Business Terms Explained: Estimate vs Quote vs Bid vs Proposal

Each professional must understand the difference: estimates vs quotes vs bids vs proposals. That is crucial for providing customers with the necessary thing at the right time. For instance, your clients may ask for an estimate, but actually, they need a proposal. Being a small business owner, you should clarify the details of customer’s requirements.

Explore Needs Before Sending Anything

Before sending anything, you figure out the following:

  • Does your customer want to include cost estimates?
  • Should you provide a full breakdown of services?
  • Does your client need an itemized breakdown of relevant services?
  • Can they expect a complex proposal that will sell your services, experience, and expertise?

When you fail to understand what your customer expects correctly, you may provide them with the wrong information. Also, that can affect the entire process. In this case, you can educate clients and explain major distinctions between the possible options. After all, your objective is to ensure successful communication with your customer. Understanding their expectations and needs properly can lessen the chance to face a breakdown in your collaboration.

Although estimates, bids, quotes, and proposals remain open to interpretation, these terms are meaningfully different. Below, we will analyze such definitions, which allows avoiding confusion, reducing the risk of miscommunication, and improving your company’s success.

What Is an Estimate and When You Need One?

Depending on the name, an estimate is considered an approximation of what the required things will cost. For instance, a building contractor works with a customer to better understand its needs. They should detail different services and materials necessary for fulfilling the project scope. Ultimately, they assign costs, in most cases, by obtaining quotes from other suppliers.
Therefore, an estimate allows determining costs and assists customers with budgeting.

Estimates are often drafted without an appropriate understanding of the customer’s needs. Also, they become subject to change since new information may surface. Such a contractor estimate may get blown, for example, in the case of discovering asbestos or old wiring.

However, an estimate does not just detail costs. It provides a thorough overview of:

  • Various services your company offers, which allows customers to understand types of work you can complete
  • Project scope, which helps customers understand better what all services entail
  • Timelines and finish dates for managing customer expectations
  • Exclusions for avoiding potential disputes
  • Other different terms customers should know before starting doing business with your company

It means that estimations offer a simple idea: you can use them for managing client expectations. A good estimate will not overwhelm customers with numerous details. Instead, it prevents you from excluding critical information and affecting working relationships. Also, it ensures project success. Thus, you need to provide each new project with a relevant estimate, even when it relates to the existing customer.

What Is a Quote and When You Need It?

Comparing the quote vs estimate, the first category offers a fixed price regarding a certain project. Besides, this project is always subject to a defined time frame. Organizations in numerous industries establish such terms for protecting themselves. For instance, if you are a bakery owner, you should remember the fluctuating price of required ingredients.

After clients accept the quote, you need to finish the necessary work as specified in the quote. Also, you should stay strict with the defined price. That is where the main difference between a quote and an estimate lies. Your company must compile a quote considering the customer’s requirements thoroughly. Here, you should discuss your services, exclusions, time frames, and the entire project scope.

What Is a Bid and When You Need One?

A bid is typical where the project has clear scope. For instance, let’s imagine a government agency that looks for perfect contractors to finish a project. They will discuss their requirements in detail and make them available. After that, companies bid for a relevant project by defining the prices necessary for completing it. Finally, a government agency chooses a winner among multiple bids. Bids are also widely used in the construction industry. In many cases, sub-contractors submit them to a general one for completing a specific part of the entire work.

The key difference between bid and estimate or quote is that bids provide more details. But if compared to proposals, the last ones are even more detailed.

What Is a Proposal and When You Need It?

Let’s say you get in one of the following situations:

  • Your customer asks your organization to provide a pitch after the meeting
  • A customer requires an estimate. However, you want to do some extra work and include more details to represent the value your company can bring

In these cases, you need to create a proposal. It should involve all the data covered by estimates, quotes, and bids and showcase the value of your offer. Sometimes, they include testimonials and portfolios of previous work for establishing trust.

Besides, a typical proposal provides

  • a detailed analysis of the project's scope
  • time frames
  • deliverables
  • costs

Comparing the proposal vs estimate, the first is specific, and the second serves as an approximation.

Often, your customers can include the expectations-related details in proposals. So you are expected to provide supporting information that involves customer reviews and health and safety documentation. After all, your ability to attract clients relies on a high-quality proposal.

How to Choose the Right Option?

Consider your business requirements, along with the services you offer. The business scenarios are different in terms of provided details, use cases, and the opportunity to negotiate.

Transparency of price

When analyzing the firmness of the price, quotes and bids are more direct compared to estimates. Quotes showcase an accurate price for products and services guaranteed for a defined period.

For instance, in the retail industry, quotes guarantee price for clients even if it increases within a relevant period. When the customer accepts a quote the contractors complete the work for this price.

Another firm option is a bid. After accepting a bid is accepted, business owners or managers and signing a contract and it becomes binding. Contractors must provide necessary services at the agreed-on price. Adding extra resources and unexpected costs can be included in a relevant contingency sum that serves as a bid’s part.

When you create quotes or estimates, you should provide an expiration date and keep it documented: that is a guarantee period of the particular offer.

Level of provided details

The level of detail provided by estimates, quotes, and bids depends on the contractor’s decision. Bids are traditionally more detailed compared to quotes and estimates because when bidding for projects, contractors compete with other companies. And they should provide customers with as much information as possible to make an informed decision.

What about quotes? They focus on establishing a price for relevant products or services. Besides, estimates are general in terms of the project’s scope. They offer an outline of the costs and may change during the progress.

Use cases

You can use quotes and estimates in numerous industries. The first ones are applied to products, loans, or insurance, while the second refers to repair services or construction projects. Finally, bids are commonly limited to contracts in government or public areas, which applies mostly to general contractors.


Generally, quotes and bids tend to be non-negotiable since all conditions and prices are usually established and agreed on. But estimates are more flexible because you break down a project into several stages. This means that customers can decide whether they should continue completing it at different stages. Therefore, they may negotiate this project considering new terms at a relevant interval. Lastly, contractors and customers can agree on whether their contracts are negotiable before starting a project.

How to Provide Accurate Estimates, Quotes, Bids, and Proposals?

Quoting for work or providing accurate estimations is essential. And sometimes it may become challenging so be sure to figure out all details of your company’s finances. Fortunately, thanks to efficient accounting software, you get deeper insights into the financial aspect of business running. That will enable you to write quotes correctly.

With billing tools, you can benefit from real-time profit and loss reports. Such reports help to see how your organization is growing and operating. A high-quality accounting app provides direct invoicing and expense reminders equipped with a convenient receipt capture tool. So you keep finances accurate and up-to-date.

Wrap Up: Getting into the Key Differences

Although estimates, quotes, bids, and proposals are often overlapped, the particular documents are incredibly different.

  • Estimates serve as an approximation and provide customers with an idea of what they should expect.
  • Comparing the estimate vs quote, the quotes are more concrete since they specify a fixed value for a certain time frame.
  • Bids offer more details. They are widely used in the construction industry. Therefore, companies may bid for relevant projects thanks to specifying the price it costs to finish them.
  • Proposals always bring many details and concentrate on demonstrating value.

To conclude, each discussed business term has its own place. Despite that many people around the world use them interchangeably. Yet, it is critical to understand correctly what your customers expect to receive. This will bring a win-win situation: you and your customers avoid any confusion or misunderstandings.

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