Meaning of Cost Estimate 3
Period of validity of the cost estimate
There is no clear legal regulation here. It is therefore important that you set a deadline in your cost estimate. It should be shorter than longer. Keep in mind, for example, that you need to have enough free capacity to complete the job. In addition, raw material prices can change quickly and with them your purchasing costs for materials. It is imperative that you note the period of validity of the cost estimate in writing.
Nowadays, cost estimates are submitted in a wide variety of areas and not only in the comparatively high-priced segment. After all, it helps both end users and companies to be able to optimally plan the costs for a specific project.
The forward-looking approach and the setting of the expected costs are particularly “popular” in the tradesmen and in the motor vehicle sector. Here, the cost estimates often ensure that the various providers can be compared with one another even more thoroughly.
Cost estimate craftsman
For a craft business, creating a cost estimate is in a certain way part of everyday life. A classic example: The Müller family has long been annoyed by mold in the area of the joints in the shower and would like to finally get rid of the unsightly, black stains.
It quickly becomes apparent that after just a few phone calls, there are clear differences between the various craft businesses. In order to get a better overview, Ms. Müller requests cost estimates. This not only results in the estimated working time, but also the type of materials, travel costs, etc. This makes it even easier to understand the various prices.
Cost estimate car workshop
A visit to the workshop can also put a strain on the available budget. This also applies to companies that have to have repairs carried out on the vehicles in their fleet.
Regardless of whether it is a general check, changing the cylinder head gasket or changing from winter to summer tires on more than 20 vehicles: even car workshops know that their customers from the commercial and private sectors value meaningful cost estimates lay.
In addition to the estimated working time and the corresponding hourly wage, the costs for the individual parts are also listed here.
Exceed cost estimate
The estimate is an estimate of the cost. Slight exceedances are to be accepted, although there is no clear limit here either. Typically, one speaks here of approx. 15%, the maximum that can be accepted. In the event of larger overruns, you must inform the client immediately if these higher costs are foreseeable. The client can then decide whether to accept the additional costs or whether to terminate the cooperation extraordinarily. That would mean that everything would be canceled and another entrepreneur would subsequently take over the outstanding work – not a nice situation and bad for the image.
In general, it can be said that it always paints a better picture if the costs are not exceeded, even if you are ultimately allowed to charge a little more.
Substantially exceeding a cost estimate is associated, among other things, with special rights for the customer. He can, for example, be informed precisely about the reason and the composition of the cost overrun, exercise his extraordinary right of termination or even demand compensation. With regard to the latter point, however, it must be possible to clearly demonstrate the fault of the company concerned. Claims settlement sometimes becomes relevant if the execution of the contract has far-reaching consequences for further follow-up work and this is also delayed.
However, there is no fixed “rule” as of when one could speak of a significant excess of a “total X”. Court judgments from the past also show some significant differences. For example, some courts felt that the amount stated in the cost estimate was exceeded by 10% as “significant”, for others this limit was only reached at 20%. What is certain is that the customer must be informed of the corresponding amount from said 10% in order to be able to make use of his rights in a timely manner.
And: the affected customers are not forced to continue the order in connection with a significant excess. You can also opt for the termination mentioned above and the search for a new company. Nevertheless, the services that have already been carried out must of course be paid for.
Since it has not yet been legally regulated at which limit the exceeding of a cost estimate is essential or insignificant, it is often necessary to speak of a “smooth transition” here.
As a rule, however, values below 10% are classified as insignificant. For the company in question, this means that it does not have to inform its customer in advance that it has been exceeded and that it can issue its invoice as usual.
However, depending on the character of your customer, even an insignificant excess near said 10% can cause trouble. Therefore, you should of course always aim for realistic sums wherever possible. In many cases, these also represent a practical means of long-term customer loyalty.
It is important to keep an eye on the differences yourself and to show them transparently to potential customers. The entire communication around the preparation of the cost estimate is also of great importance, because not only the price decides, but also the basis of trust that can be built between the entrepreneur and potential clients.
For the cost estimate itself, the following points are most important:
- Clear and clear structure
- Communicate the next steps for placing the order
- Create the cost estimate for free – if that is not possible, explain in advance why you want to charge something and how high the costs are
- Make sure that all points are clear to potential clients and offer additional explanations and further discussions
- Calculate so that you can keep the costs as precisely as possible
- Always set a deadline so that the validity is clear