Generally speaking, most customers or clients like to get an idea of how much they will need to spend before they purchase your product or service. This is a lot easier to estimate when thinking about tangible product purchases. However, in the case of service industries, this is sometimes where the challenge lies. And in most cases, this is where it is equally important for businesses to be able to provide some sort of an estimate that can help them secure the job. It’s tricky because at this stage as a business professional, you might not be quite sure of the exact cost yourself, and you’re afraid of quoting a price too high that will scare the customer away or a price too low that can result in potential profit loss. This ultimate guide will help you get a better understanding of how to create an estimate your customer can’t resist.

Start with a time line for completion of the job

The first step that goes in to working up an estimate is the most important as it forms the foundation for the later steps coming up. You want to make sure that your foundation is strong enough to base all other following steps on. So start by creating a time line for the job to be completed. Jot down all the steps that go into delivering the final service or product. Elaborate it into mini descriptions to make sure you’re not missing out on any step. Then follow this by putting in a reasonable estimate into the number of hours required for completing each job. Here again, make sure you give yourself enough time to comfortably complete the task while also taking into consideration inevitable unforeseen events. But make sure you don’t get too carried away and end up with something not so realistic. It’s about finding the perfect balance. It also comes with practice so don’t panic if the first few times you create an estimate for your customers, it seems like a really daunting task.

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After deciding on the number of hours, quickly work up the number of people that will be required to complete these stages. In many cases this will be a one man job, especially for startups and small companies. But again, set realistic goals and carefully consider whether you will need to add any independent contracts to the job or not.

Calculating labor cost

The first step in which you highlighted the number of people you will need to complete the job will help you create this estimate. If you do need to hire independent contracts, calculate how many hours you will need them for on each little task on the time line. From here on, work up how many hours you will need each independent worker to work. This should be carefully calculated in cases of large projects where you are looking at a small team on independent contractors. This might vary depending on the nature of the product or service you are offering. If you don’t need a full time independent contractor to work for you on the job, you might still be looking at outsourcing some services to another company. Again, if that is the case, look into the cost of these additional services.

Simply put, make sure in this step you full account for all those additional services you will need to pay for in order to ultimately deliver the final product or service your customer is paying for.

Figuring out the material you will need

Think of all the equipment and materials you need to complete the job your customer has requested. Do you have all the necessary equipment? Is there anything you need to purchase in order to complete the task? If you already have all the material that goes into offering this product or service, how much of it will you be using to complete this particular task? The quantity of it should help you work up a quick estimate of the cost going in for all the materials and equipment required for your job. This is highly dependent on the nature of your business. For some companies, they might be purchasing equipment and materials each time they get a new contact or job. For others, it might simply mean using a portion of their monthly or yearly supplies. Whatever the case is for you, work out a reasonable estimate of all the materials you will need.

Deciding on a profit margin

This is a tricky area as there are so many different factors that will help you decide what profit margin you want to have. But to keep things simple, the least you need to do, is work up the total cost for the project or job and then add something to it which can be anything from a 10% profit to a 100% profit. I always tell my clients this is something that really defines the type of business they want the public to see them as. If you have a lot of competition and find yourself struggling for customers, you might want to consider lowering your profit margins to lure in more customers and beat competitors. However, are you sure you want to be seen as the cheaper option? A lot of companies like to distinguish themselves from their competitors by saying they are different and better than them and hence they confidently charge a higher price. But of course make sure your product or service also matches the image you are trying to attain. If you want yourself to stand out as a better quality, more expensive option, make sure your products and services represent that image well.

Writing the final estimate to present to your customer

Giving an estimate to your customer is a lot better than verbally putting down a figure. Make sure you have some sort of template or software to professionally present this import part of scoring a client. This is your source for bringing in more customers and converting more estimates to real sales. Always make sure your estimate includes a full break down of all the tangible steps you highlighted in the first step. This will help your customer see what you are charging for and how the final figure was calculated. It erases all room for doubt in the customers head and gives you a stronger position. Finally, my last suggestion will be to always include an expiry date on your estimate.

These simple yet powerful steps can really help you improve your chances of converting an estimate into a sale.