What is a Quote in Business?

What is a Quote in Business? Definition, Types, and How to Use Them

If you're new to running a business or freelancing, you might be wondering: What is a quote? How does it differ from an estimate? When should you use one? This comprehensive guide will answer all your questions about quotes in business.

What is a Quote? Basic Definition

A quote (also called a quotation) is a formal document that a business or service provider sends to a potential client before starting work. It outlines the services or products that will be provided and the estimated cost.

Think of a quote as a professional proposal that answers the client's question: "What will you do for me, and how much will it cost?"

Key Characteristics of a Quote:

Pre-work document - Created before any services are rendered
Formal proposal - Professional document with business details
Price estimate - Shows expected costs for services/products
Binding potential - Becomes binding when client accepts
Time-limited - Valid for a specific period (usually 30-90 days)
Detailed breakdown - Lists services, quantities, and prices

Quote vs. Estimate: What's the Difference?

Many people use "quote" and "estimate" interchangeably, but there are subtle differences:

Quote

More formal and binding
Detailed breakdown of services and prices
Often includes terms and conditions
Typically used for larger projects
Client acceptance may create a contract

Estimate

Less formal, more preliminary
Rough approximation of cost
May be verbal or informal
Often used for quick assessments
Less legally binding

In practice: Most businesses use "quote" for formal proposals and "estimate" for rough ballpark figures. However, the terms are often used interchangeably, especially in certain industries.

What Information Does a Quote Include?

A professional quote should contain these essential elements:

1. Business/Vendor Information

Company name and logo
Contact information (address, phone, email)
Business registration details (if applicable)
Tax ID or business number

2. Client Information

Client name or company name
Billing address
Contact person (if applicable)
Email and phone number

3. Quote Identification

Quote number (unique identifier)
Date the quote was created
Expiration/validity date
Reference to any previous communications

4. Project/Service Details

Description of work to be performed
Specific deliverables
Scope of services
Timeline or schedule
Any special requirements

5. Pricing Breakdown

Itemized list of services/products
Quantities and rates
Line item totals
Subtotal
Taxes (if applicable)
Discounts (if any)
Grand total

6. Terms and Conditions

Payment terms (deposit, payment schedule)
Validity period
Acceptance process
Cancellation policy
Scope change procedures
Timeline and deadlines

7. Professional Notes

Any special instructions
Assumptions made
Exclusions (what's not included)
Next steps for client

Types of Quotes

Different situations call for different types of quotes:

1. Fixed Price Quote

A set price for the entire project, regardless of actual time spent.

Example: "$5,000 for complete website redesign"

Best for: Projects with well-defined scope, deliverables are clear

2. Time and Materials Quote

Estimated cost based on hourly rates and materials, with final price depending on actual usage.

Example: "$75/hour for design work, estimated 40 hours = $3,000, plus materials"

Best for: Projects where scope may vary, uncertain timelines

3. Per-Unit Quote

Price based on quantity of items or units.

Example: "$50 per printed brochure, quantity: 100 = $5,000"

Best for: Manufacturing, printing, product sales

4. Milestone-Based Quote

Payment tied to project milestones or phases.

Example: "$2,000 for Phase 1, $2,000 for Phase 2, $1,000 for Phase 3"

Best for: Large projects, complex deliverables, phased work

When to Use a Quote

Use a quote when:

✅ Client Requests Pricing

A potential client asks how much your services will cost before committing to work.

✅ Competitive Bidding

Multiple service providers are competing for the same project, and the client wants to compare options.

✅ Complex Projects

The work involves multiple components, phases, or variable factors that need detailed breakdown.

✅ Professional Standards

You want to present a professional, formal proposal that builds trust and credibility.

✅ Legal Protection

You need written documentation that outlines scope, pricing, and terms for legal protection.

✅ Custom Work

The project is unique and requires specific pricing based on client's individual needs.

What Happens After Sending a Quote?

