A supplier quote tells you what the supplier wants to be paid.
It does not tell you whether the order is worth placing.
Between the quoted unit price and the money you keep from each sale sit freight, insurance, duties, clearance, handling and the costs of selling the goods. Some appear in the quote. Many do not.
The short answer: turn the quote into an estimated landed cost per unit, subtract the variable costs of selling each unit, and compare the resulting contribution margin with the margin your business requires. Then test how much that result changes if freight, the selling price or other key assumptions move. Only then decide whether to accept, negotiate or pause.
Why the cheapest quote may not produce the best margin
A low unit price can come with a delivery term that leaves more freight with you, a higher minimum order, a different specification, a short validity period or payment terms that tie up cash earlier.
Two quotes are only comparable once they are on the same basis: the same product, the same quantity, the same currency and costs measured to the same point, usually your own warehouse. That is why it matters to understand what is included in that price before comparing numbers.
What to check in a supplier quote
Unit price, currency and minimum order quantity
Confirm whether the price is per unit, per carton or tiered by volume, and which currency it is in. If it is not your selling currency, your real cost depends on the exchange rate when you pay, and a deposit and a balance paid months apart may convert at different rates.
Check the minimum order quantity against what you can realistically sell at your target price. A good unit price on more stock than you can sell is not a good deal.
Product specification
Materials, dimensions, finish, packaging, labeling and any required certifications should match what you intend to sell. A lower price for a different specification is a quote for a different product.
Incoterm and named place
A term such as FOB with a named port of shipment, or DAP with a named destination, shows where the seller's responsibilities end and yours begin. The ICC describes the Incoterms® 2020 rules as clarifying the tasks, costs and risks involved in delivering goods from seller to buyer.
Use the term to avoid double-counting. If a CIF quote already includes main freight and insurance to the destination port, do not add them again, but destination charges, clearance, duties and onward delivery may still be yours.
Incoterms do not set payment terms or decide when ownership of the goods passes. Those belong in the sales contract.
Freight, insurance, duties and clearance
If freight and insurance are not included, get your own estimate from a forwarder.
Duties depend on the product's classification, its origin, the destination, the customs value and any trade agreement that applies. There is no universal rate. Depending on the destination, duty may be calculated on the value of the goods alone or on a customs value that also includes freight and insurance. Check the applicable treatment with official tariff sources or a customs broker.
Add customs clearance, brokerage, port or terminal charges and handling.
Import VAT or GST needs separate treatment. Where your business can recover it, it is generally a cash-flow item rather than a permanent cost, though it may still have to be paid or accounted for at import. Where it cannot be recovered, it is a real cost. The treatment depends on the jurisdiction and your registration.
Packaging and handling
Export cartons, pallets, labels, inspection and any preparation needed before the goods can be sold all add cost.
Payment terms, lead time and validity
A deposit with the order and the balance before shipment means paying long before you sell. That affects working capital, may carry a financing cost and sets the timing of any currency exposure. Bank or letter-of-credit charges are transaction costs too.
A long lead time delays revenue and gives freight, exchange rates or demand more time to change. A short validity period can force a decision before the other costs are confirmed.
Missing or excluded costs
Read every exclusion. Tooling, samples, testing, certification, inspection, surcharges and destination charges are common examples. If something is unclear, ask the supplier in writing.
Step 1: Estimate total landed cost
The example below is hypothetical. The figures are illustrative estimates, not market rates, and the duty amount is not a rate for any real product or country.
An importer receives a quote for 500 units at EUR 18 per unit. The quote is in euros, the same currency as the selling price, and is on a basis where the buyer pays the main freight and insurance separately.
| Order total | Per unit | |
|---|---|---|
| Product purchase cost (500 × EUR 18) | EUR 9,000 | EUR 18.00 |
| Freight and insurance | EUR 1,500 | EUR 3.00 |
| Illustrative import duties | EUR 600 | EUR 1.20 |
| Customs clearance and handling | EUR 400 | EUR 0.80 |
| Total estimated landed cost | EUR 11,500 | EUR 23.00 |
Import VAT is left out on the assumption that the importer can recover it.
What looked like EUR 9,000 of stock requires an estimated EUR 11,500 before a single unit is sold. For more on what belongs in this figure, see landed cost vs product cost.
Step 2: Calculate contribution margin
The importer plans to sell each unit for EUR 40, excluding VAT or sales tax. Selling each unit also carries EUR 4 of variable selling costs, such as outbound delivery, payment and channel fees. In this example they are treated as a fixed amount per unit.
Contribution per unit = EUR 40 − EUR 23 − EUR 4 = EUR 13
Contribution margin = EUR 13 ÷ EUR 40 = 32.5%
If all 500 units sell at that price, the order contributes EUR 6,500.
Comparing the selling price with landed cost alone gives a gross-margin-style figure of 42.5%. Contribution margin goes further and subtracts the variable costs of selling each unit, which is why it is the more useful number for an order decision.
Neither figure is net profit. Fixed overhead, staff, rent, software, financing costs and the cost of stock that does not sell are all excluded. For a broader view of which costs to include, see how to calculate true profit margin before selling.
Step 3: Test sensitivity before approving
Suppose the business requires a 30% contribution margin on this kind of order. The baseline passes, with 2.5 percentage points to spare.
Two illustrative stress scenarios:
Scenario A: freight increases by EUR 1,000.
