Quotes, estimates, and bids are often used by general contractors in construction but can be used by businesses in many industries. Although they sometimes are used interchangeably, each one has a specific purpose. In general, quotes, estimates, and bids offer summaries of the cost of a particular project, product, or service—which may be projected or guaranteed.
Depending on the needs of your business and your goals for your clients, you may use a quote, an estimate, a bid, or even a combination of the three. See how these three documents differ in order to determine which ones may be best for your business.
Quote vs. Estimate vs. Bid
Quotes, estimates, and bids differ in terms of format and content. One may be as simple as a one-page list of prices while another may be more detailed with several pages of information.
A quote typically includes a price for a product or service and other details such as a description, date of shipment, and terms of sale. Quotes are usually simple, to the point, provide basic information, and can be used in a variety of industries such as retail, insurance, and banking. They are also often used for repairs and installations.
In a standard template for a quote, which is usually one page long, you’ll find contact information for both the business/service provider and customer at the top, followed by a summary of the total cost of the order.
Estimates generally give an approximate cost of a project, which usually includes labor or service, but can also be used for loans. Estimates include cost of labor, materials, deliveries, and any other expenses related to the project. These expenses may be divided into stages, depending on the project’s complexity and length of time. Estimates may be ongoing as they provide a guideline for the expectations throughout these various stages.
An estimate is also divided into categories to show the cost of different parts of the project. For example, sections may include the cost of the site (land) as well as inspection and construction costs, which would include the actual labor.
While the term “bid” commonly is used in auctions, it’s also prevalent (and carries similar meaning) when it comes to business contracts. In auctions, bidders compete against others to purchase a specific item. In business, a bid commonly refers to a contractor’s proposal to solicit an available project. Contractors bid against each other for the same project, trying to offer the best price while making a profit from their work. Some bids may be restricted, meaning they are not available to all contractors or workers.
Which Is Right for You?
Depending on your business needs and the services your business offers, you may find a quote may be more fitting in some instances, while an estimate may be fitting in others. Each is different when it comes to firmness, level of detail, industry use, and whether it’s negotiable.
|Firmness of Dealings||Very firm; guaranteed price for specified time period||Not firm; provides an approximate cost that can change||Very firm; price is set and agreed on|
|Level of Detail||Typically simple but inclusive of important details||Not too detailed; usually general in scope||Very detailed due to competition; outlines all aspects of project|
|Industry Use||Used in various industries (retail, insurance, construction)||Any business but primarily general contractors||Typically used by general contractors in construction|
|Negotiation||Non-negotiable as prices are set for a specified time period||Can be negotiated at various stages of project||Non-negotiable as work must be completed as agreed|
Firmness of Dealings
When it comes to firmness of the price, the quote and bid tend to be more firm than the estimate. A quote lists an exact price for a product or service that is guaranteed for a specific period of time. For example, a quote used in retail guarantees a certain price for a customer even if the price increases within that time period. Once a customer has accepted a quote, the contractor has to do the work for that price.
A bid is also firm in the sense that once a business owner or manager accepts a bid and the contract is signed, it is binding. As a result, the contractor must perform these services for the agreed-on price, regardless of whether they need to add more labor or materials for the project. These unforeseeable costs may be covered in a contingency sum as part of the bid.
When creating a quote or estimate, include an expiration date so the client knows how long the offer is guaranteed. To stay organized, keep this documented so you know how long to honor that price.
Level of Detail
While quotes, estimates, and bids may be as detailed as the contractor or worker decides to make them, a bid is generally more detailed than the quote and estimate. When a contractor bids for a project, they are competing against other contractors and must include enough information for clients to make an informed decision.
Quotes are generally simple as they focus on setting a price for a particular product or service. Estimates are made to be general in scope as they provide a general outline of the cost of the projects, which may change as the project progresses.
Quotes and estimates can be used in various industries. The former can be used for products, loans, and insurance, while the latter can be used for loans, repair services, and construction projects. Bidding is typically limited to government or public contracts and therefore, mainly applies to general contractors.
In general, quotes and bids are non-negotiable as the terms and prices are usually set and agreed on. The estimate, however, is more flexible since the projects are broken down into stages. Clients can decide whether to continue with the project at these various stages, and the project may be negotiated with new terms at each interval. Overall, contractors and clients can decide whether contracts are negotiable before the project begins.
The Bottom Line
Deciding whether to use a quote, estimate, or bid depends on the services your business offers, your preferences for conducting business, and the needs of your clients. Quotes are recommended if you’re looking for something simple and straightforward that provides basic pricing information. Estimates are recommended for long-term projects that require labor and materials. Bids are recommended for general contractors looking to land a contract with a client.
Frequently Asked Questions (FAQs)
How do you write a quote for a job?
A quote doesn’t need to follow a certain set of standards. However, you’ll generally need to include information about the costs, a reference number, an expiration date, and the customer’s contact information. Some quotes may be more detailed than others depending on your industry.
What if a work estimate is more than the actual cost of work?
Since the estimate is reviewed in stages, the cost may fluctuate and can be adjusted for the project. If the work estimate is more than the actual cost within these stages, the funds can be allocated to other expenses for the project, such as upgrades or add-ons. If the work is complete, the estimate can be revised to reflect this new cost.
What is a proposal?
Proposals are often used in business to showcase a new idea for a product or service. Proposals are usually detailed and include information about the marketing plan, financial aspects, and the benefits. They may be presented to clients and may include supporting documents with detailed information.