What is an Estimate? Definition, Purpose, And Types

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Your customer has just shifted to a new place and needs a handyman to fix a few things. So, they call you to request an estimate.

If this is the moment you seek the answer of “what is an estimate”, you are already too late.

Competition for contractors is fiers and you should be always ready with an estimate.
It helps you and your customer identify the approximate budget for the particular work and eventually helps with decision-making.

What is an Estimate?

A contractor’s estimate calculates the expected cost for a particular job. Say the client hired you to fix a tap. The cost of this work will include the new tap (if that is the case), the labor charge, and the material cost. However, the material prices may have gone up since you last fixed a tap.

As a result, the budget for the work you will share with your client will be a cost estimate. You will give an approximate judgment of the costing based on your past experiences and knowledge. This estimate is and will be subject to change.

The estimate is crucial for any contractor or business owner, as you cannot further process the contract. If we look at estimating traditionally, it was a pen-paper kind of job. The contractor would calculate roughly and provide a few things on the paper. Sometimes, they would not offer any breakup to the customers, leaving them confused.

project coast estimate

What is an estimate in construction?

In the case of construction, the estimate lists out the quantities of items required to complete the job and the estimated cost of each item. These costs are derived from the list of materials and the overall scope of work.

How Did Approximate Calculation Work Traditionally?

In a paper published by Hemanta Doloi in 2013, the author talks about the importance of cost estimation. The paper clearly states the issues related to poor cost performance and the contractor’s mistakes by not estimating the scope and total cost of the work. Estimation played a pivotal role in a contractor’s life for a long.

Traditionally, contractors used the bottom-up method to estimate the cost of the work to be done. For instance, you would connect with the client to discuss the requirements. It would help identify the number of days/hours needed. Eventually, you will know the total cost of the work.

The question here is – what is wrong with traditional estimating methods?

If you were to answer this question in a single line, it lacks flexibility. You cannot step back once you have determined the scope or hours. It doesn’t make room for additional scope of work or payments.

This estimating method is a bit laborious. As a result, you spend hours estimating itself.
Let’s take a look at the traditional estimating process.

Difference Between Estimate and Budget

budget estimation difference

An estimate is when you approximate the cost based on several parameters. In a construction environment, you will estimate the labor costs, the total cost of materials, and the cost of cutting.

Example of Estimate:

  • Roof removal: $1000
  • Scraping: $500
  • Installing new sheet: $2000
  • Tiling the roof: $1000
  • Painting: $100

Budget is dependent on the estimate. It is the estimate that helps companies calculate the exact and actual amount they are likely to spend on a particular project.

Example of Budget:

  • Scraping: $500. Timeline 4 days
  • Installing new sheet: $2000 Timeline 3 days
  • Tiling the new roof $1000 Timeline 5 days

Overview of Contractor Cost Estimate Process

Contractor cost estimate overview

As a contractor, this is the detailed process you need to go through to calculate the work’s cost.

  1. Inspection of the Site

    Inspection is stage one to begin the estimation process. You need to identify or ascertain the things to be done at the site. Diagnosis is the key to identifying the issue. You may know the tap or roof is leaking. However, you aren’t aware of the reason behind the leakage. That’s where the diagnosis plays a role. When you detail out the reason, you get the estimates right.

  2. Requirement Analysis

    Establishing the requirements for the job is the next stage of the process. For example, you now know you need to change the roof with a roofing solution. So, you will talk to the owner about scraping the existing roof, laying the layer for the new roof, and other aspects.

    • It would help if you now defined the scope of work. In the case of the traditional methods, this is very rigid. Let’s take an example. You have been asked to solve the tap leakage issue. You visited the place, diagnosed the problem, and then defined the scope of work. You thought it was a simple tap replacement.
    • However, the issue was internal, and you realized that only after working on the project. This immediately changes the scope and requirements for the work to be done. It also impacts the rate and the hour estimation. That’s where a rough estimate combined with agile processes can help.
  3. Bid for the Job

    You are not the first contractor your client is visiting. They have already connected with several others. Your estimate and the detailing within will help you get the job.

