Quoting Best Practices for Your Service Business
You can provide the best service in your business niche and still fail to generate a profit because of one significant factor. You failed to price the value of your business services accurately.
Whether you sell a product or offer a service, you must present prices to every customer. Some businesses, such as restaurants and beauty salons, present a menu of price options that cover all products and services. Prices never change, unless customers present coupons or other promotional items to receive price discounts.
On the other hand, many field service businesses must present unique price proposals to customers that depend on myriad pricing factors.
This short guide outlines how your business should present price quotes for services.
A Price Quote is Not an Estimate
The first thing that service business owners need to understand involves knowing the difference between a price quote and an estimate.
A price quote represents a fixed price that legally can’t change once a customer accepts a contract. For example, a heating and cooling business presents a price quote to service an air conditioner. Once the customer signs on the dotted line, the price quote becomes legally binding.
A price estimate is simply a guess as to what the service costs and thus, has no legal standing. Use price estimates to hone your final price.
First Things First
Quoting best practices for your service business begins by creating a price list for all of your services. Make sure to research the cost of materials to ensure pricing accuracy. This list provides you with the framework to tailor individual projects.
However, you can’t create a price list one time and leave it to collect dust. You must constantly update the price list to account for changes in your services, as well as inflation. Moreover, be sure to date your price list and include offer expirations. Finally, clearly define any postage and delivery costs to ensure customer satisfaction.
Next Comes the Estimate
A price estimate provides the foundation for presenting a price quote. Every price estimate that you submit must include the following:
- Price of the Service
- Itemized Expenses
- Project Details
- Payment Terms
- Project Conditions
Make sure that you and the customer both sign a price estimate, even though the estimate doesn’t represent the legally binding price of a service. Every price estimate that you submit must include a disclaimer that the price estimate can change at any time, for any reason.
How to Prepare a Written Price Quotation
Any price quotation that you submit to a customer must include crystal clear requirements for the work provided. This means you must detail the time, labor, and most importantly, the materials required to provide a service. A price quotation legally binds you to a set figure for material costs. Therefore, you must research material costs to present an accurate quote that generates a profit. Price quotes also ensure that the service you provide doesn’t evolve into a more complicated project.
Here’s what you include in a price quote:
- Final Service Price
- Business Contact Information
- Length of Contract
- Project Schedule
- Expenses Breakdown
- Payment Terms
Don’t forget to obtain a written confirmation for customer price quotes to ensure that each customer is satisfied with the details of the service that your small business provides. A paper trail protects you during any legal skirmish that involves a service contract. Never perform service work without a legally binding written confirmation from each customer.
Public Sector Price Quote
Most public sector contracts require price tenders, with how you price your bid becoming the most important component of the price quote. Each public sector customer provides instructions on how you should submit the costs of a service.
Some of the cost considerations include the following:
Service tenders submitted for public sector projects require a detailed breakdown of costs during each project stage. Even if a public sector client doesn’t ask for cost breakdowns, you should submit a detailed service cost list to prove that your service offers the greatest value.
Setting a price for a public sector service tender presents challenges that you don’t face for writing up private sector price quotes. For price tenders, you don’t have a precedent for referral, since each public sector service project presents unique parameters. Remember that quality matters more than the price for public sector price tenders.