If you’re trying to grow a manufacturing business, quoting is an essential building block you need to get right. Fast, accurate and professional quotes get a better response from customers, helping you win more business and generate a profit.
Creating quotes manually – and guessing at prices – will only lead to underquoting or overquoting. But having a reliable automated quoting system in place will empower your team to quote accurately and transparently without wasting time.
In this guide, we explain how to quote more accurately, how to avoid underquoting and the best quoting tools for manufacturing businesses in Australia.
How to avoid over-quoting and underquoting
Both overquoting and underquoting can have a detrimental impact on your business growth. Overquote and you’ll win less jobs. Underquote and you’ll do the work without making a profit. Knowing how to quote more accurately means you can avoid the pitfalls of both overquoting and underquoting.
How do I stop underquoting?
- Improve communication with your leads – only make a quote when you’ve understood clearly what the client wants. Don’t include anything extra in the quote.
- Be clear and transparent – know exactly what a potential customer requires, and make sure they know exactly what you’re offering. Communicate this clearly in your written quote.
- Understand the total costs involved – look beyond material and labour costs, factoring in overheads and hidden costs as well.
- Quote to generate a profit – ensure your quote is enough to get the job done and generate a profit, not just cover your costs.
- Gather data with an ERP – base your quotes on real, accurate data about your costs, time requirements, overheads and more.
How to quote more accurately?
It’s crucial to know how to quote more accurately, and how to avoid underquoting in manufacturing. Whether you’re a small cabinet-making shop or a larger manufacturing company, now is the time to get your quoting processes right. Here’s how:
1. Understand your client’s needs
Since quotes are binding, it’s crucial to base your figures on actual data rather than guesswork. The more accurate the information you have about what your client wants – and what it’ll take to deliver it – the more accurate your quotes will be.
Spend time talking with your client and asking the right questions so you’ve got all the necessary information. Then tailor your quote to exactly their needs. Avoid including anything on your quote that the client doesn’t need. Quoting for unnecessary materials or work will only drive up your price, making it harder to win customers over.
On the other hand, if you don’t know the scope of a client’s needs before you quote, you could end up underquoting. By knowing everything they want, you can be more realistic about what it’s going to take in terms of materials, overhead costs, labour time and so on. When you have an accurate picture of the client’s needs, you can avoid underquoting, and ensure you generate a profit from the job.
When details of the job aren’t clear, or you’re having a hard time getting the exact information from a client, consider providing an estimate rather than a quote. Where quotes are generally binding, estimates are not. Simply referring to your quotes as estimates in the early stages of the scoping process can save a lot of drama down the road.
2. Measure your costs accurately
Knowing the total cost of a job is crucial if you want to avoid underquoting. Instead of basing your cost estimates on guesswork, use real data to figure out the true cost of a job.
When it comes to calculating labour costs, it pays to be accurate. If your quote allows for 12 hours, but you spend 16 hours on the job, you’re going to find it hard to generate a profit. Collecting data about how much time is spent on jobs, and where time is being lost can help you make more accurate cost calculations.
Don’t forget to factor in all costs when calculating your quotes – including overhead costs and hidden costs like downtime and logistics. It’s only through understanding the full costs of a project that you can quote for profit.
The most accurate and efficient way to track your costs is by using an ERP software that integrates every sector of your business. While most accounting software only allows you to measure costs when you run a profit and loss statement, an ERP system will capture all cost data points across your business operations so that you’re always in the know.
Find out more: How to know and control your true job cost with an ERP.
3. Add a real profit margin.
You can’t grow a manufacturing business sustainably unless you’re adding a real profit margin to your quoted prices. You should add a profit margin on top of the total costs, not just labour and materials. Otherwise all of your profit will be going into the overhead costs of running your business instead of generating business growth.
Find out more: How to increase your profit margins with an ERP.
4. Present your quotes professionally
Almost as important as the dollar figure of your quote itself, is how you present it. The devil is in the details, and by paying attention to these details you show your potential customers that you’re detail-oriented, which means they’re going to put more trust in you. Similarly, a professional, clear quote demonstrates the standards of your businesses, and helps to prove the value behind what you’ve quoted them.
This presentation shouldn’t take long, or need the assistance of a professional designer. Good ERP software should do this for you with the click of a button—turn data into job-winning presentations. As an added benefit, if you’re still drafting quotes in Word or from your accounting software, using an ERP software will offer multiple benefits.
5. Track the performance of your quotes
Analysing how things went with your past quotes is a smart way to make improvements to your future quotes. You should track the performance of your quotes across a number of data points, such as whether they were accepted, how long it took for them to be accepted, whether they accurately reflected the time and costs required for the job etc.
By collecting this data, you’ll be able to review your quotes and whether they were profitable. It also gives you a chance to spot errors and find room for improvement. Without knowing where your quoting process is falling short, you’ll keep repeating the failures. But track and analyse the performance of your quotes, and you’ll be able to streamline your processes and set your business up for success.
Find out more about how you can turn ERP data into actionable insights.
6. Eliminate errors by automating
Quoting errors can have a big impact, especially for small businesses. Using a robust automated system is the best way to eliminate human errors, avoid double input and increase efficiency at each point of the quoting process.
If you’re planning on growing your manufacturing business, it’s crucial to fix your quoting issues now before you expand. If you attempt to scale before your quoting foundations are right, you’ll just amplify the problems.
7. Quote faster
Sending quotes out fast can help you win more customers – and get paid faster. But for many small businesses, quoting is a highly time-intensive process, especially if the quotes are created manually for each new lead. An automated quoting system can dramatically improve efficiency, helping you get your quotes in front of leads sooner and freeing your team up to focus on what they do best.
With an ERP, you don’t have to spend time manually calculating costs, figuring out how long a job will take or researching current material prices. Accurate data about costs, inventory and timesheets is synced across the system, meaning you can fill out your quotes in seconds.
Quoting faster isn’t just good for your business cash flow, it makes customers happier too. Find out other ways you can use your ERP to improve customer relationships.
8. Requote even faster.
When a client is asking you to requote, they’re on the hook. If your price was way out of their ballpark, they’re simply going to reject it rather than request a requote. So if they do, get those changes made fast and use the bulk of the data you’ve already collected. The ability to make these global changes with transparency and speed are a hallmark of good, well thought-out ERP software.
9. Bring your team on the journey.
Making changes to your quoting process to improve efficiency, reduce errors and avoid underquoting is a smart move. But to make it a successful transition, it’s crucial to bring your team along for the journey.
Producing highly accurate quotes takes highly accurate data. When your team is on board with the data collection process, it’ll be much easier to generate fast and accurate quotes that win customers.
The best quoting software for manufacturing businesses
Jobman is an ERP system designed specifically for Australian manufacturing businesses. The quoting feature allows you to create fast, accurate and professional quotes from anywhere. It’s user-friendly and completely scalable – an ideal solution for simplifying the quoting process, freeing your team up and eliminating human error.
By collecting data across all the different areas of your business, Jobman allows you to instantly access information you need for any given job – and create accurate quotes that actually generate a profit for your business.
Find out how you can save time, win more jobs and get paid faster with Jobman. Call us on 1300 056 262.