Managing Quotes

Job quotes are a pathway to more work, so effectively managing them is a valuable use of company time.


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Many companies, especially custom machine shops, are required to provide job quotes to customers in order to get new business or to keep existing business. Companies that have done this for a long time are quite good at determining all of the costs that need to be accounted for in these quotes. This requires tracking material costs, labor hours spent converting this material into finished goods and indirect costs required to support this conversion process. Experienced people are usually able to complete their quotes and get them into the hands of their customers quickly.

Yet, despite doing all of these things well, follow-up on submitted quotes is something many companies need to improve. In the worst cases, follow-up may not be done at all.

There are numerous excuses for not following up on quotes. One of the most common is that everyone in the company is too busy generating new quotes or doing other things to take the time to follow up on completed quotes. Another excuse is a simple lack of management of the quoting process. Completed quotes may reside in different places in the organization, such as desk drawers, filing cabinets, personal computers and even one person’s head. Locating these quotes when needed can be difficult and a real time-waster. 

Clearly, the effective management of quotes would make them more accessible to everyone, increasing the likelihood of follow-up action. Considering that quotes are a pathway to more work for the company, properly managing them is one of the best uses of company time. Whether the quotes are managed with a simple spreadsheet or a sophisticated estimating software package, companies can expect to reap the following benefits:

• Greater insight. Managing anything provides greater insight. Recording or logging all quotes is the first step. Whether quotes are recorded when they are received or after they are completed, their existence needs to be documented to provide the company with valuable data. Once documented, critical information can be reviewed, such as the number of quotes completed in a given period, number of different customers quoted, number of quotes open, length of time quotes are open, dollars quoted, percent of quotes converted to orders, and more.

• Understanding the reasons for “wins” and “losses.” Completing a quote is one activity that has a bearing on future business. As such, it is important to learn the ultimate outcome of each quote. Obviously, when a job is “won,” the outcome is known. Yet, a great deal can also be learned from the “losses,” so effort must be made to find out why the company did not get a particular job. Perhaps the job was cancelled and nobody won it. Perhaps the job was put on hold and there may be an opportunity to get it in the future. On the other hand, maybe another company won the job due to lower cost, faster delivery or greater familiarity with the customer’s requirements. This would be useful “intelligence” and could provide an advantage when quoting that customer in the future.

• Ability to make better decisions about the business. In managing quotes, the focus should be on performance. If the business’s overall performance in quoting is poor, such as a low quote conversion rate, perhaps the company’s current cost structure needs to be reviewed and opportunities sought out for improvement. If the quote conversion rate is acceptable for the industry, this can serve as confirmation that things are going well and that the company is on the right track. A high quote conversion rate may be a positive sign, but may also be the result of underbidding. Perhaps not all jobs are profitable, and a rigorous cost analysis of recently completed jobs is warranted. While the occasional low- or no-margin job may be a cost of doing business, an ongoing pattern of low margins is unsustainable and cause for concern.

• Driving future business. Managing the quote process and understanding the activity level, reasons for winning or losing jobs, and overall quote performance can directly impact future business strategies. Selection of target customers and markets, investment in new equipment, or targeted continuous improvement initiatives may stem from effective quote management.

• More sales. Managing quotes might just lead to more sales. At the beginning of this column, I highlighted quote follow-up as a weakness in some organizations. Managing quotes makes follow-up easier. In this world that appears to get busier and more hectic all the time, it is fair to assume that things occasionally fall through the cracks. This can happen in all companies, including customer companies. Undoubtedly, there are times when orders are supposed to be placed but are not. Such situations can be revealed when follow-up occurs.

Taking time to follow up also demonstrates interest in customers and their work, something that can strengthen a customer/supplier relationship. When you think about it, there is little downside to quote follow-up, and as long as you have a means of managing your quotes, there could just be a significant upside.