Contractors' Questions: Is an estimate the same as a quote?
Contractor’s Question: One of three businesses I’m trailing my ‘Plan B’ with are insisting on a quote while the other two are happy with estimates. Is there much difference between an estimate and a quote? I’m keen to stick with estimates, not least because the other two firms have agreed to them and because I’m unsure of how long, precisely, the development work with the third firm will take.
Expert’s Answer: One area of freelancing that can be subject to change from contract to contract is estimating or quoting your price for a job.
But before you can do that you have to be aware of the distinctions between an estimate and a quote. The differences are subtle, but if you don’t get it right at the beginning of a project your client may contend what they are paying you – and this can lead to a number of difficult outcomes which it’s best to avoid altogether.
An estimate is exactly what you might think by its name, an estimation of how much you think a job may cost.
As your latest potential customer seems to realise, an estimate is by no means a guarantee. Usually, an estimate should be within a percentage range (for example, 20 per cent) of the final price, depending on whether anything changes during the project.
Indeed, with an estimate the price may increase if you have to put in more time or effort to do the work. As a result, many clients will tend to ask for a definitive quote as they are more comfortable with knowing how much something will cost outright.
So a quote is a concrete figure which you will agree with a client before starting a project. In order for this to work properly, you must specify the amount and type of work you are doing alongside the cost for doing so. If the client then wants you to carry out further work, you can charge for more according to your initial contract agreement.
In short, the main difference is that a quote or estimate provides the client with a concrete (in the case of a quote) or good idea (estimate) of what they will be paying for.
If you are still keen to give an estimate, while being aware that your third potential customer wants a quote, you could give a total time estimate in terms of a quoted hourly or daily rate. For example, the job may take an estimated ‘X’ number of hours or days, for which you will quote a set amount per hour or per day.
By doing this -- providing the third potential customer with an itemised account of how much time you intend to spend on each aspect of the project -- the firm can gain a better understanding of the service you are providing. This also helps you to organise your time and allows you to plan out a project from the start. Good luck!
The expert was Richard Gray of Boox, an accountancy firm specialising in contractors' tax affairs.
Editor’s Note: Further Reading –