How to Write a Job Estimate (With a Worked Example)

To write a job estimate, work out your costs first (labor, materials, equipment and overhead), set your price from them, then put it in front of the customer as a short document: the scope of work, priced line items, what’s not included, how long the price holds, and how and when you get paid. The customer sees the price, never your cost or your margin. The worked example below takes one job from the numbers to the finished estimate.

What a job estimate needs

How to write a job estimate, step by step

1. Visit the job and pin down the scope

Most disputes start with a scope nobody wrote down. See the site, measure, take photos, and ask what the customer actually expects at the end. Write the scope as outcomes you can both check: “Remove and dispose of the old vanity, fit the new vanity and tap supplied by us, connect to existing supply and waste” is better than “bathroom vanity work”.

2. Add up your direct costs

• Labor: people × hours × your hourly cost. Be clear whether the hours are per person or for the whole crew; on a two-person job that’s a factor of two.
• Materials: everything that stays on the job, plus a little for waste and offcuts.
• Equipment: hire, fuel, skips and anything else the job uses up.

3. Add overhead

Overhead is what it costs to run the business when you’re not on a job: insurance, vehicle, phone, software, accounting, unpaid quoting time. Work out last year’s overhead as a percentage of your direct costs and add that percentage to every job. Leave it out and every job looks profitable until the end of the year.

4. Set the price from your margin

Price = total cost ÷ (1 – margin). A 25% margin on $1,800 is $1,800 ÷ 0.75 = $2,400. Don’t confuse margin with markup: a 25% markup on the same cost is only $2,250, a 20% margin. The free job estimate calculator shows both, so you can’t price at one and think you got the other.

5. Decide on any discount before you send it

A discount comes straight out of your profit, not out of your costs. If you plan to offer one, work out what it costs you first (the next section shows the sum), and put it on the estimate as its own line so the customer sees it.

6. Write it up and send it

Turn the numbers into a document the customer can read in a minute: scope, line items, total, exclusions, terms. Send it promptly while the job is fresh, and follow up if you haven’t heard back within the validity period.

A worked example

A two-person job: ten hours each at $50 an hour, $400 of materials, $100 of equipment hire, 20% overhead and a 25% margin. You agree to 10% off, and sales tax is 10%.

Your numbers (not for the customer)

What the customer sees

The price is spread across the lines in proportion to their cost, so each line is priced 1.6 times its cost ($2,400 ÷ $1,500). The customer gets prices, not your costs:

Underneath: the scope of work, what’s excluded, “This estimate is valid for 30 days”, the deposit and payment schedule, and a line for the customer’s acceptance.

What the discount really cost

Your profit at full price would have been $2,400 – $1,800 = $600. After the discount it’s $2,160 – $1,800 = $360. A 10% discount took 40% of your profit, and your margin fell from 25% to 16.7%. It also cut your margin for error: $360 covers six extra crew hours at $60 an hour all-in, against ten without the discount.

Sales tax on an estimate

Whether you charge sales tax on labor, on materials, or on both depends on your state, and sometimes on the type of work. The example charges it on the whole discounted price. Check your state’s rules, and show tax as its own line so the customer can see it. If a customer gives you a total that already includes tax, the reverse sales tax calculator takes it back out.

Estimate, quote or bid?

Customers often treat an estimate as a promise. If the price can move, say so on the page, with a limit: “Final price within 10% of this estimate unless the scope changes, which we’ll agree in writing first.” In some states, and for some trades such as auto repair, the law requires a written estimate and the customer’s consent before the final bill goes over it. Check the rules where you work.

Terms worth putting on every estimate

• Validity: how long the price holds. 30 days is common; shorter if material prices move fast.
• Deposit and payments: how much up front, when the rest is due, and how you accept payment.
• Changes: extra work is priced and agreed in writing before you do it.
• Exclusions: what isn’t included, such as permits, disposal, making good, or problems found behind walls.
• Assumptions: what you’ve assumed, such as clear access, working power and water, or no rot under the floor.
• Acceptance: how the customer says yes: a signature, an email reply, or the deposit.

Common mistakes

• Leaving out overhead. Jobs look profitable and the year doesn’t.
• Using markup when you meant margin. A 25% markup is only a 20% margin.
• A vague scope. “Fix the deck” invites an argument about what fixed means.
• No exclusions. If it isn’t excluded, the customer may assume it’s included.
• Discounting without doing the sum. 10% off the price is far more than 10% of your profit.
• Showing your costs. Customers compare your material cost with the shop price and ask why you’re charging more. Show prices only.

Frequently asked questions

What should be included in a job estimate?

Your details, the customer and job address, a clear scope of work, priced line items, the total with any discount and tax, exclusions, how long the price is valid, payment terms, and a way to accept.

How do you calculate a job estimate?

Add labor, materials and equipment, add your overhead percentage, then divide by one minus your margin. With $1,500 of direct costs, 20% overhead and a 25% margin, the price is $1,800 ÷ 0.75 = $2,400.

Is an estimate legally binding?

An estimate is usually an approximation rather than a fixed price, but what you write on it matters, and some states set rules for written estimates in certain trades. If you want the price to be fixed, call it a quote and define the scope tightly. For anything with legal weight, check your state’s rules.

How long should an estimate be valid?

Thirty days is common. Use a shorter period if your material prices change quickly, and say so on the estimate.

Sources and method

• The worked example uses the same figures and order of operations as our job estimate calculator: overhead on direct costs, price from margin, discount before tax, tax on the discounted subtotal.
• Line prices on the customer’s copy are each line’s cost times price ÷ direct costs, so they add up to the price exactly.

Checked 10 November 2026. This guide is general business information, not legal or tax advice. Rules on estimates and on sales tax for labor vary by state and by trade.