What Is a Price Quote? An Introduction for Small Businesses
A price quote delivers a fixed price for a product or service. It is given to a client or customer by a supplier and can be either written or verbal. The quoted price is only valid for a certain period of time and can’t be changed once the client accepts it. The price may be subject to certain terms and conditions, according to FreshBooks.
In this article, we’ll cover:
What Is a Price Quote?
A price quote is a document or verbal communication that gives a fixed price for a project. A quote is given to a potential buyer from a supplier and is also known as a “quotation” or simply a “quote.”
A quote’s price is only valid for a limited time. For example, a quote might say: “valid for 60 days.”
A quote will also include, according to Business Queensland:
- Supplier’s business details
- Client details
- Quote number
- Date of issue
- A list of services to be provided
- What services won’t be provided
- Breakdown of costs
- Total cost of the project
- Variations (extra costs)
- Timelines and completion dates
- Factors which may affect the completion date
- A place for the customer to sign their acceptance
- Payment methods, if asking for a deposit
Here’s an example of a simple quote:
Source: NALDZ Graphics
Quotes are common in the construction industry and also for service-based businesses that provide custom jobs. No two projects are the same, which is why these companies can’t use a standard price list and instead need to create custom quotes, according to Nibusinessinfo.co.uk.
Quotes are more concrete than estimates, which only give approximate prices. And when a client accepts a quote, the supplier must stick to the quoted price and complete all tasks included in said quote. If the supplier does more work than expected, they still need to charge the same price.
If you expect a project will eventually require more work than written in the quote, it’s a good idea to include terms and conditions that detail what additional charges will apply.
In order to prepare the best quote possible, talk to the client first about what they want and expect from the project. That said, a quote doesn’t need to be overly detailed. If a client wants a detailed quote, they are probably actually looking for a bid or proposal.
Or you may want to use an estimate instead since it isn’t binding upon acceptance and better accommodates unforeseen events and surprise costs. For more information on estimates, this article has all the details. FreshBooks has an estimates feature that lets you easily create and send estimates online.
What Is the Purpose of a Price Quote?
The purpose of a price quote is to help protect businesses from fluctuating prices. This is why a quote’s price is only valid for a certain time, according to FreshBooks.
While labour costs might be fixed, the cost of materials can certainly fluctuate (depending on the industry). It’s important to analyze all your costs to see which are fixed and which may change, according to Nibusinessinfo.co.uk.
- For example, a catering company has to deal with changing ingredient prices. Its quotes are only valid for 30 days so that price fluctuations for seasonal ingredients won’t affect them.
The purpose of a quote is also to provide customized pricing for custom jobs. This is common in industries like construction where each project is unique. A supplier can give a more accurate price to a client while also making sure they’ll turn a profit given a project’s specific needs.
People also ask:
What Is a Quote in Business?
When you think of the word “quote,” you might think of a saying by a famous person. For example, a quote by Albert Einstein is: “Strive not to be a success, but rather to be of value.”
On the other hand, a quote in business is a verbal or written promise by a supplier to provide certain products or services to a buyer, according to Business Dictionary. The supplier usually asks for a quote first before a buyer prepares one. A quote may include terms and conditions that qualify the final price and account for unexpected changes in the project timeline or cost. If the buyer accepts the quote, the quote becomes an agreement that is binding for both buyer and seller.
What Is a Sales Quote?
A sales quote (or “sales quotation”) is like a price quote but is used specifically by a supplier to quote products to a potential buyer. A price quote could be for either products or services or both. A sales quote lists products with the corresponding quantity and price for each, according to Megaventory.
It can also include discounts, product numbers and product descriptions, plus any applicable taxes and terms and conditions of sale like payment terms.
A sales quote can either be accepted by the buyer or rejected. If accepted, a sales order is generated from the sales quote. The sales order has the same products, quantities and prices as the sales quote.
Here’s an example of a sales quote:
What Is a Quote in Writing?
Both a verbal and written quote are legally binding for both the client and small business providing it. Anything that’s considered an “offer” that’s then accepted becomes a legally enforceable contract under law, according to DBL Law.
However, it makes more sense to put a quote in writing both so you and the client can refer to the promised prices and services once the project is in progress and also to protect you if there are any legal issues down the line. Drawing up a detailed formal written quote also lets both parties revise their obligations before the quote is accepted so both sides are comfortable with what they’re promising, eliminating problems down the road.
To put a quote in writing, it’s helpful to use a template. This article has a number of quote templates for various industries.
Here’s an example of a written quote for a product:
Here is an example of a written quote for a service: