How to Write an Estimate: A Step-by-Step Guide

We all appreciate surprises such as coupons, perks, or a thoughtful thank-you note, but an unexpected bill that impacts our wallets — not so much. 

That’s why it’s essential for service providers, such as coaches, to accurately estimate service costs. Clients want to be able to review an estimate carefully, check it against their budget, and make sound decisions for their personal finances. 

So as a service provider, it's your task to offer the exact numbers possible. Here’s how to write an estimate representing your work and costs well. 

What is an estimate? 

A job estimate, or simply an estimate, is a document that outlines a project or service’s scope and duration as well as its projected cost.

While using the terms “estimate” and “quote” interchangeably may be tempting, the two documents are not the same. A quote is a legally binding document that includes even more detailed descriptions of the scope of work. As quotes set a firm dollar amount and parameters on a project, they often also contain an expiration date. The service provider isn’t legally held to honor an outdated rate if the client takes time to confirm their interest. 

So is an estimate legally binding, too? Not really. A job estimate is a projection, and while it should be accurate, you retain the right to change the information therein as needed. The document gives a client an idea of what to expect, and it’s wise to set realistic expectations and start your professional relationship right.

Why are estimates essential? 

Since an estimate isn’t legally binding, you must provide an official quote later. So why provide an estimate in the first place? That’s because job estimates are an excellent opportunity to familiarize clients with your services and pricing without subjecting them to price quote pressure. Although a price quote covers much of the same information as an estimate, estimates do so without putting the client in the position of committing to the services. 

Here’s what an excellent estimate can do: 

• Set clear expectations: Without pinning down exact dates or final numbers, an estimate can gauge a project’s terms, services, and costs. For example, an estimate might represent a project that costs $2,027.89 at $2,000. These projections and actual figures to come in the price quotes are similar enough that there’ll be no major surprises for the client. Clear expectations prevent future misunderstandings. 
• Help you plan: Running the numbers on a potential project serves as a financial estimate for your client and demonstrates whether the project is economically viable for you. Should the client accept your offer, you’ll have already evaluated how much time and resources you’ll need to invest in the services and what you stand to earn. 
• Generate trust: While your clients trust you and your services, providing solid information in writing fosters credibility. Yes, estimates aren’t official quotes, but they’re formal enough for the client to understand your offering and fees. 

{{mid-cta}}

How to create an estimate

Writing an estimate is one of the first steps to securing a new client or project. All you need to do is combine your excellent preparation and presentation skills. Here are seven steps to guide you: 

1. Gather all project details: Talk to the client about their needs to understand what services they need. A coach, for example, might have a conversation with a potential client to determine their key goals, such as quitting smoking or applying for a promotion at work. This information helps you choose which of your services best aligns with the client’s needs.  
2. Determine the work’s scope: Every project is a bit different, and depending on your industry, this step may have many moving parts. Be as specific as possible to ensure the client can access the most information. For example, if you’re a construction contractor, gathering project details may require approximate (or accurate) pricing from plumbers, woodworkers, and electricians, besides collating material costs, labor hours, etc. Or, if you’re a coach, you’ll have to figure out what service package you’ll offer, such as a 12-session optimal wellness module. 
3. Estimate each task’s time and cost: Yes, you have to determine the overall project’s costs but don’t forget to break it down by each stage. If involving third parties, like a woodworker, add your fees to theirs. But if you’re the only person providing services and earning from this project, it’s essential to consider your overhead –– such as material costs, rent, and tech tools –– as part of your fees.
4. Add up the costs, and calculate the total estimate: Calculate how much you should charge your client by determining project costs, overhead, and profits. For example, if you’re a contractor remodeling a bathroom and labor, materials, and overheads cost $3,000, and you want to charge $500 as profit, your estimated fees should be $3,500. 
5. Include a detailed breakdown of costs and services: While you don’t have to show your client how you arrive at all your numbers (no one needs to see your overhead calculations, for example), you should outline every expense the client has to pay for. For example, a contractor should show the client a line-item estimate of how much bathroom tile and the plumber’s labor will cost. A coach or similar service provider should demonstrate how much the work costs per hour, session, or another unit. 
6. Write up your terms and conditions: Ensure the client understands the engagement’s rules. Model your estimate terms and conditions on a sample like this: “This document provides estimates, not exact costs for the services. Additional services not described in this document will be subject to a new estimate and fees.”
7. Send the estimate to the client: Email the client estimate with a letter or note explaining the document and the next steps. Include information that could help the client understand your services better, such as links or longer descriptions on your website.

Tips for a polished estimate

Before hitting send, take a few minutes to review if there’s potential to improve your estimate. Here are a few tips to help you take your document from good to great: 

• Provide options: Say you’re a coach who offers three different session packages that align with your client’s goals. Offer all three so people can choose the best option for their budget and needs. 
• Follow up: After the client has had time to review the estimate, follow up and offer to answer any questions. Clients may hesitate because they don’t have all the information they need or can’t understand part of the estimate. A chat to clear up questions could seal the deal.
• Say thanks: Thank the potential client for considering your services. This is an opportunity to remind the client of the human side of your operation and acknowledge you appreciate their business. 

Build a better business with Practice

You’re a master of your craft, but there’s so much more to running a successful business.

Head to The Practice Blog that contains a wealth of educational materials to help you tackle administrative tasks, such as writing estimates, marketing and branding your company, and protecting your livelihood with contracts and insurance. You can even learn what to do if you feel stuck in your current career and want to take on a new challenge.

And once you set a solid client base, you’ll need a customer relationship management (CRM) tool to manage client data. Check out Practice’s Client Management Software that allows you to send files and contracts, receive payments, and store data securely –– all in one place. Try it today.