Once you send a quote, several outcomes are possible:

1. Client Accepts the Quote

Quote becomes a binding agreement
You begin work as outlined
Payment terms take effect
Client is committed to the price and scope

2. Client Requests Changes

Client may negotiate price or scope
You can revise and resend the quote
Original quote is replaced by new version

3. Client Declines

Client chooses not to proceed
No obligation on either side
You can follow up after quote expiration

4. Quote Expires

If not accepted within validity period
Prices may need updating
You can create a new quote with current pricing

Quote vs. Invoice: Key Differences

It's crucial to understand how quotes differ from invoices:

Feature	Quote	Invoice
When	Before work begins	After work is completed
Purpose	Proposal/Estimate	Request for payment
Binding	Becomes binding when accepted	Creates payment obligation
Payment	No payment requested	Payment required
Status	"This is what I'll do"	"This is what I did, please pay"

Learn more: See our detailed guide on Quote vs Invoice: Understanding the Key Differences.

Why Quotes Matter for Your Business

Using professional quotes offers numerous benefits:

1. Professionalism

Well-crafted quotes demonstrate professionalism and build trust with potential clients. They show you're organized, detail-oriented, and serious about your business.

2. Clear Communication

Quotes eliminate misunderstandings by clearly stating what work will be done, how much it costs, and what the terms are.

3. Legal Protection

A detailed quote creates a written record of the agreement, protecting both you and the client. It can serve as a contract when accepted.

4. Scope Protection

By clearly defining what's included (and excluded), quotes protect you from "scope creep" - clients expecting more work without paying more.

5. Better Cash Flow

Clear quotes lead to faster client decisions, which means you can start work sooner and get paid faster.

6. Competitive Advantage

Professional quotes help you stand out from competitors who send informal estimates or verbal quotes.

How to Create a Professional Quote

Creating a professional quote doesn't have to be complicated. Here's the process:

Option 1: Use Quote Templates

Using a professional quote template ensures you include all essential elements and maintain a consistent, polished appearance.

Benefits of using templates:

Save time - don't start from scratch
Look professional immediately
Ensure you don't miss important elements
Maintain consistency across all quotes

Browse our quote templates by industry to find the perfect fit for your business.

Option 2: Use a Quote Builder

An online quote builder streamlines the entire process and automatically handles calculations.

With our free quote builder, you can:

Toggle between quote and invoice mode
Add unlimited line items
Automatically calculate totals
Add your logo for branding
Export as PDF, Word, or Excel
Save templates for future use

Ready to create your first quote? Use our quote builder and toggle to "Quote" mode to get started.

Option 3: Create from Scratch

If you prefer to create quotes manually:

Use professional software (Word, Google Docs)
Include all essential elements listed above
Use consistent formatting
Double-check all calculations
Proofread carefully

Quote Best Practices

Follow these best practices to create effective quotes:

✅ Be Specific and Detailed

Don't be vague. "Website design - $3,000" is less effective than a detailed breakdown showing hours, rates, and specific deliverables.

✅ Include All Costs

Make sure your quote accounts for:

Labor/Service fees
Materials (if applicable)
Third-party services
Taxes (where applicable)
Any other fees

✅ Set Clear Validity Period

Always include an expiration date. Typical validity periods:

Services: 30-60 days
Products/Materials: 15-30 days (prices may fluctuate)
Complex projects: 60-90 days

✅ Define Scope Boundaries

Clearly state what's included and what's not. This prevents scope creep and misunderstandings.

✅ Set Clear Payment Terms

Specify:

Deposit required (if any)
Payment schedule
Accepted payment methods
Late payment terms

✅ Use Professional Formatting

Clean, organized layout
Easy to read fonts
Proper spacing
Your logo/branding

✅ Proofread Everything

Check for:

Spelling and grammar errors
Calculation mistakes
Missing information
Correct client details

Common Quote Mistakes to Avoid

Learn from common mistakes:

❌ Being Too Vague

Bad: "I'll fix your website - $500" Good: Detailed breakdown of specific fixes with time estimates

❌ No Expiration Date

Bad: Quote with no validity period Good: "This quote is valid for 30 days from date issued"

