue reading at the 5:42:09 Marker.

Each buyer’s situation is different for me.  Now if the buyer is looking for the same type of service or product and there are no changes expected then a quote works and normally it based on past experienced transaction of a same type.  An estimate is based on similarities and not the same because normally that means the buyers are different with some similarities but not the same.

Also, when giving a quote at the time our cost of goods sold or cost of services sold are at a purchase price for you that you calculated into your pricing that would include different components that would get you to a profit per sale and that price is your quote.  Normally the quote is non-negotiable unless you say you are willing to negotiate and that means you have worked that room into your pricing. 

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The only problem is if your costs change during the time frame you put out the quote.  Or if it does turn out this situation is different from past situations.  Unless you worked in some wiggle room for pricing changes and what -if you could come in at a loss on this sales offer.  Hence quotes are the situations that leave someone without potential loss more so than an estimated sales offer.

An estimated sales offer is based on experience and current cost including other components as well that equal the sales pricing that you are offering to the client at that time.  Your estimate is based on your current cost, and it is based on the scope of services for this situation and you give the client a range.  The client will experience a higher cost if they make changes outside of the scope of services.  If the buyer adds or wants to take out something that was agreed upon that could potentially impact the estimate.  Often the buyer wants to keep the price the same or they are trying to get a lower price.  So, we have to let them know they cannot change what you offer, and we do that through the scope of services.

Your goal is to meet the lower end of the offer, but you know you already worked in the room if your costs change as well.  Thereby the client would not expect something higher than the price range highest point but would be excited if you came in even lower than your lower point because perhaps your costs were lower than expected on your side.

If your costs are lower and you come under your estimate range, you have the two options of not going lower giving you a higher profit.  Or you could use that to encourage future business from that buyer and potential referrals without incurring a cost or added expense for marketing. So, you can turn it around for your benefit.

So, most negotiators or deal makers prefer quotes because they know they can lock you in and then attempt to wrangle additional work.  I would recommend not negotiating that way you stay within your quotes if you are using the quotes type of sales process.  Quotes are also used when bidding against other businesses so you must be willing to lose out on potential new clients if your quote is saying not the lowest quote that the person would like.

The estimate sales system normally does not work in the bidding type situation because people will say you did a bait and switch.  Bait and switch are where you suggest one price and then you give them another as opposed to giving them a range and allowing them to choose if they like your range.  The estimate sales process is normally used with a different type of buyer that is looking for quality over pricing.  Not to say they will want to purposely pay a higher price, but they will also look more at what you offer as opposed to just the price.

Quotes bring in price hunters more than not.  I am not saying they are not quality clients but normally they do not stay long term if they do choose you.  Or worse they feel you cannot raise your pricing.  And often will attempt to bring up other people to get you to maybe lower your pricing.  Some people will always want a way to keep that pricing in what they consider fair not taking into consideration some of us need to increase pricing every year.  Some long-term clients expect a discount and want your pricing to decrease. I have never heard of that until business ownership.

Perhaps you can only offer that pricing for a new customer so after that official offer they will move on.  Since there is a cost with adding new clients at least time and always minimum cost to provide the service or product it can become a loss to have this type of rotation in your business.

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