What does a quote really cost? Three examples, from simple to complex

Ask an engineering business what it costs to win an order and most can give a rough answer for marketing or a sales visit. Ask what it costs to produce a quote and the answer is usually a shrug. The time is spread across several people, rarely recorded against the enquiry, and absorbed into the working week of engineers who were hired to do something else.

That makes quoting one of the least visible costs in many businesses, and one of the larger ones. This piece sets out where the time goes, how to put a figure on it, and three worked examples showing how the cost changes with the size and complexity of the enquiry.

Where the time goes

Whatever the product, most quotes pass through the same six stages. The balance between them changes from one enquiry to the next, but the stages themselves are remarkably consistent.

• Reading and qualifying. Working through the enquiry, specification and terms, and deciding whether it is worth pursuing.
• Finding past quotes and prices. Tracking down the last similar job, the current datasheet and whether a supplier price is still valid.
• Drafting technical answers. Responding to the buyer’s questions and writing the scope, assumptions and exclusions.
• Building the BOM and price. Assembling the bill of materials, getting prices for bought-in items and applying the right margins.
• Writing into the buyer’s file. Re-entering the answers and prices into the buyer’s own spreadsheet, form or portal.
• Clarifications and revisions. Handling questions back and forth, changes of scope and revised versions.

Drafting is usually the biggest single block of time, because it needs the most experienced people. Finding and re-entering information are the stages most often underestimated: they feel like small tasks, but they recur on every quote.

How to work out your own cost per quote

The calculation is simple. Add up the hours each person spends on a quote and multiply by a fully loaded hourly rate: salary plus employer’s National Insurance, pension and a share of overheads. A loaded rate is typically well above the salary divided by working hours, and it is the honest figure to use, because that is what the time costs the business.

The examples below use £55 an hour, the same rate we use on our ROI page. Substitute your own; the shape of the results rarely changes.

Three examples

Simple: about £140

A repeat order or a request for standard items is quick, as long as the information is to hand. Two and a half hours covers reading the request, checking the last price and any changes, and sending a reply. The cost is small per quote, but these enquiries often arrive in volume, and the time goes up quickly when the last price is hard to find or a supplier needs chasing.

Typical: about £850

A configured product with a technical questionnaire takes around fifteen and a half hours. Six of those go on drafting technical answers, and more than two each on building the price, filling in the buyer’s spreadsheet and handling clarifications. An engineer, an estimator and a manager are usually involved, so the quote also waits in several queues, which is why it can take a week or two to go out.

Complex: about £3,500 and often more

An engineered system or formal tender can take sixty hours or more. The specification alone can take half a day to read properly. Drafting grows because more of the content is new, pricing grows because more items come from suppliers, and revisions multiply because the buyer’s requirements change during the process. More of the work falls to senior engineers and directors, so the true cost is usually higher than a single hourly rate suggests.

What drives the cost up

Size and complexity are different things, and they push on different stages. Size, meaning the number of pages, questions and line items, mainly adds reading and re-entry time. Complexity, meaning how much of the answer has to be worked out rather than found, adds drafting and pricing time, and needs more senior people. The factors that move the figure most are:

• Novelty. Whether a close precedent exists. Answering from a similar past quote takes a fraction of the time of starting from scratch.
• Bought-in content. Every item priced by a supplier adds a request, a wait and a chase.
• The buyer’s format. A long spreadsheet or portal form can add hours of re-entry that adds nothing to the quality of the answer.
• Compliance and standards. Each clause that needs a statement of compliance, a certificate or a deviation adds checking time.
• The number of people. Each hand-off adds waiting time and the risk that something is missed.
• Revisions. A change of scope late in the process can repeat much of the work.

The costs that do not appear on a timesheet

The hours are only the visible part. Time spent quoting is time not spent on design, delivery or existing customers, and in most engineering SMEs the same people do both. Quotes that take weeks to go out give a faster competitor the chance to get there first. When the team is stretched, enquiries are declined or rushed, and a rushed quote is where underpricing and missed exclusions creep in. And where the knowledge sits with a few experienced people, the cost rises sharply when one of them is busy, on holiday or leaves.

What it adds up to over a year

Take a business that handles ten simple, six typical and one complex quote a month. Using the figures above, that is around 180 hours of skilled time every month, or about £10,000. Over a year it comes to roughly £120,000, which is more than one full-time engineer’s working year spent on quoting.

Where the hours can come back

Not all of that time can or should be removed. The commercial and technical judgement on a quote is what wins the work, and it belongs with experienced people. But much of the time in each example goes on finding, assembling and re-entering information the business already holds, and that is the part that can be reduced.