An estimate is a rough guess of what a project will cost given to a prospective client.
It doesn’t normally have the exact details of a project but it will generally include a breakdown of the products and/or services, their costs and an estimated timeline with finish dates.
Clients use estimates to compare companies and assess whether your services/products are within their budget.
Essentially, they help you win jobs.
That’s why it’s important for business owners to understand what an estimate is.
What is a job estimate
A job estimate is a document that outlines the products and/or services with their respective costs being provided as a part of a larger project.
Estimates are used by clients to get an overview of the costs and timeframe of a service being provided by a company. This can be used to help a client budget or to compare companies that offer similar services.
Estimates generally include the following:
- What is and isn’t included in a project
- Services being provided
- Cost of services
- Cost of materials (if not included in the services)
- An approximate timeline of services
- Terms and conditions
Prior to drafting an estimate, there will be an initial conversation between the client and seller about the project requirements, expectations, and when these will need to be provided by.
Estimates are not fixed and can be adjusted as a project changes. Additional services may be added or removed as seen fit. Costs can also change if there are any issues or the price of materials has changed since the first estimate.
There are benefits of estimates for both the seller and the client. For the client, they are able to factor the project into their budget. For the seller, they are able to plan the resources they dedicate to the project and schedule other projects accordingly. Estimates are also useful to confirm a mutual understanding between the client and seller about what each party wants and are required to provide.
It should be noted, however, that an estimate is not a legally binding document and it can’t be used to receive a payment.
Difference between an estimate and invoice
The big difference lies in the timing. An invoice is a bill for services/products and is usually issued during or after the project (although it can be before). An estimate is more of a proposal or a general outline of the costs and services and is provided before a project.
In other words, an invoice is sent after the seller is hired whereas an estimate is sent before the seller is hired.
An invoice can also be a legally binding document if it is part of a signed contract.
You might also notice the language is different on an estimate and invoice.
Difference between an estimate and quote
Unlike a quote, an estimate is not a fixed price. An estimate gives an approximate cost for the goods and services provided.
Generally, the fixed price in a quote will be available for a limited time. Depending on your services and industry, this can vary. However, this time frame is usually around 30 to 90 days.
A quote’s fixed price and conditions can’t be changed once accepted by the client except if it is to change the amount of work required if extra work is required.
Quotes are also legally binding if it is part of a signed contract whereas an estimate is not. As a result, you should never label an estimate as a quote or vice versa.
The main benefit of sending an estimate over a quote is that it’s flexible. You don’t have to guarantee what is written on an estimate. Alternatively, with a quote, you are required to meet what has been outlined. However, you are able to set the price of a product that normally fluctuates and the client must pay the price you set.
If you need to make an estimate for your business, you can do so using Bookipi Invoice.
You can make as many estimates as you want for free!
Kick start your entrepreneurial career with Bookipi.