Should I do flat rate pricing or time and materials?
Short answer
Flat rate for anything you've done a hundred times. Time and materials only for genuinely open-ended troubleshooting where you can't scope the job in advance.
Flat rate protects you and the customer
With time and materials, every slow tech becomes a customer complaint and every fast tech leaves money on the table. Flat rate books the same price whether the tech takes 40 minutes or two hours, which means your best techs get rewarded for being good and your slower techs feel pressure to speed up.
Customers also trust a flat number more than an open-ended clock. 'This repair is $420' closes faster than 'it'll run $95 an hour plus parts, we'll see how it goes.' Uncertainty kills approval rates on the doorstep.
Where time and materials still fits
Some jobs genuinely can't be scoped until you're inside the wall or the unit is apart: intermittent electrical faults, a leak with no visible source, a custom remodel tie-in. For those, be upfront that you're billing time and materials and give a not-to-exceed estimate so the customer isn't signing a blank check.
Never mix the two inside one job without telling the customer which parts are flat rate and which are hourly. That's where trust breaks and you get the callback demanding a refund.
Flat rate book math
| Loaded labor cost | $85/hr |
|---|---|
| Target labor margin | 50% |
| Book rate needed$85 / (1 - 0.50) | $170/hr |
| 1-hour flat rate task | $170 labor + parts + markup |
The math: Loaded hourly cost divided by (1 minus target margin) gives you the rate to build your flat rate book on. Every task in the book gets priced in book-rate hours, not actual minutes.
Where owners get this wrong
- Building a flat rate book off a national price list instead of your own loaded cost.
- Letting techs quote time and materials verbally because 'the flat rate book didn't have this one,' which erases your pricing discipline.
- Not updating the book when parts costs move.
Worth knowing: Flat rate books need updating at least twice a year or your margin erodes quietly as material costs rise.
Ask your version of this question
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