Create a Project Estimate

Step 1: Pin Down the Scope in Writing
Step 2: Break the Work Into Line Items

To create a project estimate, write down what the client needs, break the work into line items, estimate the hours and costs for each one, add any pass-through costs and a contingency for named risks, then state your assumptions, exclusions and how long the price is valid. The result is a document the client can compare, question and approve, and that you can turn into an invoice once the work is agreed.

Step 1: Pin Down the Scope in Writing

Before you price anything, confirm the outcome the client needs, the deadline, the budget limit if there is one, and who approves changes. Send a short recap email so the scope you price is the scope the client agreed to.

The US Federal Trade Commission's consumer guide How To Avoid a Home Improvement Scam (July 2022) tells homeowners that "A written estimate should include a description of the work to be done, materials, completion date, and the price." Whatever your trade, cover those four items.

Step 2: Break the Work Into Line Items

Split the project into phases or tasks the client can recognize, such as discovery, design, build and launch. Line items let the client see where the money goes and trade off scope if the total is too high.

Step 3: Estimate the Hours for Each Line Item

Estimate each line item separately rather than the whole project at once. Your own records of hours spent on similar past jobs give you a starting point. For methods, see how to estimate project hours accurately.

Step 4: Price the Work

Multiply hours by your rate, or set a fixed price per line item. If you're not sure what to charge, see how to price your services.

Step 5: Add Pass-Through Costs

List materials, licenses or other costs you'll pay on the client's behalf as separate line items, so the client can see what isn't labor.

Step 6: Add a Contingency for Named Risks

A contingency covers work you can't fully predict. Tie it to specific risks (for example, an unknown condition you'll only find once work starts) and decide whether to show it as its own line. How large it should be depends on your work and your history of overruns.

Step 7: State Assumptions, Exclusions and Validity

List what the price assumes (for example, that the client supplies content by a set date), what it excludes, and the date until which the price is valid. When the scope changes later, these lines are what you point to. See how to handle estimate revisions.

Sample Project Estimate

These are sample figures for a fictional job: a five-page website for a local bakery, priced at $85.00 an hour.

Labor

Discovery and content plan: 6 hours × $85.00 = $510.00
Design: 20 hours × $85.00 = $1,700.00
Build: 30 hours × $85.00 = $2,550.00
Testing and launch: 8 hours × $85.00 = $680.00
Labor subtotal: 64 hours, $510.00 + $1,700.00 + $2,550.00 + $680.00 = $5,440.00

Pass-through costs

Website theme license: $120.00
Stock photos: $80.00
Subtotal: $120.00 + $80.00 = $200.00

Contingency

10% of labor, for the risk that the bakery's existing photos can't be used: 0.10 × $5,440.00 = $544.00

Total

$5,440.00 + $200.00 + $544.00 = $6,184.00

Assumptions, exclusions and validity

The client supplies all text by the end of week 2.
Excludes hosting, ongoing maintenance and copywriting.
Valid for 30 days from the issue date.

Building the Estimate in Billed

Billed's estimating software page says you can "save your product or service details for instant access in your estimates" and "customize units and quantities for each product". Billed can "Calculate Taxes On Estimates Automatically", and you can "Add Discounts" and attach files with "Estimate Attachments".

The estimate generator page says you can "Set validity dates, taxes, and any conditions the client should agree to" and "Duplicate a past estimate for similar jobs and adjust the details". When the client approves, the estimating software page says you can convert "approved estimates into invoices with just a few clicks". For ready-made layouts, see the estimate templates.

Related Guides

FAQ

What should a project estimate include?

Include the work you'll do broken into line items, the hours and price for each, any pass-through costs, a contingency if you use one, the total, your assumptions and exclusions, and the date until which the price is valid. The FTC's home improvement guide lists a description of the work, materials, completion date and price as the core of a written estimate.

How do I estimate a project I haven't done before?

Break it into the smallest tasks you can describe, estimate each task separately, and compare them with any similar work you've done. Name the risks you can't size yet and cover them with a contingency or an assumption on the estimate.

Should I include a contingency in my project estimate?

If parts of the job are uncertain, yes. Tie the contingency to named risks, and decide whether to show it as its own line. In the sample on this page, a 10% contingency on $5,440.00 of labor adds $544.00.

How do I handle scope changes after sending an estimate?

Point to the assumptions and exclusions on the estimate, describe the change in writing, and send a revised estimate for the client to approve before you do the extra work.

Quick checklist

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How to Create a Project Estimate