Should You Offer Free Estimates to Your Customers?
Should you offer free estimates or charge for them?
This has been a long-standing debate in the field service industry. If you have been in the business for long enough, you must have come across several field service companies that offer free estimates to their customers. While this is generally regarded as an effective marketing strategy by many companies in the field, there are potential risks involved as well. On the other hand, companies that deal with large, complex projects with a higher price tag often charge a fee to provide an estimate. And they claim that it is essential to mitigate potential risks since the projects require more consideration.
This brings us to the dilemma once again. Should you or should you not charge a fee for providing an estimate to your customers? One cannot deny the importance of estimates in ensuring customer acquisition and retention. So, what is the standard market practice here? Well, there is no easy answer. Let us take a closer look at the various aspects of how to do estimates and try to understand whether charging a fee for estimates is a smart move for your business.
Table of Contents
1. What is an Estimate?
An estimate is a probable cost of the work, derived by mathematical calculations based on the measurement of quantities of various items of work involved in the work. The purpose of estimating is to determine the cost of a project before you actually do the work. It is typically created during project initiation and/or planning and takes the project’s scope, deadlines, and potential risks into account. In order to calculate how much do estimates cost, you need to consider the elements that it includes. Generally, you must take into consideration the following aspects while creating estimates:
- Labor hours
- Cost of materials
- Outsourced labor (technicians)
- Direct job expenses
- Indirect costs (overheads)
- Labor availability
- Variable job conditions
2. Why Estimates are Important?
Every customer has a budget and wants to know if a project is worth the costs before they invest in it. This is why estimates are considered the most important competitive advantage to secure more deals for field service businesses. If you can come up with a comprehensive break-up and overall cost that suits your customer’s budget, you are more likely to close the deal. An on-site estimate gives your customers a general idea of how much time, effort, and money it’ll take to get the job done. This also makes it easier for you to build a feasible project budget and plan so you can set your team and organization up for success.
There are a handful of reasons that cost estimation is important in field service management. See the below reasons that estimates should be a service delivery company’s number one priority!
Estimates Saves Time
Estimates take time, and time is money. Inaccurate estimates can cause revised estimates to be needed. The more time you take to create new estimates, the more money you are losing. Time is also critical for customers. Having to have more than one estimate done by a company slows down their plans as well.
Estimates Drive Expenses
When you’re creating an estimate for a project, you’re also estimating your company’s associated costs. Estimates include how many labor hours a job will take, as well as the materials needed. If your estimates are incorrect regarding either, there’s a good chance your company will have to absorb the costs. Many jobs are done using a flat rate, or the materials for them are bought in bulk. If your cost estimate doesn’t include all of the necessary labor or materials, you’ll likely end up going over budget.
Estimates Help Decide a Completion Date
Before you start the project, your customer is certainly going to ask: “So when is the project going to be done?” An estimate clearly answers that question. Providing reasonably accurate timelines will prevent you from being taken unawares by a project that runs longer than expected and hurts your cash flow. An estimate should include provisions for possible delays and terms and conditions that outline how a client will be charged if they request extra work.
Estimates Build Better Customer Relationships
An estimate includes all project details and makes sure you agree on everything from completion dates to prices. If you and the client are on the same page, it’s much less likely there’ll be conflict down the road. Often, getting quotes from contractors for free becomes the deciding factor when they look for services. It adds more transparency to the whole project.
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3. Which Businesses Offer Free Estimates?
Companies that offer small, simple jobs that are fairly straightforward can afford to provide free estimates. For example:
- Getting a price to fix something
- Small jobs like washing windows or painting a room
- Installation work (of fixtures, for example)
- Consultations that involve talking to a client over the phone or visiting the site to do a more precise evaluation
On the other hand, jobs that are more complex and involve higher stakes tend to charge a fee for the same. They are usually not free for
- Getting a diagnosis for why something isn’t working
- Consultations for large, complicated jobs that need lots of design work, revisions and several plans (like remodelling a bathroom)
- Companies that have a policy of charging for estimates
Whatever the policy or strategy is, a business should always tell a client upfront if they charge for estimates or not, even if it’s just a trip charge.
4. Should You Offer Free Estimates?
As a very general rule of thumb, whether you should offer free estimates or not depends on what kind of services you are providing to your clients. However, if a small business charges for an estimate is determined based on various considerations, such as the size of the job, the general practice of its industry and personal philosophy or company policy.
Scope of the Job
You should charge for estimates if it is a large project with multiple stakeholders. It will take more time to coordinate with them as you prepare your estimate. Also, charge for estimates where pricing out materials will take time.
