As a business owner, you’re (naturally) well-aware of the value of your company’s work. But actually communicating this value to outside parties can be a daunting task if you don’t have a process in place. Which is why learning to craft a well-written business quote is essential to the health of your company.
Put simply, a quote sets out the price you’ll charge a customer for a proposed product or service. It may include an itemised breakdown of the products or services in question and, when relevant, will set out a timeline or schedule for the project delivery.
It’s best practice to have a quote describing the full scope of work and payment details for your project, and to get it signed by both parties. When a customer signs a quote, it becomes a legally binding contract — so it’s important to be as accurate as possible when writing them. (If the customer changes the project requirements after accepting your initial quote, you’re entitled to issue a revised quote.)
As you can see, that’s a lot of legal work — which is why you want to try and compose a quote correctly the first time around. Here are some tips for doing just that:
How to write a great quote
First, you need to understand your customer’s needs and expectations. Depending on the nature of the project, this may require a site visit or a lengthy phone call. Don’t skip the legwork in these beginning stages; you may have to go the extra mile to have an in-depth conversation with the customer, but getting a clear initial idea of what they’re looking for will save you time in the long run.
Once you’ve thoroughly talked through goals and expectations with your client, it’s time to cost the job. You’ll need to consider not only how much it will cost you to deliver the project, but also any specific challenges or customisations that will add to the final dollar amount. Here are some specific factors you may want to consider:
Materials
Labour
Overhead
Travel time
Freight
Subcontractors
While all of these factors may not apply to your job — and it may require costs not listed here — they are some of the general considerations you’ll want to take into account.
Now that you’ve assessed the costs, you’ll want to put some finishing touches on your quote, including:
Your ABN and contact details
An itemised list of costs
A list of any variations that may affect your costing
A condition stating that you can revise the quote if the project scope changes
Finally, you’ll want to make sure that your quote complies with any GST obligations. Once that’s all squared away, it’s time to move on to your invoice.
Crafting the perfect invoice
As with most initiatives, investing in a bit of technology can give you a leg up and save time when it comes to managing your invoicing process. Specifically, you should do some research and see what accounting software will work best for your business. Most platforms can automatically generate an invoice from a quote, but be sure to update your system with any quote revisions before you issue the invoice.
If you deliver your project for less than previously quoted, it’s wise to pass these savings on to your customer, as doing so can be great for generating good reviews and referral business. But don’t over-quote on purpose — you’ll likely lose business to your competitors.
4 quoting pitfalls to avoid
Quoting can be surprisingly nerve-racking, as you must balance your desire to win the job with your desire to be properly compensated. Here are four mistakes to avoid, in order to find the perfect balance:
Don’t rush: Quoting takes time and effort, and there’s no guarantee your prospective customer will accept your quote. It might be tempting to put as little time into it as possible, but cutting corners is bound to hurt your business. Rushing your quote will lead to you overlooking expenses that will eat into your profit margin, so quash that impatience and take your time.
Don’t sweat the competition: Most customers will seek three quotes from different suppliers, but cheaper is not always best. Stay focused on what you need to charge to maintain profitability; your work will speak for itself, and a savvy customer will see this. Trying too hard to undercut your competitors will lock you into a race to the bottom.
Avoid lump-sum payments: If you’re working on a large project, you may want to set a payment schedule that’s tied to clear milestones. This will ensure you’re not creating a cash-flow bottleneck by holding out for a lump-sum payment at the end of the job.
Don’t hesitate to penalise late payments: Penalising customers for late payments may be an uncomfortable undertaking, but it’s necessary for the health of your business. To promote prompt payment and assist with cash flow, your quote should include interest clauses for payments that are overdue.
While quoting may initially seem like a daunting task, it’s crucial that you’re able to clearly and succinctly articulate your company’s worth to potential customers. Once you’ve developed a system for writing quotes, the process will get easier and easier each time you do so. If you follow the above tips (and avoid the mentioned pitfalls), you’ll already be off to a great start.
Original post by Bank of Queensland