What Is a Quote?
At times, it gets necessary for businesses and individuals alike to provide a quote to proceed with a deal. This is really important because a prospective customer is in their research phase and looking at the options available. When providing a quotation, there are quite a few things you need to take care of.
Below, we’ll cover:
- What is a Price Quote?
- What is the Purpose of a Price Quote?
- How to Write a Price Quote?
What is a Price Quote?
A price quote or price quotation, as defined by Investopedia, is the most recent price at which a transaction or investment is expected to be traded. The element of “most recent price" is crucial because your business might have charged a different price the last time you had similar transactions. The current price you charge might be the same or different. Therefore, referring to the old price for upcoming transactions wouldn’t be feasible.
Generally, you’d provide a quotation in general, written format. But if the buyer is comfortable with verbal communication and the project at hand is less complicated, then a verbal quote is just fine. But you should always go for a written quote wherever possible.
Price quote is also the agreed price, which, once fixed, cannot be changed later unless there’s a breach in terms and conditions (more on that later). As opposed to an estimate, which is a variable, a quote is most likely fixed unless you quote your price in the form of a range.
Finally, a quoted price is limited only for a certain period of time, after which it becomes invalid. This can be hours, days, months, or years. Once expired, a new quote must be issued to proceed with the deal or transaction.
What is the Purpose of a Price Quote?
The main reason a buyer asks for a price quote is to prospect the sellers available. He then compares and selects the one that’s within his budget range. But the cost is not the only factor he looks at. Along with cost, the value offered and terms and conditions are also taken into consideration before finalizing a seller. Therefore, you must balance the price-value equation.
The second purpose of a price quote is accountability. Once a seller offers a quote, and a buyer accepts it, then it’s liable for the seller to provide the goods or services at the said quotation. It cannot be changed quickly and shouldn’t be. Otherwise, the buyer has the right to terminate the transaction or move to court. That’s also the reason written quotation are better than verbal quotations.
From a seller's point of view, a price quote is simply a figure to let potential customers know what the cost of the goods or service provided is.
How to Write a Price Quote?
A quote price is simply a figure. So writing it down is not difficult, but arriving at that figure is. In this section, we’ll discuss how to quote appropriately and the things you must take into account when quoting a price to a potential buyer.
Cost of the product/service
The first thing you need to consider is the cost of the product. How much is it going to cost to produce? Are there going to be transportation cost? Labor cost? Storage cost? You need to factor in all the costs that are associated with the product or service you provide.
In the service sector, the cost often varies with the buyer’s requirement. Therefore, you must have a good understanding of their requirement before you can provide a quote. When calculating the cost, you may also calculate the variable cost, the ones that can change with time.
Calculate your margins
Every for-profit business exists to make profits from the goods/services they offer. Therefore, you need to calculate your own margins before you can provide a quote to the buyer. This can be 10%, 20%, or even 100% of what it costs to produce the good.
After you’ve calculated both, you can prepare a price quotation form from scratch and use a quote template that’s available online. This template has all the necessary fields like Quote Number, Company Name, Item, Description, Cost, among other details. You just have to download it and fill in the blanks. Not only does this saves time, but it also makes the quotation much clearer for the buyer to go through.
Depending on the nature of your business, you can add additional fields like:
- Business details
- Cost of production and variable cost
- Date of issue
- Timeline and completion dates
- Payment methods
- Miscellaneous
- Terms and conditions
Finally, it’s highly recommended to include terms and conditions either at the bottom of the quotation form or at the backside. It should cover when the price is likely to change and what obligations the buyers and sellers are undertaking by agreeing to the transaction. This is to hold each party accountable for the transaction. In case of a dispute, lawyers and law institutions will look at this to determine who is right and who is wrong.
FAQ
Here are some frequently asked questions on price quotation and their respective answers.
What is a Quote in a business?
A price quote is generally a price at which the seller intends to sell his products or services to the buyer. For the buyer, it’s a way to know what he/she is expected to pay for the goods or services .
How is Quote different from an estimate?
A quote once issued is fixed and cannot be changed, unless otherwise stated. It is also exact. An estimate, on the other hand, is a price range where the price of the goods and services can change.
Is a Quotation required for the products sector?
Products, especially mass-produced ones, come with a price tag. So they don’t necessarily need a quotation. But if the products are sold in bulk to a potential buyer, then the seller can issue a quote to let the buyer know what he should expect to pay.
What is a Quote in Writing?
A quote in writing means a seller provides a quotation in written format, especially in a well-formatted template.
Is it safe to use ready-to-use quote templates that are available online?
Yes. They are safe and legally compliant. Just ensure to download and use templates from verified sources like the invoice software WeInvoice.
If you need to provide a quote to your prospective client and are looking for suitable templates, WeInvoice is here to help you out. Explore our wide variety of templates now.