PRICE LISTS, ESTIMATES, QUOTATIONS AND TENDERS

Every business has to give its customers prices for its products or services. There are several ways you can do this.

Many businesses, such as hairdressers, use a standardised price list that remains the same for every customer. Other businesses, such as painters and decorators, have to provide tailored prices for the specific products or services a customer wants to buy. This is usually done with an estimate or a quotation. Larger, more complicated projects are often priced on the basis of a detailed tender document drawn up by the customer.

This guide outlines how to present your prices to your customers. It tells you how to create a price list, describes the difference between a quotation and an estimate, details how to prepare quotations and estimates and describes how to price a tender for a contract.

Prepare a price list

The difference between a quotation and an estimate
Prepare a written estimate
Prepare a written quotation
Prepare a price for a tender
Win contracts at the right price

PREPARE A PRICE LIST

Most businesses will need to draw up a price list at some stage. If you sell a fixed range of products, this may be the only form of pricing you need. This type of standard price list can also be used as the basis for pricing your non-standard orders.

It's a good idea to date your price lists - particularly if your customer is likely to keep it for a long time. You should make it clear when any special offers expire. It can also be useful to include a clause at the end of the price list stating that prices are subject to change.

You should make clear whether any delivery, packing or postage costs are included in your prices. Additionally, although you don't have to indicate discounts for bulk purchases on your price list, it might attract more business.

You may be able to use software packages such as Sage Simply Accounting to help you draw up complex price lists.

THE DIFFERENCE BETWEEN A QUOTATION AND AN ESTIMATE

It's impossible for some businesses to give standard prices for goods and services. This may be because the skills, time and materials required for each job vary depending on different customers' needs.

This situation is more common in some trades than others - decorators or builders, for example, rarely do exactly the same job twice. When it's not possible to work from a standard price list, you have to give a quotation or an estimate instead.

A quotation is a fixed price offer that can't be changed once accepted by the customer. This holds true even if you have to carry out much more work than you expected.

If you think this is likely to happen, it makes more sense to give an estimate. You can also specify in the quotation precisely what it covers, and that variations outside of this will be subject to additional charges.

An estimate is an educated guess at what a job may cost - but it isn't binding. To take account of possible unforeseen developments, you should provide several estimates based on various circumstances, including the worst-case scenario. This will prevent your customer from being surprised by the costs.

To work out a quote or estimate you need to know your fixed and variable costs. These include the cost-per-hour of manual labour and the cost of the materials you'll require. Your quote or estimate is then calculated according to what you think the job will involve.

You should provide all your quotes and estimates in writing and include a detailed breakdown. This will help to avoid any disputes about what work is included in your overall price.

You may also wish to set an expiry date. Your quote or estimate will no longer be valid after this time.

PREPARE A WRITTEN ESTIMATE

When you prepare an estimate it's good practice to give the customer a written copy, including a full breakdown of costs.

Your estimate should include the:

overall price
breakdown, listing the components of the price
schedule, detailing when work will be done or products delivered
terms and conditions
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