Do you tell your customers you offer quotes or estimates? If you're like a lot of people, you might even say you do both. Did you know that depending on which you use, customers could expect—and even be legally entitled to—a ballpark price or one that's set in stone?

What is an estimate?

It might be obvious to some, but estimates are just what they claim to be. An estimate is an estimate of what a job might cost. They're just educated guesses. They're really intended to do two things:

  1. Give a customer a ballpark of the cost of the work
  2. Make it clear that the price is actually an estimate, and it could go up or down, based on actual work performed

What is a quote?

Quotes often look the same as an estimate—they have line items, a price, etc. However, depending on where you operate your business, they can actually be legally binding documents in some areas—an actual agreement between your company and your customer that specifies an exact price for goods or services. Even if you aren't in an area that considers quotes to be legally binding, many customers may think quotes are the exact price they'll be paying at the end of the job, even if there are surprises, if things take longer than expected, and so on.

Estimates are best for service businesses

Running a service business can often feel like driving blind. A customer calls and wants a ballpark price on something you've never seen and really can't estimate over the phone. It doesn't matter if you're a house cleaner, pool cleaner, window washer, landscaper, plumber, or something else—almost all service businesses have encountered this problem. Most deal with this by offering a "free estimate". The problem is, there's often still a lot of unknowns that you're not aware of until you get into the job. That's reason #1 why you should be providing estimates.

A word of caution

Some small business owners use an estimate as a way to get the job no matter what by purposely low-balling the estimated cost. A customer might agree to the work, thinking the estimate will be roughly accurate, but when the job is done, the final price rises dramatically because the business owner wants to make a little extra. This is a terrible practice, and it will lead to unhappy customers, a bad reputation, and loss of work. Do your customers and your business a favor by avoiding this kind of dishonest behavior.

How to estimate jobs correctly

Estimating correctly is not the same as estimating a job accurately. Most jobs are impossible to estimate accurately, and that shouldn't be your goal with an estimate.

You want to give the customer a fair ballpark, make it clear that it's a ballpark, and provide enough info to make it clear where the cost is going and where it might go up or down.

Explain to your customer all the conditions you are expecting to be true in order for the final price to match the estimate. Be up front that the unexpected will likely raise the cost if it demands more time than you allotted in the estimate. You should also let them know that if the job gets done quicker than expected, the final price is going to be lower.

When you're inspecting a job, if you happen to notice something that could be a problem or an unknown, let the customer know up front. When you're creating your estimate, make sure to break down materials, supplies, labor cost and hours, etc. When an estimate is itemized, it's easy to point to a line and explain that a cost could increase because of a material, supply, or extra work that couldn't be anticipated.

Every business is different

We think estimates are the way to go for businesses that provide professional services to their customers, but recognize every business is a little different. One habit that always works for customers is clear communication. Regardless of if you provide estimates or quotes, simply letting a customer know that a price could go up or down is a great way to combat any misunderstands when the job is done and an invoice is sent.