How to Write a Professional Estimate

Estimates and proposals are critical parts of any contract-based business. The ability to accurately estimate a job and present that information to clients can make the difference between winning bids and losing to the competition. 

An effective estimate should be accurate, professional, persuasive, and prepared quickly. But that’s easier said than done, as preparing estimates can involve a lot of manual effort.

At Estimate Rocket, we’re experts at streamlining the estimate process. In this article, we’ll show you how to write an estimate and turn it into a professional proposal that will help you win more business. 

What’s the difference between an estimate, quote, proposal, bid, and invoice?

For starters, it’s important to get our terminology straight. These terms are often confused by contractors and clients alike, and using the correct names for different parts of the process can help ensure you don’t get your wires crossed. 

Estimate: The process of evaluating the job in order to arrive at a cost and timeline. The estimate process varies by trade, but may include on-site measurement, diagnosis of issues for repairs, or supply and labor costs research. In the end, the estimate will enable you to calculate your selling price and profit margin and prepare a proposal. 

Quotes and Proposals: These terms are often used interchangeably, although quotes can be verbal or informal, while proposals are almost always formal, written documents. The proposal is the client-facing version of your estimate. In addition to the price and timeline estimate, a proposal will contain a description of how your company will do the job and the services you will provide. It will also contain terms and conditions and contractual language. A formal proposal (or any document) that is agreed to and signed by both parties becomes a binding agreement.

Bid: When two or more contractors or subcontractors are competing to be selected for a project, their formal proposals may be referred to as “bids.” Bids enable clients to compare costs, timelines, and other factors side-by-side and select the best person or company for the job — the winning bid. This terminology is most commonly used in the construction industry.

Invoice: An invoice is a bill. It’s what tells the client what they owe and how to pay it, and is typically only prepared after a job has been accepted.

If you’re asking “how to write an estimate,” you’re probably imagining a proposal. In this article, we’ll provide tips for streamlining the estimating process and tips for writing a great proposal. 

Common estimate mistakes

Mistakes made in the estimating process might seem small, but they can come back to bite you. Estimate too low, and you might end up with slim profit margins or even lose money on a job. Estimate too high, and you might lose the bid to your competitors. 

Here are some common mistakes you should avoid while coming up with an estimate:

• Not being transparent about how you arrived at the estimate
• ‘Eyeballing’ costs rather than calculating them using measures like square feet or linear feet and counts of what will be done
• Underestimating labor or material costs
• Not adding enough gross margin

How to prepare an estimate

Now that you know what to avoid, let’s dive into the process of preparing a professional proposal that includes an accurate estimate. 

Understand the scope
“Scope” refers to the boundaries of the job. What exactly are you promising to do, and what are you definitely not on the hook for? “Scope creep,” or the tendency for jobs to grow past what the initial estimate accounted for, is one of the worst enemies of contract-based businesses. 

The estimate process should start with understanding exactly what you’re being asked to do. That means meeting with the client, asking a ton of questions, and taking good notes. 

Software can help you keep this information in order. With a tool like Estimate Rocket, you can take measurements and counts, describe the areas being worked on, and flag anything that might go beyond a standard job in terms of labor, materials, or equipment.

At the end of this meeting, you should be able to clearly define the scope of the job. This information will be included in the final proposal. 

Approximate the timeline
We’ve all had experiences with contractors vastly underestimating how long a project will take. You can stand out from the competition by not overpromising on a timeline — instead, you should calculate a completion date based on the specific factors of the job. 

By sharing this information with your client, you can build trust and manage expectations. 

Some tips for this process:

• Account for possible delays caused by common issues like permitting, supply slowdowns, and weather
• Consult your schedule to make sure labor resources will be available and not tied up in another project

Even if it’s not a binding deadline, it’s best practice to include an estimated completion date in your proposal. Some states even require you to state an estimated start and completion date.

Calculate your costs
This is the most important part of the estimate process. While you probably know exactly how to cost your jobs, here are some tips to help you improve this process:

• Use your accurate timeline estimate to calculate labor costs. Faster timelines might necessitate hiring subcontractors or additional labor to get the job done on time.
• Compare your costs to your predicted cash flow to help you determine whether the job is worth taking.
• Use software like Estimate Rocket to simplify the process of calculating the cost of each line item, including taxes.

Once you’re done calculating costs, include separate line items for materials and labor in your proposal. Depending on the job, you might choose to be more specific and include more detailed line items. Again, software will make this easier. 

Use a template for your proposal
The proposal document you send your client will reflect on the professionalism of you and your team, your attention to detail, and your level of organization. 

Even if it doesn’t have any real bearing on your ability to do the work, it’s important to make your proposals good-looking, easy to read, and error-free. 

The easiest way to accomplish this is to use a template. A template will speed up the process of preparing a proposal by saving you from starting from scratch, help provide a consistent experience for clients, and make it easy for anyone on your team to simply fill in the blanks from the estimate process. 

Additional items that should be included in your proposal template include:

• Your branding
• Your contact information
• Payment information, including methods and fees 
  

We get it: preparing estimates and proposals is far from the most important part of your job, and you’ve got a hundred other things on your plate

The good news is, you can save time, improve consistency, and win more business by using estimating software. Estimate Rocket includes tools for estimating prices and costs, and templates for preparing proposals. We even offer pre-built, customizable estimate forms for a wide variety of trades. 

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