How to write a commercial quote
The daily work of many teams involves creating quotes. This document not only sets the price of a transaction, it also serves as a tool for opening negotiations, which makes the way it is drafted crucial.
Let’s look at how to put together a quote that does everything it is meant to do.
The two types of “presupuesto”
Before getting into the subject, it is worth clearing up an ambiguity, because the Spanish word «presupuesto» has two very different meanings in business.
Commercial quote
It is a binding commercial document in which a supplier tells a customer the price of a product or service, along with its scope, description and other details of the engagement.
Customers typically accept it by signing. For example: «I took the car to the garage and they gave me a quote of €1,200 for the repair».
They are essential so the customer knows what something will cost before committing to it, and so they can compare offers from different suppliers.
Financial budget
It is a planning tool in which different sums of money are set aside to be used across various spending categories.
For example: «My company’s budget this year sets aside €12,000 for marketing and €15,000 for transport».
They are used to allocate a company’s financial resources to specific tasks without exceeding what was planned, and they are usually drawn up at the start of each year as an annual forecast.
In this article we are talking about the first one: the commercial quote.
Why the commercial quote matters
To start with, a commercial quote is a binding commercial document in which a supplier tells a customer the price of a product or service, along with its scope, description and other details of the engagement.
This type of quote serves several purposes at once:
- Communicating costs. It sets out the costs associated with a product, job or project, so the customer understands what is included and how much it will cost.
- Negotiation. When customer and supplier need to reach an agreement on costs and scope, the quote is the starting point.
- Customer approval. It acts as a formal document requiring acceptance: the signature indicates agreement with the costs and terms.
- Starting a job. When the customer signs, the supplier can plan their time and get the agreed work under way.
- Record. It documents the agreed details and serves as a reference for future queries or for resolving disagreements about what was agreed.
So a commercial quote is also a key communication and negotiation tool in the relationship with the customer. To do all of this effectively, it is essential that it is well written and includes a few must-have elements.
Steps before creating the quote
For the quote you write to achieve its objectives, some preliminary research is essential.
1. Know your customer
The first step when drafting a quote is knowing who you are writing it for. Is your customer a company? Or an individual? And what do they need your services for? Bear in mind that every customer has unique preferences and needs, and the better you know them, the better you can communicate with them, tailor your products or services to their needs, anticipate any negotiations that may come up and spot opportunities to improve.
What is more, there is nothing like knowing your customer to earn their trust and build a relationship that benefits both of you in the long term.
2. Set your prices
When setting prices for your products and services, there are a few criteria to bear in mind. To start with, based on your fixed and variable costs, you need to know what your work is worth and, on top of that, set the profit margin you want. When doing so, studying the competition and their prices is essential.
In this situation there are two mistakes to avoid. The first is setting a price well above the market rate. If you go down that road, it is important to be clear about the added value your product or service has compared with the competition, so you can justify the increase. If you cannot, you will probably lose a lot of opportunities.
The second case is setting a price that is too low. This can create a mistaken impression of your product: if it is positioned well below the competition, it can lead the customer to think the quality is inferior. It also carries the risk of not covering your costs.
In short, when setting prices you need to know your expenses, the value of your work and your competitors like the back of your hand.
How to write a quote
Now it is time to write the quote, and it is essential that it is clear, concise and detailed. To achieve that, a quote cannot do without the following sections:
Customer details
The first thing the customer should find when they open the quote is their basic information: name, the project they are contacting you about, tax ID or national ID number and so on. That way, right from the start, the customer knows it was written for them.
Company details
The quote has to include, wherever you like to place them, the details of the service provider: name or registered company name, tax ID and registered address as a minimum, though you can also add other useful details such as an email address or phone number.
Details of the product or service
When the customer reads the offer for the first time, they need to know exactly what they are paying for. To achieve that, the quote must include every item you need (the product or service, materials, hours of work and so on) explained simply and understandably for the buyer, along with the quantity of each item, its unit cost and its total.
Key dates
In a quote, it is worth considering several dates:
- Validity (or expiry) date. It is important to state how long the quote is valid for. The standard is usually between 3 and 6 months, but it can be adapted to whatever you need. This date is usually included in every quote.
- Start date. Depending on the type of quote you are drawing up, the customer may need to know when the project would start if they sign.
- Review dates. You can also include the dates on which the quote will be reviewed and adjusted (if necessary).
Amount
The amount must include the final price the buyer will pay, taking into account the price of the product or service excluding VAT, the VAT rate applied and the total amount of the quote.
Payment methods
Before establishing payment methods, it is important to think about what your company needs: do your services require buying materials up front? Do you need help from third parties? You should be clear about all this, because depending on it you may need to include advance payments in your quotes.
Once that is clear, it is time to establish whether payment will be by bank deposit, transfer or cash, and whether it will be a recurring or a one-off payment.
These elements are commonly found in quotes. There are, however, many others you can include to make your quote clearer, such as legal terms, explanatory notes, a summary of the benefits of hiring your services and so on.
What a quote looks like
Now that you know the sections your quote should include as a minimum, it is time to structure all this information so it is as clear as possible. In general, a quote starts with a header, followed by a table specifying the following information for each item:
- Description.
- Unit price.
- Number of units.
- Amount.
- Discount (if applicable).
- VAT rate.
- Total.
At the bottom of the quote there should be the sum of all the totals, and when it comes to sending it, it should be sent as a PDF. When you handle a couple of quotes a month you can do it with Excel; when this is a regular task, however, there are other tools that automate the process and let you create as many as you need in minutes.
How a quote is accepted
Once both parties are happy and in agreement with the quote, it is time for the customer to accept it so they can receive the product or start enjoying the services. The usual way of accepting a quote is by signing the PDF itself.
Although in many situations the signature can be done by hand, that is not the most efficient approach, as it can delay closing the sale. To avoid this, an electronic signature brings numerous benefits, such as control over the whole process, the ease with which the customer can sign (even from their phone!), the saving in resources and so on.
As you have seen, creating a quote manually takes a lot of time and can end up delaying the sales process. If you have quoting software, however, you will automate much of the work and close sales in a matter of minutes.