Service providers and vendors often provide a written estimate for the total costs of the work or products a buyer wants to purchase. In some cases, the provider is legally required to do so. Writing an estimate means you have to assess the work or product order and break it down into a list for the buyer’s review.
Materials or Product List
For a potential product order, you need to take the request for an estimate or quote that the potential buyer provides you and convert it into a list with applicable prices. For other types of services, such as electrical work, plumbing or construction, you need to examine the work site to gauge the full extent of the work required. From that assessment, you construct a tentative list of the materials you believe the job requires and current prices for the materials at your supplier of choice or the customer’s supplier of choice.
You can determine labor costs in two main ways. Some service providers charge a flat rate for a given service based on their experience of how long it takes to perform the job and what price point makes it profitable. If you lack a sufficient track record to develop an average flat fee, you must make an educated guess about how long you expect the work to take and multiply that by your hourly rate; this rate may reflect local industry standard rates. Or you can set your hourly rate by dividing your desired annual salary by, for example, 50 weeks a year and then dividing that by 40 hours a week. You can also add a percentage to the top to cover overhead costs.
Work Description or Scope
The estimate should include a description of all the work you expect to do. For example, a cabinetmaker hired to build custom kitchen cabinets would include the construction of the kitchen cabinets, the number of cabinets and a brief description of the main materials, such as oak cabinets with butcher block counters. Basic drawings or dimensions might be attached on a second page. The cabinetmaker might also note things not within the scope of the estimate, such as delivery and installation costs.
No single format for the written estimate enjoys universal acceptance, but most estimates follow a general pattern. Your business information, such as a letterhead, appears at the top. The term “estimate” or “quote” should be highly visible near the top of the page. The date of the estimate generally appears directly above the customer’s information. The work description comes next, followed by the materials list and labor costs, if any. The estimated total appears at the bottom of the page. While it's not mandatory, most estimates also include a window of validity for the estimate, such as 30, 60 or 90 days. Most customers also appreciate knowing the forms of payment you accept and expected payment terms. The estimate needs to include a space where the customer can note his acceptance with a signature.