How to prepare a quotation: price the job and set terms

To prepare a quotation, define the scope in writing, price each cost line, add your margin, state what is excluded, set a validity date and payment terms, and send it before the client asks twice. A quotation is a seller's written offer to supply goods or services at a stated price and on stated terms. This guide shows how to prepare one in seven steps, with a worked pricing example and a reusable layout.

It is written for freelancers and small businesses in the United States, the United Kingdom and Germany. It describes common practice and cites the published rules. It is not legal or tax advice.

How do you prepare a quotation in seven steps?

Prepare a quotation by following seven steps in order. The order matters, because the price depends on a scope that is clear before you start counting costs.

1. Write the scope. Describe what you will do and what the client receives, in plain words. "Paint two bedrooms, two coats, walls and ceilings" is a scope. "Painting" is not.
2. List what is excluded. State what the price does not cover, such as furniture moving, wall repairs or permits.
3. Cost each line. Price labor, materials, travel and subcontractors separately.
4. Add your margin. Add overhead and profit on top of the costs.
5. Set the validity period. Say how long the price stays open, such as 30 days.
6. Set payment terms. State the deposit, the stage payments and the due date for the balance.
7. Send and follow up. Email a PDF, give the quote a number and ask for written acceptance.

A quotation that omits the exclusions and the validity date is the one that most often causes disagreements, because the exclusions protect your margin from unrecorded additional requests, and the validity date protects you from unexpected increases in material prices between the proposal and the acceptance.

What does a quotation need to contain?

A quotation needs a number, two sets of contact details, a clear scope, itemized prices, a validity date and terms. These are the fields most professionals include.

If you want a ready layout, our guide Quote template: what to include, with a free example shows one in full. The rest of this guide focuses on how to arrive at the numbers.

How do you price a quote? A worked cost-plus example

Cost-plus pricing means you calculate your actual costs and then add a percentage for overhead and profit. It is the simplest method available, and it is the easiest to defend when a client questions the reasoning behind a particular price.

The example below prices a painting job for two bedrooms. Every figure is an assumed 2026 illustration, so replace each one with your own costs.

Check the sums: 168 + 392 + 204 + 46 + 36 = 846. A 20 percent margin on £846.00 is £169.20, so the pre-tax price is £1,015.20. The VAT figure uses the UK standard rate of 20%, which GOV.UK VAT rates lists as the rate for most goods and services. Check the rate and whether you must charge tax before you copy these lines.

A margin is not the same as a markup. Adding 20 percent to cost gives a 16.7 percent margin on the price. If you want a true 20 percent margin on the price, divide cost by 0.80 instead: £846.00 / 0.80 = £1,057.50. Decide which one you mean before you quote, because the difference here is £42.30.

How long should a quotation be valid?

A quotation should be valid for 14 to 30 days for most services, and for a shorter time if your costs move fast. The validity date is the day after which you may change the price.

For example, a joiner who buys timber to order might quote for 14 days. A designer whose only cost is time might quote for 30. Write the date, not the number of days, so there is no argument about when the clock started.

The date also has legal weight. In Germany, § 145 BGB says that a person who offers to conclude a contract is bound by the offer, unless they have excluded being bound. In practice, a quote that is clear and has no stated end can be accepted by the client for longer than you intended. A validity date and a line such as "price subject to change after the valid-until date" limit that risk. Rules differ elsewhere, so check with an adviser for large jobs.

Should you take a deposit or stage payments?

Take a deposit when you buy materials up front or when the job is longer than two weeks. Take stage payments when the job has clear milestones, such as design, build and handover.

A common structure for small jobs is a quarter on acceptance and the balance on completion. For a larger job, use three stages, such as three tenths on acceptance, four tenths at the midpoint and three tenths on handover. Put the percentages and the due dates in the quote, so the invoices that follow match what the client agreed.

Using the painting example, a quarter deposit on the £1,218.24 total is £304.56. The balance is £913.68. State both figures on the quote.

How do you turn an accepted quote into an invoice?

Turn an accepted quote into an invoice by copying its lines, adding the invoice number and the supply date, and quoting the quote number. The invoice is the request for payment, and it must carry the fields the tax rules require.

In Germany, § 14 UStG lists what a regular invoice must show. That includes the full name and address of both parties, a sequential invoice number, the date of supply, the net amount, the tax rate and the tax amount. A quote lacks several of those, so never send the quote as the invoice. For the sequence rules, see our guide What is an invoice number? How to number invoices.

Keep the quote, the written acceptance and the invoice together. In the United States the default retention period is 3 years. It becomes 6 years if you leave out more than 25% of your gross income, and indefinitely if you file no return or a fraudulent one, according to the IRS record retention guidance.

What is the difference between a quote and an estimate?

A quote is a fixed price offer. An estimate is a best guess that may change. Use a quote when you can control the cost, and an estimate when the scope may move.

Our guide Estimate maker: how to write a job estimate clients accept covers the estimate side in detail. If you are unsure which to send, send a quote with a clear exclusions list and a change clause.

What mistakes lose the job or the margin?

Most lost margin originates in six avoidable habits, and correcting them before you send the next quotation takes only a few minutes of administrative attention.

• Pricing before scoping. You cannot price a job you have not defined.
• No exclusions. Everything not excluded is assumed included.
• No expiry. An open-ended quote can be accepted after your costs rise.
• Hidden tax. Say whether the price includes tax, in the same line as the total.
• Slow replies. Send within 48 hours. Speed signals reliability.
• No acceptance step. Ask for a signature or a written "accepted" email.

If you send quotes often, the Invoqk quote generator turns a short job description into an itemized quote with totals and tax.

Spot a mistake in this guide? Contact the Invoqk editorial team and we will check it against the sources. You can also read about Invoqk and who writes these guides. The table above shows the quote fields at a glance.