How to use price quotes to build sales and revenue
For many small businesses — especially those in service-based industries — delivering price quotes is a crucial part of the sales process.
Done well, it can lead to increases in your conversion rate and sales numbers. A haphazard approach to creating and delivering price quotes, though, can all but shut the door on potential projects for your team.
In this guide, we’ll be discussing how to estimate and write a price quote, along with some key best practices to follow along the way.
What is a price quote?
A price quote, or price quotation, is a statement of a project’s scope and its cost to the customer, as presented by you, the service provider.
Once communicated and agreed upon, a price quote sets the project’s price in black and white — and marks the moment the provider can “officially” begin working on the project.
(Note: Price quotes can be amended after the fact for a variety of reasons, but more on this later.)
Price quotes can be communicated and agreed upon through both written or verbal means. As we’ll discuss, there are many reasons both parties will want to get this agreement in writing.
When creating price quotes, businesses will typically use a standardised format that still allows for any customisations required on a per-project basis. This aims to avoid any salient information slipping through the cracks and makes it easy for businesses to provide a tailored service to each customer.
Because creating a price quote is a rather involved process, many businesses charge a small fee to prospects that request them, which is then included in the final project cost should the work go ahead.
Price quotes vs. estimates: what’s the difference?
Though some use the terms estimating and quoting interchangeably, the two are not synonymous.
(And getting them confused could land your business in a bit of trouble.)
Here’s the most important difference: price quotes are legally binding once accepted, while estimates are not.
For this reason, it’s critical you clarify this detail to your customers — and also make clear which is which when presenting them with either.
Price quotes and estimates are usually quite different in structure and appearance, as well.
Estimates, on the one hand, are just that: the provider’s best guess as to the cost of a project based on some preliminary information and their own background knowledge. They don’t include too much info other than a ballpark price — which is in no way meant to be construed as a final asking price.
Price quotes, on the other hand, are more focused and in-depth — they define what the final quotation price of the project will be to the customer. On top of this price-related info, price quotes will define the scope of the project and any other information either party needs to know before getting started.
That said, both estimates and quotes can play an important role in the sales process, and some businesses will opt to use both.
Usually, you'd deliver estimates to prospective customers to gauge their interest — and ideally move them along the sales funnel). If they stick around after seeing the project’s estimated cost, you'd then provide them a more specific price along with the additional info included in an official quote.
If a prospect doesn’t go along with your estimate, you can reconnect with them to determine a better course of action — and hopefully get them back on track toward conversion.
If you take nothing else from this information, though, remember:
Estimates aren't legally binding, but price quotes are — and must always be treated as such.
Find out more about the legally binding nature of price quotes at Business.gov.au.
Why are price quotes essential for businesses?
Offering price quotes is standard across most service and project-based industries, such as the trades, building and construction sector.
Though they’re not exactly mandatory from a legal standpoint, buyers in these industries will likely expect a formal quote including details on the scope of work before they commit to working with you.
The good news is delivering a solid price quote to potential customers can increase the chances of them converting. What’s more, you’ll also have more control over the business agreement moving forward.
Price quotes set clear terms for the agreement
A price quote is a contractual agreement between provider and customer regarding:
what the vendor will be providing
what the buyer will be receiving
how much the buyer will pay in exchange for services rendered
how and when services will be rendered
terms for amending and/or nullifying the price quote and contract.
Quotes provide more clarity to prospective customers from the start — and can also ensure things go your way should a discrepancy arise at some point down the line.
Price quotes provide detailed information on the project
Price quotes also allow vendors to provide more detailed information about the actual project at hand.
an itemised receipt showing exactly where the customer’s money went
additional costs outside the scope of the project (such as taxes and processing fees.)
payment options and financing terms available to the buyer.
The more agreeable these terms are to your prospective customers or clients, the more likely you’ll be to seal the deal.
Price quotes let you tailor service to your customers’ needs
Every project your team tackles is unique in some way — and your price quotes need to reflect this.