Whether you should charge for an estimate can depend on whether your competitors are doing the same or not. Practices can also vary based on region. Some industries consider free estimates part of overhead costs and just another factor in doing business. Perhaps there are too many competitors in the business to consider charging for an estimate. Or it’s considered unprofessional to ask clients to pay for estimates, or n some cases, it is generally believed companies with good reputations don’t need to ask clients to pay for them to convince them to hire them.
Moreover, if your competitors are offering free estimates and you are charging a fee, there is no prize for guessing which company customers will choose. So, before you finalize whether to charge for estimates or offer them for free, look around and find out what your competitors are doing and decide on that basis.
As a business owner, your personal philosophy is an important factor in making the decision as well. Some people want to be compensated for any work they do. So, they would naturally ask for a fee to give an estimate. Other contractors believe charging for estimates eliminates clients who aren’t serious about hiring them. They think that money changing hands means a commitment, and so they don’t spend the time on a detailed estimate unless they feel the client is serious about the job.
If you subscribe to any of these philosophies, you might want to consider charging a fee for providing estimates as well. But if you can afford it, you should offer free estimates.
There are some more factors that might affect whether or not you charge for estimates:
- Your level of experience and hourly pay
- The likelihood of closing the sale
- Whether you’d be working with other companies
- If you need to diagnose a problem before planning the work
- How accurate your estimates are
- How much detail you include in your estimates
- How long it takes to put together an estimate
- Your usual estimate close rate
5. How Much Do Contractors Charge for Estimates?
There is no simple answer to the question “how much do contractors charge for estimates?” As you can see, not everyone charges for providing them. Those who do charge must follow some standard practices as well. Considering the potential time, knowledge, and skill set required to diagnose a problem, contractors may charge for estimates, which can range anywhere from $150 to $100.
5. What is the Best Way to Create Estimates?
When you’re looking to create accurate construction estimates, it is impossible to do it manually for it invariably leaves room for human errors. In that case, you’ll want to use free estimate software. This incredible digital tool comes with plenty of built-in features that help you create accurate estimates, as well as estimate invoice templates. Many of them also have integrated material costs and can update on their own. This way, you’ll never be surprised by the actual cost of materials, and neither will your customer. With estimating software, there’s no need to guess or wait any longer. Even if you don’t know how to do an estimate. It can do most of the work for you, that too more effectively and flawlessly!
To sum up, whether or not should you offer free estimates ultimately depends on what works best for you, your industry, and most importantly, your customers. If you feel free estimates are winning you more sales, then you should definitely go for it. Conduct thorough market research and find out what is the standard market practice, and you will have a clear idea.
Before you ask “How much should I charge for estimates?” make sure you are providing your customers with an accurate one. Free or not free, you must provide your customers with flawless, professional-looking estimates if you want to close the deal. You can always refer to the internet and look for professional estimate examples and emulate them. This, however, will give you an idea at best. That is, you can learn the format and technicalities that you must incorporate into your quotes. But this does not ensure accuracy, especially if you are doing things manually. So, as explained above, you should switch to automation and let digital tools do the job for you.
If you want the best results, you should go for the best. Therefore, you should choose Field Promax to take care of your estimation tasks. This is not just an estimation tool; rather it is a smart, comprehensive field service management software that simplifies and standardizes all your field service management tasks, including estimation. Using cutting-edge technology, it gives you an accurate break-up of the project, without missing a single item. And there’s more. Once your customer approves the estimate, Field Promax automatically turns it into a work order and allows you to proceed with the project, all on the same platform.
The simplest way to create an estimate is to make an itemized list of costs and add them up to get a total amount. Make sure you include all applicable costs, such as equipment and parts, materials and supplies, labor, financing, fees and licensing, transportation, and acquisition costs for land or facilities. Do market research to get the numbers right. You can also take references from previous works. Your estimate should include:
- Your business contact details
- The details of the person or business receiving the estimate
- The date of the estimate
- The goods or services that you are offering to supply
- An estimated price for each good or service
- The total of all estimated amounts
- The projected timeline
An estimate is a document that you give to a customer, showing how much you expect to charge them for goods or services you’re going to supply. The primary objective of an estimate is to enable one to know the probable cost of the work before the completion of the project. If the estimate is prepared carefully and correctly there will not be much difference between the estimated and actual cost.
Ideally, a cost estimator prepares the estimate. There are different types of cost estimators, whose title may be preceded by a modifier, such as building estimator, electrical estimator, or chief estimator. For small businesses, however, it can be done by managers, accountants, or business owners.
Costing refers to ascertaining the actual costs of a project. Estimating, in contrast to costing, refers to ascertaining, in advance, the probable cost of manufacturing an article, completing a contract, or executing a process in the near future.