❌ Unclear Payment Terms

Bad: No mention of when/how payment is due Good: "50% deposit upon acceptance, 50% upon completion"

❌ Missing Scope Boundaries

Bad: Unclear what's included Good: Clear "Included" and "Not Included" sections

❌ Poor Calculations

Bad: Math errors or inconsistent totals Good: Double-checked calculations, totals that add up correctly

Industry-Specific Quote Examples

Different industries have different quote formats:

Construction/Trades

Separate labor and materials
Include allowances for unknowns
Specify cleanup and disposal
Note permits and inspections
View Construction Quote Template

Service Businesses

Focus on time and expertise
Break down by phases or milestones
Include travel time (if applicable)
Specify response times
View Service Quote Templates

Creative/Design

Define revision rounds included
Specify file formats and rights
Include stock image/licenses
Clarify portfolio usage rights
View Creative Quote Templates

Product Sales

Itemize products clearly
Include shipping and handling
Specify quantities and variations
Highlight warranties or guarantees

Converting Quotes to Invoices

Once a quote is accepted and work is completed, you'll need to convert it to an invoice.

The traditional way:

Manually recreate the invoice
Copy over line items
Adjust for actual work done
Change estimate language to invoice language

The easy way: Use our AI-powered Quote to Invoice Converter to automatically extract all details from your quote document (PDF or image) and create a professional invoice. Simply upload your quote, and the tool extracts company information, line items, dates, and all other details automatically.

Learn more: How to Write a Quote for a Job - Step-by-step guide with templates.

Frequently Asked Questions

What is the difference between a quote and an estimate?

A quote is more formal and detailed, while an estimate is typically a rough approximation. Quotes often become binding when accepted, while estimates are usually preliminary.

How long should a quote be valid?

Typically 30-90 days. Shorter for products/materials (15-30 days) where prices fluctuate, longer for services (60-90 days) with stable pricing.

Is a quote legally binding?

A quote becomes a binding agreement when the client accepts it. Until acceptance, it's just an offer. Always include clear acceptance terms.

Can I change a quote after sending it?

Yes, but send an updated quote with a new quote number. The original quote is replaced by the new one.

What if the project costs more than quoted?

If the quote was accepted as a fixed price, you typically can't charge more unless the scope changed. For time & materials quotes, the final price reflects actual costs.

Should I include taxes in my quote?

It depends on your location and business structure. Some include taxes in the total, others add them separately. Be clear about what's included.

How do I create a professional quote?

Use a professional quote template or our free quote builder. Both ensure you include all essential elements and maintain a professional appearance.

Can I use a quote template?

Absolutely! Using quote templates saves time and ensures consistency. Browse our quote templates to find the perfect one for your industry.

Tools and Resources

Create Quotes:

Free Quote Builder - Create professional quotes online
Quote Templates by Industry - Ready-made templates for every business type
Handyman Quote Template
Construction Quote Template
Plumbing Quote Template
And many more...

Convert Quotes to Invoices:

Quote to Invoice Converter - AI-powered tool to automatically convert quotes to invoices

Learn More:

How to Write a Quote for a Job - Comprehensive step-by-step guide
Quote vs Invoice Guide - Understand the differences
Getting Started with Invoicing

Conclusion

A quote is a fundamental business document that serves as a professional proposal outlining services and pricing. Understanding what a quote is, when to use it, and how to create effective quotes is essential for any business owner or freelancer.

Key takeaways:

A quote is a formal proposal sent before work begins
Quotes include detailed breakdowns of services and pricing
Quotes differ from estimates (more formal) and invoices (sent after work)
Using professional quote templates saves time and builds credibility
Quotes become binding agreements when clients accept them

Ready to create professional quotes?

Browse our quote templates to find one that fits your industry
Use our free quote builder to create your quote
Export as PDF and send to your client

Or, if you have an existing quote that needs to become an invoice, use our free Quote to Invoice Converter to automatically extract all details and create a professional invoice.

Remember: Professional quotes don't just communicate price—they build trust, set expectations, and protect your business. Start using professional quotes today and watch your business grow!