By taking a more flexible and focused approach to creating price quotes for your customers, you’ll communicate your team’s value more clearly — and give individual customers every reason to stick with your brand.
Price quotes help you get started immediately
This is actually a 2-for-1 in terms of benefits.
For one, a comprehensive price quote will make your customer’s purchasing decision just that much easier. The quicker they decide to sign on the dotted line, the faster you can start delivering value to them.
But you’ll also be better aligned with your customers as the project gets underway. This will allow you to get started immediately — and to start making progress right away.
Multiply this experience throughout your customer base and you’ll find a good quoting process means more contracts and completed projects in less time than ever before.
Price quote considerations
With so much riding on each sales quote you present, it just makes sense to be intentional and strategic when creating them.
This means paying close attention to the following details.
1. Understand the job requirements
Since your price quote is where you’ll define the deliverables for the project, you need to know what this will take on your end.
Underestimate the project at hand, and you’ll have a tough time following through on your end of the bargain. This can not only spell immediate legal trouble for your company — but can also cause long-lasting damage to your brand’s reputation. So it’s important to take this time to come to a consensus with your customer as to what they expect from you. In turn, you can nail down these specifics in the contract and prepare your team to get started.
2. Set realistic deadlines and expectations
On that note, you also need to be realistic when setting the terms and scope of a given project.
While you certainly don’t want to downplay your team’s ability to deliver as promised, you also don’t want to overpromise and underdeliver. This will lead to a similar outcome as described above.
In setting a timeline for progress, along with clear expectations at each stage of progress, you’ll prepare your customer for the next steps to come, while also allowing your team adequate time to deliver on expectations.
3. Use the latest pricing information
Because material, labour, and other costs are constantly fluctuating, it’s important to use the most up-to-date pricing information available when creating a price quote.
Though these prices will likely change to some degree from the time you draft the quote to when the customer agrees to it, you at least want to make an effort to be as accurate as possible.
Basically, you don’t want to get caught in a situation where the price of materials has increased so much that it impacts your bottom line.
4. Add special terms and conditions
In many situations, it may be prudent to add special terms and conditions to your price quotes.
This is especially true in cases where your team may be taking on additional risk throughout a project.
A few examples:
when a project may require additional work
when outside circumstances may hinder progress or a new quote
when the customer’s finances may be in question.
In setting these added terms, both your team and your customers will be able to navigate any issue that arises as you complete the project at hand.
5. Price with profit margins in mind
This is Business 101, but it’s worth mentioning anyway: if you don’t have your company’s bottom line in mind when creating price quotes, you’re almost definitely selling yourself short.
In addition to factoring in the cost of doing business, then, you also need to guarantee that completing a given project will net you a certain amount of profit. While profit margin is just one factor to consider when pricing your services, it’s perhaps the most important to consider for internal purposes.
What to include in a price quote
In Australia, price quotes must include your company’s, as well as the customer’s: name, address, contact information and Australian Business Number (where applicable).
Individual price quotes should also include a unique quote number, along with a Customer ID or similar identifying information to make them easy to track and refer to as necessary.
An overview of the total cost to the customer, along with a summary of what this price does and doesn't include.
Defining what’s not included in the scope of work is often very useful, as it'll help mitigate scope creep from the start.
A more specific explanation of the cost of the project.
On the surface, this info helps legitimise the price of your services. On a deeper level, it allows you to showcase your expertise to your potential client.
Taxes should be listed as a separate cost as applicable.
Key things to define here include:
starting date (such as: “x days from signing of contract”)
completion date (based on start date)
days of the week you’ll be in operation
time of day you’ll be in operation.
You may also want to add language regarding problems outside your control that could add delays or other complications to the schedule as quoted.
In addition to the above, you might also include more specific scheduling information.
For example, if you’ll be providing services in stages, your price quote should include a breakdown of when each stage will be complete.
