If you are in a business that quotes products/services - there is an art to it.

If you apply standard markups across the board, you are likely

1. Leaving money on the table
2. Losing sales at best, upsetting some customers at worst

Here are some quoting considerations imo

A note: At the heart of every one of these concepts below is Scale.

You can ignore certain costs,
and accept lower margins to win a customer.

However, as this behavior perpetuates, the lost margin prevents you from acquiring the resources you need to continue growing.

First, you need to make sure you are quoting based on your acquisition cost, not your COGS cost.

Many companies actually realize 10-15% less margin than they think because they forget about shipping costs, receiving, time, and import related fees when pricing up.

Any labor required (even if it's the owners) needs to be accounted for.

In Landscaping I have seen owners not include their labor, because there is no accounting cost for it on the books. Only to continually find they have no cash left over each month, even as business booms.

If receiving product into your company takes time because of inspection, or packaging, or really anything required to make ready to deliver or ship to the customer, that time needs to be included as well.

This is most easily done as a fixed fee (labor cost per min * mins)

If you store your product, or items related to giving your service, you MUST include those in your costs.

Here is what happens if you don't.

1. You have a large space which you pay for no problem out of current business, and you only use 60% of the space.

2. Each additional item, unit, sku, part takes up an extremely small (1 x 1 foot space maybe). So you think, my space is already paid for, storage essentially free at this point - covered by all my previous items sales.

3. You continue to grow, and soon your capacity is at 95%

4. When you go to look for more space, or a bigger space, you wont have the money. 40% of the items in your storage space dont afford extra margin to cover a new or bigger warehouse.

Even if the cost is marginally small, at some scale it will matter, so better to price it in now

You need to consider customer risk.

Is this a difficult customer?
Higher risk of sticking you with inventory?
Going to be a lot of quality returns?

Its ok to take these customers, if you have the margin to service them.

What service level do they require?

More service is more time.

If you take on a customer that takes up 20% of your time, you need to be compensated, or you won't be able to hire additional people as you grow and need more time for new customers.

Industry norms

Some industries are known for certain risks.

This is why I avoid appliance and automotive.

The volume is great,
but the attention required,
documentation mandated,
inventory risk,
quality risk,
and overall trouble are not covered in the very small margins

The more complex is product or service, the greater the margin potential.

Related to this, products (like CNC parts) that have highly variable quoted prices have high margin potential.

Products fairly standardized pricing (like fasteners), not as much.

Variance = Opportunity

Volume

As volume increases, costs typically decrease, but so do margins.

If you are quoting something low volume, the variance it typically higher, allowing you to include a slightly higher markup

Know Your Customer

Are they quoting in other countries?
Do they have foreign divisions?
Are they local?
How big is their procurement staff?

Knowing this will help you know their sourcing acumen, and help you price higher if able.

Urgency

This one is event-based, but a customer's urgency is a higher margin opportunity for you.

Remember, you will spend more time following shipments, cutting your systems in order to push this project through, rushing various aspects, and risking potential mistakes.

Urgency is not a time to price gouge, as that ruins relationships instantly.

It is a time to consider risks and extra time in your quoting and adjust accordingly.

Inventory Holding Time

There are storage costs, but there are also inventory costs. If you are required to hold inventory for your customer, potentially for 6-12 months at a time, that is cash tied up you can't invest (and get an ROI on) in other parts of the business.

This is essentially an interest-free loan to the customer. Include interest in quoted price.

These are some of the major components I have used in quoting to manufacturing companies for parts, or coding services for supply chain firms.

I hope it was helpful!