Win the bidding war.
What's the difference?
What is the difference between estimating and quoting?
We understand that all business transactions rise and fall on accurate estimates and quotes. That is why our estimating and quoting module is built around your business.
It is robust, reliable and trusted by hundreds of clients who use our estimating software daily to produced estimates that are fast, on time, and accurate.
- Estimate: An estimate is the base-line costs for the job. It is the value needed to cover all your costs to carry out a job (direct and indirect) before making any profit.
- Quote: A quote is estimate plus your markup. After you know how much it costs you to produce a job, you put your quote together, which is usually what you give your customer and ensures the business makes a profit and grows financially.
Why accuracy and software are important.
When a prospective client walks through the doors and asks for a quote or an estimate to perform a job, giving them an accurate estimate is incredibly important.
- Competitive advantage: We understand how important it is to gain and maintain a competitive advantage in this economic climate. Your competition is fierce and your customer is well-informed; they know exactly what your competitors are offering, and there are several factors involved when deciding which supplier to choose – such as brand values, service, product quality and price.
- To make a profit: Keeping even the smallest margin on costs, or on profit, can be the difference between keeping your business’s doors open, or closing up shop.
- To not make a loss: That’s why accurate estimating is vital: Estimate too high and you stand the risk of losing the job to a cheaper supplier. Estimate too low and you lose money.
Things to consider for an accurate estimate
When you go about setting up an estimate, you need to keep the following in mind so that you can estimate accurately, and set client expectations correctly:
- Costs: You need to know your costs (indirect and direct expenses) first before you can even consider adding a discount or a markup. If you’re not sure what your machine is costing you, it is difficult to know if your estimate recovers those costs. If you have not factored in your labour and salary expenses, determining an hourly rate for your estimate is impossible.
- Cost centres: Your cost centres are what your estimate should be based upon – we’ll unpack that in more detail in the next chapters.
- Due dates, and variables that might affect that, such as weather, port delays, and overtime.
- Lead times: Factoring in how long it takes to produce your product / service, and whether meeting the client’s deadline is possible.
- Material availability, import or manufacturing delays for the material required for the job.
Overview of the components of an estimate
What elements make up an estimate? In order to fully understand how to break down your estimate to the basic costs for a product or project, you need to understand what the elements are that make up an estimate:
Services can be calculated as follows:
- Cost centres / overheads (internal costs like salaries, equipment, rent, etc)
- Internal services and Outwork (outsourced work)
- Services Formula = Quantity (Hr/s) x Hourly Rate
Materials can be calculated as follows:
- Materials Formula = Quantity of Units x Unit Cost
Markup is the amount you add to your sales price over and above your cost price calculated in your estimate. When calculating your markup, you will ensure you have considered these costs in the price of your product or service.
- Overheads (Optional – if not included in Service Rates)
- Commission (Optional)
Estimate and quotation formula:
Now that you have a high-level overview of what elements make up an estimate, here is a high-level summary of how an estimate is calculated.
Estimate formula: Services (Qty x hourly rate) + Materials (Qty of units x unit costs) = Cost
Quotation formula: Cost + Markup = Selling Price