Quote expiry date
The date by which the client must agree to the price quote before the offer becomes null and void.
Payment terms and conditions
A price quote should always include information about how and when the provider will be getting paid.
upfront, lump sum payment
50/50 payment upfront and upon project completion
instalment plans or net payment terms.
Each price quote should include a space for your signature, your client’s signature, and the dates on which both parties signed the contract.
It’s important to sign your side of the price quote before sending it over to your client. As mentioned earlier, delivering price quotes digitally will make this process even faster.
And remember, once a quote is signed by both parties, it becomes a legally binding agreement.
List the payment methods you accept and provide space for your client to fill out their specific information.
Price quotes can change
While price quotes are meant to bind both parties to a legal agreement with specific terms, these plans can easily go awry through no fault of anyone involved.
From inclement weather to material shortages to unforeseen disasters, there will be times when fulfilling a price quote as expected will be impossible for your team.
You may also encounter problems during your work that can hold you back, ultimately leading to additional expenses for your business.
For these reasons, it’s vital to include language in your price quote reserving the right to revisit the agreement should extenuating circumstances arise. As it’s impossible to account for all possibilities, this statement should be broad enough to cover all bases — while being specific enough to be considered legally binding, as well.
As always, business operators are advised to consult with a qualified legal practitioner whenever you set about writing terms and conditions, agreements or contracts of any kind.
How to get more price quotes accepted
When sending a price quote, you’re trying to get the buyer to convert to the sale.
That’s why you’ll want to be strategic in your approach to creating and delivering every price quote you put together.
Here’s what you should be aiming for if you want to maximise your sales and revenue through the quoting process.
Ensure price quotes are clear and complete
First things first, your price quote needs to be comprehensive and comprehensible.
There are actually two reasons for this:
For one, it allows your clients to get more insight into what you’ll be providing, and how you’ll be providing it. To this end, your price quote should explain things in terms the client will understand — but should also avoid overwhelming the client with superfluous info.
Secondly, your price quotes should include clear language that leaves minimal room for interpretation. This will help settle potential disputes with clients — either on your own, through mediation or via legal recourse.
Send price quotes quickly
When a potential client requests a price quote, it’s a pretty good sign that they’re ready to convert.
That is, as long as you strike when the iron’s hot.
(This is just one of the reasons creating a template for your price quotes is so important.)
Every moment you hesitate means fewer opportunities to deliver value to your potential customer — and more and more chances of them choosing a competitor’s solution.
Send and track quotes electronically
When it comes to sending price quotes, the digital method trumps the manual every time.
It’s quicker. It’s more secure. And it requires less effort on the part of your customers. The more streamlined their experience, the more likely they’ll be to convert.
On top of all that, it’s also easier to track the engagement metrics and behaviours when sending out quotes. This makes it easy to reach out to those who haven’t responded and to do what’s needed to get them back on track toward conversion.
Automate follow ups
In digitising your price quote delivery process, you can also automatically send out reminders to your more hesitant prospects.
These reminders are typically sent via email, but may also be effective when delivered via text message or social media chatbot.
These reminder messages should accomplish the following:
restate and reinforce the offer made
illustrate the value of the offer (and the downsides of not converting)
remind the client of the expiry date at which the offer is no longer valid
call the client to take action — whether it be making a purchase or reaching out for additional info.
Ask for feedback on the quote process
Whether or not a prospective client converts, you should try to collect feedback from them on the process up to this point.
To be sure, you’re more likely to get responses from those that do convert — but you still want to make the effort either way.
On an individual level, this gives you the opportunity to improve the client’s experience — and potentially save a lost sale. You can then use the info you gleaned to make more overarching improvements to your quote process for each of your clients moving forward.
Send and track price quotes with MYOB
MYOB’s accounting software allows you to deliver, track, and receive electronic price quotes with ease — so you can spend more time and energy on running your business. You can even convert price quotes into invoices.
Learn more about MYOB Business and start a FREE 30-day trial today.
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