What a quotation promises, and what an estimate does not
The word at the top of a priced document decides how much it binds you. A quotation is an offer that can be accepted into a contract at that figure; an estimate is a considered opinion about a figure that has not been fixed. Plenty of small businesses use the two words interchangeably, and most of the time nothing goes wrong — until a job overruns and the customer produces the piece of paper. This piece covers the difference, the parts of a priced document that prevent arguments, and the pricing arithmetic that decides whether the work was worth doing.
An offer, or an opinion
In most legal systems a quotation is an offer. Once the customer accepts it while it is still open, there is an agreement at that price, and discovering afterwards that the work is harder than you thought is your problem rather than theirs. That is not a trap; it is the point. A fixed price is what a customer is buying when they ask for a quotation.
An estimate makes no such promise. It says: on what we know now, we think it will cost about this. The final bill can be higher. It cannot be wildly higher without explanation, because a figure so far off suggests the estimate was not honestly made, but there is no fixed sum to be held to.
The practical consequence is simple. If the work is well defined and you have done it before, quote. If it depends on what you find when the floor comes up, estimate — and say clearly what would make the figure move.
Every price needs an end date
A price offered with no expiry is an open offer, and open offers can be accepted at surprising moments. A customer who finds a quotation in a drawer six months later and says yes has, in principle, accepted the price that was offered, whatever has happened to materials in the meantime.
Thirty days is the common default and is short enough to be safe in most trades. Where the cost is dominated by a material with a volatile price, or by a subcontractor's own quotation that expires sooner, the sensible period is shorter still. There is no obligation to explain why; a validity period is normal and expected.
The failure mode worth guarding against is the copied document. A quotation produced by editing last month's carries last month's expiry unless somebody remembers to change it, and nobody remembers. Deriving the date from the issue date removes the possibility.
Scope is what the arguments are actually about
Very few disputes are about the number. Almost all of them are about whether something was included. The customer assumed the price covered making good the plaster; you assumed it did not; both of you were reasonable, and there is nothing written down either way.
The cure is two paragraphs rather than one. Say what is included, in ordinary sentences, at enough length that a stranger could tell what was being bought. Then say what is not included, which is the half most quotations omit and the half that prevents the argument.
Exclusions feel awkward to write because they read as negative. They are not: they are the difference between a professional document and an optimistic one, and customers who have been caught before recognise and value them.
Optional extras, presented honestly
Real jobs come with choices. A better carcass material, a nicer handle, an extra socket, a lighting upgrade. There is a strong commercial temptation to fold these into one attractive figure or, worse, to include them silently and hope nobody asks.
The honest arrangement is to price them separately, list them clearly as optional, and keep them out of the headline total. The customer then sees both the price of what they asked for and the price of what they could have, and can choose. A total that turns out to have quietly included the upgrade is the fastest way to lose the trust the rest of the document was building.
There is a commercial argument for the honest version too. Optional items presented as choices are chosen far more often than optional items buried in a total, because the customer feels in control rather than sold to.
Margin and mark-up are not the same number
This is the most expensive arithmetic mistake in small business, and it is easy to make. Mark-up is profit expressed as a share of what something cost you. Margin is profit expressed as a share of what you sold it for. They are different numbers for the same transaction.
Add fifty per cent to a cost of one hundred and you sell at one hundred and fifty: a fifty per cent mark-up, but a margin of one third. Work on cost plus thirty per cent believing you have a thirty per cent margin and you actually have about twenty-three, which is a quarter less than you thought and is often the entire difference between a comfortable year and a worrying one.
Knowing which one you mean matters most when comparing yourself with others. Trade advice about typical margins is usually about margin proper; supplier discussion of mark-up is not. Comparing one against the other produces confident, wrong conclusions.
What a margin has to cover
Profit on a job is not the same as income. Out of it come the things that never appear on any individual quotation: the van, the insurance, the accountant, the tools, the quotes that were written and not won, the hours spent quoting rather than working.
Those unbilled hours are worth counting honestly. A trade that wins one job in three spends two unpaid estimating visits for every paid one, and if that is not built into the margin it is being paid for out of somebody's evenings.
This is why a thin margin on a large job is more dangerous than a thin margin on a small one. The overhead scales with the time the job occupies, and a big job at a low margin can lock up capacity that would otherwise have earned properly.
Deposits and payment stages
Asking for money before starting is normal, and customers expect it where materials have to be bought. A deposit that covers the materials is easy to justify and easy to agree; a deposit that plainly funds the profit before any work happens is not.
Setting out what is payable when, as a short table rather than a paragraph, removes an entire category of misunderstanding. The customer knows what is due on acceptance and what is due at the end, and so do you.
For longer work, staged payments tied to visible milestones protect both sides. The customer is never far ahead of the work, and you are never far behind it. The wording matters: a stage tied to something observable is enforceable in a way that a stage tied to a date is not, if the job has slipped for reasons outside anyone's control.
Numbering, and why it matters later
A reference number seems like bureaucracy on a two-person business until the first time somebody rings about a quotation from four months ago and cannot say which one. A short scheme with the year in it — a prefix, the year, a sequence — sorts naturally, restarts sensibly and is easy to read out over the telephone.
The same number should carry through to the invoice. Being able to put your finger on the quotation that produced a bill is the difference between a two-minute conversation and an afternoon of searching, and it is what makes it possible to look back at the end of a year and see which kinds of work were actually worth doing.
Keeping the ones you lost is just as useful as keeping the ones you won. The pattern in what was rejected is the cheapest market research available.
Presentation is part of the price
Customers comparing two quotations for work they do not understand will use whatever signals they have. A clear document with a defined scope, named exclusions, a validity date and a signature line reads as competence. A figure written on the back of a card does not, however good the tradesperson.
That is not an argument for elaborate design. Plain, well organised and complete beats decorated every time, and a document that is easy to read is easy to say yes to.
The last practical point is to send something the customer can keep. A PDF that they can open on a telephone, forward to a partner and find again in six months is worth more than a message that scrolls away. It also means that when the job is done and the invoice arrives, both of you are looking at the same piece of paper.