Businesses usually spend significant time preparing a quote or an estimate for prospective clients. This process requires tremendous effort because every project’s requirements differ, increasing the time and workload to determine the project cost. This is particularly undeniable for those in the construction industry.
However, many people often use an estimate and a quote interchangeably, assuming they’re the same. Of course, they have a similar purpose, but in reality, they are quite distinct. Therefore, you need to make sure you use the right one when dealing with new clients.
Think from the customer’s perspective, how would they feel if they were expecting an estimate but received a quote instead? None of your clients want to be caught off guard by an unexpectedly hefty project cost.
That’s the reason why you should know the difference between estimate and quote. In this blog, we will cover exactly what you are looking for – what is an estimate, what a quote vs estimate is, and when to use them.
What Is a Quote?
A quote is a written document outlining the project cost which cannot be changed once the customer has agreed. Therefore, quotes are only generated if you are confident there will be no amendments later. Quotes are prepared following the detailed inspections & determining the exact cost of work required to be done.
Neither the business nor the customer can change the price mentioned in the quote. When you issue a quote to the customer, they will know how much exact price is required to get things done. So, a quote is a fixed price that once offered no one has the right to change it.
What Is an Estimate?
An estimate is a formal document offering an idea of how much the project could cost and the estimated time of completion. Estimates are generated without any detailed inspection or knowing the exact labor or material costs. The project cost is just a ballpark number entailed in the estimate and it is likely to change when you determine the scope of the project and the materials required to complete the work.
It is the guesswork done by the estimator to brief clients about approx. cost and timeline of the project. Estimates are based on initial thoughts influenced by past work experience and are likely to change once you gather more information.
Difference Between Estimate and Quote: Quote Vs Estimate
An estimate and a quote hold significant differences that you must know before meeting prospective clients. Here’s how an estimate differs from a quote.
| Differences | Estimate | Quote |
|---|---|---|
| Price |
A price mentioned in an estimate is a round figure and not the exact one because it is made considering assumptions about materials and labor costs. This estimated price is likely to change. | Unlike estimates, a quote comprises a fixed price that can’t be changed following the customer’s approval. Prices are written only after checking the project scope and requirements. |
| Project Duration | An estimate does not exactly say when the project will be completed because it is just a rough idea presented on paper, meaning it will change once you start digging more about the project work. | A quote highlights the exact time of the project. It helps both parties to understand when the project work will be finished. It is generated after gathering detailed information. |
| Calculations | The random calculations are made when preparing an estimate. So, calculations are likely to change after you get the exact material cost. Calculations on an estimate are just ballpark figures. | A quote has an exact calculation of labor and material costs that collectively contribute to the project cost. Calculations are based on meticulously counting the materials & labor costs. |
| Legality | Estimates are not legally binding because it is the result of guesswork and not the actual project cost. It is shared to help clients understand what would be the approx. project cost. | Quotes are legally binding documents because they commit both parties to the agreed price and mentioned terms, offering more clarity in the transaction. |
| Time of Sharing | Estimates are usually shared in the first meeting with the client to give them a rough idea about the overall project cost. They are made prior to the client’s approval. So, the client is yet to commit to the project work. | Quotes are shared only after all project details have been finalized, probably in the second or third meeting with the client. You should have gathered all the details while making quotes and therefore, it will be shared when an estimate is accepted by the client. |
Make Quotes or Estimates in Less than a Minute
Let Moon Invoice help you create accurate quotes or estimates that receive approvals from clients 2x faster.
When Should You Use an Estimate?
You can share an estimate only when your clients demand the estimated project cost and not the exact numbers. They would be interested in hiring you for project work once they identify the approximate project cost and if it aligns with their budget. Since they have not made any commitments, you can offer them a price based on a guesstimate without digging into the details.
For example, if the prospective client wants to hire you for flooring installation and repair work, they might ask you how much the cost is. On this occasion, you can share an estimate outlining the approximate idea about the project cost and deadline. There is no need to pay a site visit or consult the flooring contractors. You can mention the estimated amount in the estimate and share it with clients straightaway.
In case the prospect agrees with the project cost, you can start digging deeper to prepare a quote. However, if they feel the price doesn’t align with their budget, you haven’t invested too much time or effort yet.
When Should You Use a Quote?
A quote should be issued only after collecting all the necessary information and ensuring no further changes are expected. This process involves visiting the job site, consulting with site engineers, and finalizing your profit margin before preparing the quote. Nowadays, it’s common practice to share an estimate before a quote to satisfy customers and reduce back-and-forth communication.
Let us continue with the same example here, if the client is happy with the estimated price you shared, you can then continue moving forward with a quote. Since you have received approval, remember you need to gather more details because a quote will be in more detail than an estimate.
Once you are done identifying materials or project costs and expect no changes in price, you can hand over the final quotation to the customer. Remember neither you nor the customer can revise the price or timeline once you have issued a quote.
Essential Elements to Include in Your Estimates and Quotes
Estimates and quotes, both usually have the same information to be included in the document. Let us walk you through the main details you must add while making a quote or an estimate.
1. Customer’s details
Put necessary customer details like their name, residential address, and contact information to specify to whom the document is issued.
2. Date & time
Mention the date and time at which you issued a quote or an estimate. This will help both parties to be on the same page regarding the validity of the issued document.
3. Labor & material costs
List out the material costs based on a guesstimate if you are preparing an estimate. Otherwise, do a detailed analysis before calculating the labor and material costs when writing a quote.
4. Final Price
Add what would be the final price of the project so the client can understand how much they need to pay following the completion of the work.
5. Project deadline
Include the estimated time of project completion when you make an estimate or mention exactly when you will finish the project in case you are creating a quote.
6. Terms & conditions
Highlight the terms & conditions regarding your job work, warranties of material used, or accepted payment methods, regardless of whether it is a quote or estimate.
Are Estimates and Quotations Legally Binding?
An estimate is a project proposal and is negotiable so it is not legally binding. You can expect that the price might change once you initiate the in-depth analysis and meet on-site engineers. The price written on an estimate does not have to be an exact match, so it is not binding by law. Whereas, a quote is a legally binding document.
If the client agrees to the quoted price, you are legally obligated to provide the services at that cost. So, when your bid is successful, at that point you will be legally obliged to provide services as per the terms & conditions mentioned in a quote.
Streamline Your Estimation Process With Moon Invoice
Create estimates using ready-made templates tailored to meet diverse project requirements and secure new project work.
Conclusion
Quote and estimate are two different terms even if they are used for the same purpose. Understanding their key differences, you should know which one to share when discussing project work with clients. An estimate or quote may receive faster approvals if made online using invoicing software like Moon Invoice.
The reason is when you can make professional estimates or quotes with readymade templates rather than creating them on paper, they will be easily understandable by clients. Also, they have no chance of misplacement because every document will be saved in the cloud storage.
Want to try it yourself? Avail Moon Invoice’s 7-day free trial now.
FAQs
Jayanti Katariya is the founder & CEO of Moon Invoice, with over a decade of experience in developing SaaS products and the fintech industry. He holds a degree in engineering. Since 2011, Jayanti's expertise has helped thousands of businesses, from small startups to large enterprises, streamline invoicing, estimation, and accounting operations. His vision is to deliver top-tier financial solutions globally, ensuring efficient financial management for all business owners.
