Quote, Estimate, Bid and Proposal: How are They Different?
Quotes, estimates, bids, and proposals — they all pretty much mean the same thing, right? You might be surprised to learn that they’re actually very different. Each comes with its own benefits to help your service business run smoothly and efficiently.
Whether you send a quote, an estimate, a bid or a proposal to a client is affected by a variety of factors. To make sure you’re sending out the right numbers at the right times, we’ll break down the key differences in this guide.
Quotes vs. estimates explained
While the terms “quote” and “estimate” are often used interchangeably, they’re technically two different things for a service business. The next time you’re thinking of quotes vs estimates and wondering which one you need to use, remember this: a quote is a determined price and an estimate is a ballpark price.
READ MORE: Should contractors charge for quotes?
What are quotes and when should you use them?
Quotes are typically fixed prices. A quote is based on specifics about the job, like the size, and costs for materials and labor. They’re unique to each client and job site.
Quotes are typically provided after you visit a job site.
When you provide a quote to a client, you should already have a thorough understanding of the scope of work, which allows you to provide an accurate price to a client.
Quotes are only valid within a specific timeframe, and usually include:
- Specific costs for labor, materials, and any additional charges such as equipment rental
- A timeline, including completion dates, if relevant
- Information about the client and job site
Quotes and invoices work together in that the price you provide on a quote is often the same as the price on a client’s final invoice.
The next time you’re putting together a price quote for a client, remember to use a quote:
✔️ Within 24 hours after you’ve visited a job site
✔️ To inform your invoices after a job is done
✔️ Only when you have enough information to accurately price a specific job for a specific client
Here’s an example of a quote that was created using Jobber’s quote management software:
What are estimates and when should you use them?
Estimates are meant to be used as a ballpark for a prospective client and don’t have to include a specific price, like equipment costs. They can be made using a standard price list and don’t necessarily reflect any client- or job-specific considerations.
In terms of when you send them, estimates are often provided before you visit a job site.
Estimates can change based on project scope and variable costs like labor and materials. They’re a guesstimate of the approximate costs of a job, excluding considerations such as the condition of the property or actual material costs.
While quotes inform invoices, estimates inform quotes. Use an estimate when:
✔️ A client contacts you about a job to ask for general costs to help determine a budget
✔️ A client asks for a price before you visit a job site
✔️ You aren’t sure about certain factors related to the job, like the amount of time it will take or if specialized skills or services will be required
What’s a bid?
Bids are most commonly used for commercial and construction clients. Typically, the prospective client provides a detailed overview of a job and this information is made available to a number of general contractors.
The general contractors determine how much it would cost to complete the job and submit a bid to the client. The client selects the winning bid based on factors such as the price, timeframe, and examples of past work.
Bids tend to be for large-scale, long-term projects and include more information than quotes or estimates. For example, they may have a specific timeframe for each separate stage of a project or details about material suppliers.
Depending on the clients you target and the type of service business you have, you may not need to use bids at all.
What’s a proposal?
Proposals are similar to bids, but they can be used for either residential or commercial clients. Often, proposals are used when a client is meeting with multiple service businesses to determine which they want to work with.
A proposal is sort of like a mix between a quote and a sales pitch. It needs to detail pricing, showcase your value, and prove that you’re worth hiring.
In a proposal, you should include:
- An itemized quote with detailed pricing
- A project timeline
- Testimonials from previous clients
- Examples of comparable projects you’ve done in the past
It’s important to make sure that your proposal demonstrates how your service business will provide the most value in meeting client expectations. As in, what makes you stand out in your market. For example, do you offer the most competitive prices in your area, or do you have a lot of experience working with similar clients?
Unlike quotes, estimates, and bids, a proposal is meant to help you stand out compared to the competition and encourage a client to pick you.
Proposals are most common for larger projects and are used when:
✔️ A client tells you they’re getting quotes from multiple service businesses
✔️ A client asks for a formal proposal after you visit a job site
✔️ You really want a job and want to use a professional proposal to tip the scales in your favor
Proposals aren’t typically necessary for average jobs, like seasonal landscaping or biweekly house cleaning for a residential client.
Making quotes, estimates, bids, and proposals work for your business
While quotes, estimates, bids, and proposals are all separate tools you can use to win jobs, they can also work together to help you organize and run your service business effectively.
Where estimates offer a quick response and general ballpark, quotes provide solid numbers and opportunities to upsell additional services. At the same time, bids increase your chances of winning commercial clients and proposals can help you to land bigger, more competitive jobs.
Pay attention to what a client asks for to determine which is the best match for their needs. For example, if a client reaches to ask for a general ballpark number on a service you offer, provide them with an estimate. Alternatively, when a client asks you to visit the job site and lets you know that they’re reviewing your competitors as well, a proposal may be your best bet.
Make sure you approach each job individually and decide for yourself which approach is the best fit for your business, the job, and the client.
This post was originally published in September 2020. It was updated in November 2021.