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What Is a Price Quote? An Introduction for Small Businesses

May 29, 2024

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.

Key Takeaways

Quotes, unlike estimates, are legally binding and, when executed properly, can greatly help in protecting your business’s bottom line.
Quotes are also a way for you to prepare your client in advance for potential variable costs.
If you’ve clearly outlined your variable costs in your quote then you can more easily justify any additional cost increases.
Quotes are a tool that allows you to offer a detailed breakdown of costs based on a client’s individual needs.

In this article, we’ll cover the following:

What Is a Price Quote?
What’s Included in the Price Quote?
Price Quote vs. Estimate
Tips for Writing a Price Quotation
Conclusion

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.”

What’s Included In The Price Quotes?

There are actually quite a few details that go into making a professional price quote. Below you’ll find a short list offering a quick explanation for a number of the major categories.

A quote will include the following items:

Supplier’s business details: Basic business details, such as company name and address, that allow the business to be identified.
Client details: The client’s key information to ensure that the correct client is receiving the quote.
Quote number: A unique number that one can easily use to identify and reference the provided quote.
Date of issue: The precise date and time the quote was issued.
A list of services to be provided: A detailed list of the services that the quote is accounting for.
What services won’t be provided: A separate list outlines what the client should not expect from the business’s services.
Breakdown of costs: A projected breakdown of all of the major and minor costs associated with the project.
The total cost of the project: A final, easy-to-see number that highlights the project’s total cost.
Variations (extra costs): Any additional costs that may impact the project’s total cost, such as change costs that could drastically impact the project’s bottom line.
Timelines and completion dates: An accurate assessment of the project’s timeline toward completion.
Factors that may affect the completion date: A list of the most likely factors to effect a change in the project’s final completion date.
A place for the customer to sign their acceptance: A simple line for the customer to write their signature and thereby agree to the details contained therein.
Payment methods, if asking for a deposit: A short list of the various payment options accepted by the business.

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.

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 the 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, check out the FreshBooks Estimates Feature which lets you easily create and send estimates online.

What Is the Purpose of a Price Quotation?

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 labor 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.

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 potential clients with 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.

Price Quote vs. Estimate

Despite these terms often being used interchangeably, they actually have very distinct meanings.

If requested, a business will provide a client with a price estimate to give them a rough idea of what they might pay for a given service. An estimate can be compared to a rough sketch: It captures the general costs involved in a project, but it’s lacking in both detail and precision.

A quote, on the other hand, is a detailed assessment prepared by a business once they have a clear idea of the fixed and variable costs associated with a given project. They are far more precise and, most importantly, they are legally binding, unlike estimates.

Curious how your business could benefit from professional software dedicated to crafting client-winning estimates? Take a quick look at FreshBooks Estimating Software which focuses on saving small business owners time through handy, easy-to-use tools, such as the ability to quickly transform estimates into invoices.

Tips For Writing A Price Quotation

Writing accurate price quotations often comes down to a few simple skills. Here are just a few tips to help you get a handle on the process:

1. Gather All of Your Information

As tempting as it can be to offer a quote right away, your best bet is often to wait. There’s nothing worse than rushing to send a quote off and then only realizing later that one of your expenses wasn’t fully accounted for.

2. Be Professional

For larger clients, it’s standard practice to secure quotes from numerous businesses. Make sure your quote has a professional appearance and is free from grammatical and mathematical errors. You may want to consider using a professional price quote template.

3. Go Into Detail

Quotes are far more detailed than an estimate. Take advantage of this fact. Be sure to list the major and minor variables that may impact the projected price in order to protect your bottom line. Avoid making a fixed-price offer.

4. Make Your Terms & Conditions Clear

Don’t leave your clients guessing about key terms or conditions in your quote. They may be on a deadline and don’t have time to clarify your lack of detail. Make their decision an easy one by explicitly stating your terms and the conditions that need to be met. You can refer to our article on quotation terms and conditions samples to create your own, ensuring you cover all essential aspects.

Avoid Surprises with Freshbooks Estimates

Conclusion

Writing a concise and clear price quotation can be a major benefit to your business. A detailed price quotation allows potential clients to accurately assess your offer, which can significantly reduce confusion down the line. It can also help protect your business from pushback if some of the variable prices increase at the project’s conclusion.

We also looked at some of the major features of a well-written price quotation. For example, we detailed how items, such as factors impacting completion time and services not included, were important to clarify the exact nature of your offering. Remember: be clear, concise, and professional and you’ll be well on your way to writing a business-winning price quote. You can refer to our guide How to Make Quotation for creating a professional proposal.

What Is a Quote in Business?

A quote in business is a verbal or written promise by a supplier to provide certain products or services to a buyer. 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. 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.

What Is a Quote in Writing?

Both verbal and written quotes are legally binding for both the client and the small business providing them. Anything that’s considered an “offer” that’s then accepted becomes a legally enforceable contract under 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.

How do you give a Price Quote to a Client?

How you deliver a price quote to a client will depend on your relationship with the client in question. These days, many price quotes are delivered via email. With that said, in many cases, it might be advisable to hand deliver the price quote to the business in question or to arrange a meeting.

What is The True of Price Quotations for International Sale?

The true price of a quotation when it comes to international sales refers to the price of the quote reflected in the currency of the quote-receiving business. Be careful, however, as quoting in a different currency may expose your business to fluctuations in the relative values of the currencies being exchanged.

Kristen Slavin, CPA

About the author

Kristen Slavin is a CPA with 16 years of experience, specializing in accounting, bookkeeping, and tax services for small businesses. A member of the CPA Association of BC, she also holds a Master’s Degree in Business Administration from Simon Fraser University. In her spare time, Kristen enjoys camping, hiking, and road tripping with her husband and two children. In 2022 Kristen founded K10 Accounting. The firm offers bookkeeping and accounting services for business and personal needs, as well as ERP consulting and audit assistance.