Sep 26, 2019

The Simple 5-Step Process to Creating an Estimate

Creating professional estimates is one of many characteristics that separate the experts from the amateurs.

If you work as a freelancer, contractor, or own any business offering personalized products and services, learning to build credible estimates is a must-have skill. Honest, reliable estimates lead to happy repeat customers. Erroneous estimates lead to confused and angry one-time buyers. Healthy, solid businesses are built on satisfied clients—not disgruntled customers with now-emptier wallets.

Put Yourself in the Customer’s Shoes

Estimates help you evaluate each project’s demand and value—but they also help your clients decide whether they want to work with you or not. Put yourself in the customer’s shoes and imagine what an estimate does for them:

  • Helps your customers compare your offer to other offers. If you provide high-quality work at a fair price, then this comparison is advantageous for your business. If you don’t…well, you have other things to worry about.
  • Enables your customers to evaluate their budget. Customers need to have accurate information to determine if a project or product is worth their money. If they need their car repaired but can’t fork up $3,000 to get their transmission serviced, they may decide to forgo a vehicle for a time. Or they may just choose to buy another car instead.
  • Provides your customers with details to understand big-picture costs. Your customer likely isn’t an expert in your business—that’s why they’re coming to you. If you offer quality SEO content, your customer might not understand the keyword research, competitor analysis, content examination, and intensive writing that the project entails. Without a fair and practical estimate, they won’t know the nuances of projects under your craft.

5-Step Process to Creating Estimates

Now that you’re wearing the customer’s shoes, let’s begin building an estimate. Follow this 5-step process to make sure every estimate you send is reliable and confusion-free.

1. Evaluate the Job

Take some time to think about the job to be done. Ask questions so you can understand the scope of their expectations. How long do you think the job will take? What materials or equipment will you need? Will you need extra workers? How many hours a week do you have the bandwidth to commit to this job? What rates are your competitors charging?

Once you have a good idea what the job will look like, it’s time to communicate this information to the client.

2. Provide a High-Level Overview

Estimates aren’t nearly as meticulous as quotes or proposals, but they should still provide the client with the predicted costs and reasoning. Again, put yourself in the customer’s shoes. If you were looking to build a treehouse for your kids, imagine your thought process.

One contractor offers: “$1,000 for the entire project, and I think it’ll take me about a week.” Another contractor offers: “I think I’ll need another pair of hands to help, so our combined labor costs will be around $500 if we can finish it in under a week. And I think the price of wood and other materials will be close to $500. Total, I believe we could finish the entire project for about $1,000.” Which estimate do you prefer? 

No, your estimate doesn’t need to get into the nitty-gritty with the cost of wood, nails, primer, paint, and necessary tools. But, it should include an educated ballpark figure of what the costs will be for you to complete the project.

3. Present Alternative Estimates for Different Scenarios

Don’t just offer a single estimate. Provide a few options to give your clients the freedom to explore alternative solutions and pricing. If you were building the treehouse, you’d provide the full project estimate, but then you might include a few other scenarios. Maybe you could lower the price and forgo painting. Or perhaps you could raise the price and offer to attach a slide to the platform.

4. Include Necessary Disclaimers

Make sure your customers understand the subtleties of an “estimate.” An estimate is not legally binding. State this upfront (preferably in ALL-CAPS BOLD WORDS) so your potential customer understands that the actual price may differ from the initial estimate.

Help the customer understand why fluctuations in price may occur. You don’t necessarily have to go into detail about the individual contributing factors, but the more your customer understands, the less surprised they’ll be if the actual price and estimate differ.

5. Convert Your Estimate to an Invoice

Once the customer accepts your estimate, it’s time to turn it into an invoice for billing. This step will help simplify both your pricing and billing procedures. With bookkeeping software like Sunrise, you can get your estimates approved online and converted to an invoice with a single click. Quick and easy.

The Bottom Line on Creating Estimates

Estimates are supposed to be simple. Use them to manage client expectations without overwhelming them with too much detail. Provide the necessary information, include disclaimers, and create a positive working relationship. Don’t make it more complicated than it needs to be.

To protect your business and build healthy customer expectations, you should create an estimate for every new job—even if it’s not a new client. Consistently create reliable estimates to start fostering professional relationships and building a strong base of satisfied repeat customers.

About the author

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Jesse Sumrak
Jesse Sumrak is a Social Media Manager for SendGrid, a leading digital communication platform. He's created and managed content for startups, growth-stage companies, and publicly-traded businesses. Jesse has spent almost a decade writing about small business and entrepreneurship topics, having built and sold his own post-apocalyptic fitness bootstrapped startup. When he's not dabbling in digital marketing, you'll find him ultrarunning in the Rocky Mountains of Colorado. Jesse studied Public Relations at Brigham Young University.

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