Scenario B: the selling price falls by 10%, to EUR 36.
| Baseline | Scenario A: freight +EUR 1,000 | Scenario B: price −10% | |
|---|---|---|---|
| Total landed cost | EUR 11,500 | EUR 12,500 | EUR 11,500 |
| Landed cost per unit | EUR 23 | EUR 25 | EUR 23 |
| Selling price per unit | EUR 40 | EUR 40 | EUR 36 |
| Variable selling costs per unit | EUR 4 | EUR 4 | EUR 4 |
| Contribution per unit | EUR 13 | EUR 11 | EUR 9 |
| Contribution margin | 32.5% | 27.5% | 25% |
| Contribution if all 500 units sell | EUR 6,500 | EUR 5,500 | EUR 4,500 |
| Against a 30% target | Passes | Fails | Fails |
The baseline's 2.5-point cushion is worth only EUR 1 per unit at a EUR 40 price. Scenario A adds EUR 2 per unit of cost. Scenario B removes EUR 4 per unit of revenue. Both are larger than the cushion.
The same numbers show where the thresholds are. With everything else as in the baseline, freight could rise by about EUR 500 on the order, or EUR 1 per unit, before the margin falls to exactly 30%. The selling price could fall to about EUR 38.57 (EUR 27 ÷ 0.70), roughly 3.6% below EUR 40.
Two simplifications are worth stating. The duty is held constant in both scenarios; where duty is calculated on a customs value that includes freight, higher freight would also raise the duty and make Scenario A slightly worse. And the EUR 4 of selling costs is fixed; if part of it is a percentage fee, it would fall with the price and make Scenario B slightly less severe.
If the quote is in another currency, an adverse exchange-rate move belongs on the same list.
Step 4: Accept, negotiate or pause
The numbers support a decision. They do not make it for you, and they do not guarantee the outcome.
Accept when the baseline clears your target with headroom you are comfortable with under realistic adverse cases, and the non-financial checks are complete.
Negotiate when the deal is close. In Scenario A, the order needs EUR 1 per unit, or EUR 500 in total, back to return to 30%: from a lower unit price, a better freight arrangement, a different Incoterm or a higher selling price. Payment terms, minimum quantity and quote validity are negotiable too.
Pause or reject when the baseline misses your target, passes only under optimistic assumptions, or depends on information you do not yet have, such as a confirmed duty classification or a clear delivery term.
A profitability calculation cannot verify a supplier. References, samples, inspections and compliance checks remain separate decisions.
Supplier quote checklist
- Does the quote match the specification, quantity and packaging you need?
- Is the currency clear, with an exchange rate you are prepared to plan on?
- Are the Incoterm and named place stated, and do you know which costs remain yours?
- Are freight, insurance, duties, clearance and handling estimated without double-counting anything already in the quote?
- Have you confirmed the duty and tax treatment with an official source or a customs broker?
- Do the minimum order, payment terms, lead time and validity fit your cash position and sales plan?
- Have you listed every excluded cost?
- Does the contribution margin meet your target, and does it still hold under the adverse cases most likely to hurt this order?
Where MarginGuides fits
MarginGuides is built for the moment before you commit. It works per unit, so order-level costs such as freight and clearance are entered per unit, as in the table above.
You enter the figures yourself, including an explicit exchange rate if the currencies differ. Nothing is looked up for you: there are no live duty rates or freight quotes, the Incoterm is recorded as context only, and MarginGuides does not read supplier quotes or check suppliers.
Analyze shows the real profit and margin per unit, the break-even price and the selling price needed to reach your target, with a plain-language decision. A lower selling price, as in Scenario B, can be analyzed as its own scenario.
Stress Test applies an explicit change, such as higher freight or a higher purchase cost, and shows whether the decision changes. Resilience compares several adverse changes you choose and shows which would cost the most profit; it is not a forecast.
Improve My Margin solves for the value of one cost or fee that brings the deal exactly to your target, such as the freight headroom left or how far the purchase cost would need to fall.
A spreadsheet can do much of this too; for a balanced comparison, see MarginGuides vs Excel.
Conclusion
A supplier quote is the start of an order decision, not the decision itself.
Check what it includes and excludes, estimate the landed cost, calculate the contribution margin after selling costs and compare it with your target. Then find out how far freight, price or currency would have to move before the order stops working. In the example, an order that passed at 32.5% failed under two plausible changes, because its cushion was only EUR 1 per unit.
That work costs far less before the order is placed than after the goods arrive.
Before approving your next supplier order, see how changes in costs affect your margin.
FAQ
How do I compare two supplier quotes fairly?
Put both on the same basis: the same specification, quantity and currency, with costs estimated to the same point, usually your warehouse. Then compare landed cost and contribution margin rather than unit price.
Should import VAT be included in landed cost?
It depends. Where import VAT or GST is recoverable for your business, it is generally a cash-flow item rather than a permanent cost. Where it cannot be recovered, it is a cost. Confirm the treatment for your jurisdiction and registration.
What is the difference between gross margin and contribution margin?
Gross margin compares revenue with the cost of the goods sold. Contribution margin also subtracts the variable costs of selling each unit, such as fees and outbound delivery. Neither includes fixed overhead, so neither is net profit.
Do Incoterms determine payment terms?
No. Incoterms allocate delivery tasks, costs and risks between seller and buyer. Payment terms and the transfer of ownership are set separately in the sales contract.