Types of Estimate

There isn’t any all-inclusive estimate solution for the contractors. The approximate judgment varies from case to case. Whether you are offering a rough estimate based on past experience or quoting an estimate for a bid, the type of statement indicates the cost changes. Every process or scope of work requires a different detailing and estimate creation. Here, we will take you through the four different types of estimates that contractors use regularly.

  1. Preliminary Estimate

    You can offer a preliminary estimate or ballpark quote based on your previous experiences. This estimate is a rough calculation of the costs based on the early-on understanding of the project.

    Say you have just completed a roof replacement project, and another customer approaches you for the same. The ballpark quote would be based on this experience. However, this estimating method allows you to make revisions and refine the scope of work once you have more information.

  2. Detailed Estimate

    Imagine you connected with the client to seek an understanding of the work. You diagnosed the place, inspected the site, and listed the requirements.

    The estimate that you prepare after this analysis is your detailed estimate. After detailing the issues and diagnosing the problem, you are no longer quoting the amount based on your previous experience.

    You would be giving a custom quote to the client for the work they need to get done.

  3. Quantity Estimate

    When you prepare a quantity estimate, you also add the number of quantities for a particular product. Say you have a construction estimation, then you will list out the number of beams needed, the tiles required, and other details in the estimate.

    You will also detail the cost of every material added to the list. It will also help describe the scope of work and the number of days you will finish the project.

  4. quantity estimate

  5. Bid Estimate

    The bid estimate is when you compete with other contractors to win the project. A mix of quantity and a detailed assessment will help you prepare the bid estimate. At this point, quoting a competitive price is also very important.

    To win the bid, you may want to quote slightly lower than your regular costs. This estimate is crucial if you’re going to get the project.

What is a Good Length for the Estimate?

The ideal length of the estimate varies from project to project. It all depends on what issues the client has, and how the estimate will offer clarity on the project. For example, some estimates don’t require too much detail. Say if the client wants to get the tap changed, the estimate will be short. However, if you look at some of the construction estimates, they need to be detailed.

The ideal estimate should include the following details to offer benefit to the customer

  • List down the tasks: You should begin the process of creating an estimate by listing down all the tasks that need to be done. Going back to the roofing example, you need to scrap the roof, prepare the layer and then replace the top.
  • Estimate the time for each task: Calculate approximately how long you will take to complete each task. It should be a point estimate and not the actual number. If roof scrapping is going to take you two days, write it down.
  • Add the materials: It is very important to add the materials required for the task. You can estimate the number of quantities required for the work.
  • Evaluate the cost: Mention the approximate charge of each quantity. You will need to provide an estimate of the cost.

Once you have added all the approximate costs and materials to the list, your estimate is good to go. You can use modern tools and software solutions to fast-track the process of creating an estimate for your business.

approximately estimate cost

This is the average length for a cost estimate, which includes all the essential details.


Contractors can enhance their chances of getting a job by offering accurate cost estimates. It includes the scope of work and a rough calculation for each job that needs to be done.

Cost estimates can empower the client-contractor relationship with transparency. Both parties are aware of the money involved in completing the project.

Traditional methods of estimating the value of the project can consume a lot of effort and time. With estimating and software, you can create estimates and invoices in just a few minutes and send them to your customers to get more jobs.

InvoiceOwl is one such estimate and invoicing software that comprehends your needs of creating estimates and invoices in just a few simple clicks. In less than a minute, you can create a fully customized estimate and invoice using your company logo, name, and details. and explore a range of features and functionalities of this software.

Author Bio
Jeel Patel
Jeel Patel

Jeel Patel is the Founder of InvoiceOwl and is the main curator & writer of the content found on this site. With ideals of quality, commitment, and perseverance, he believes in creating lasting business relationships with the clients.