Flat Rate vs Time & Materials
The pricing model debate for trade contractors. Here's how to think about it—and why the answer is usually "both."
Flat Rate Pricing
A fixed price quoted before work begins. Customer pays the same regardless of actual time or complications.
Advantages
- Higher margins when jobs go faster
- Customers prefer price certainty
- Easier to sell upgrades and options
- Rewards technician efficiency
- Predictable revenue per call
- Reduces "watching the clock" perception
Disadvantages
- Requires accurate estimating systems
- Risk on unforeseen complications
- Price book maintenance overhead
- Can feel expensive for simple jobs
- Technicians may rush quality
- Harder for complex/custom work
Time & Materials (T&M)
Customer pays for actual hours worked plus materials used. Final price determined after work is complete.
Advantages
- Fair when scope is uncertain
- Lower risk on complex jobs
- Simple to implement and explain
- Transparent cost breakdown
- Works for change orders
- Commercial customers often prefer it
Disadvantages
- Leaves money on table when fast
- Customer anxiety about final cost
- Perception of "running the meter"
- Harder to sell without job starting
- Invoicing disputes more common
- No reward for efficiency
The Real Answer: Use Both
Most successful trade contractors don't choose one model—they use both strategically.
Flat Rate Works Best For...
- Water heater replacements
- AC/furnace tune-ups
- Standard drain cleaning
- Outlet/switch replacements
- Maintenance agreement work
- Any job you've done 100+ times
T&M Works Best For...
- Troubleshooting/diagnostics (before knowing scope)
- Commercial service agreements
- Retrofit/remodel work
- Jobs where customer is on-site
- Change orders
- Anything with "we'll see what we find"
Making Flat Rate Profitable
Flat rate only works if your pricing is right. Here's what you need:
- Accurate job costing data
You need to know how long jobs actually take and what materials you actually use. Guessing leads to either leaving money on the table or losing bids.
- A maintained price book
Someone needs to update prices as material costs change and as you learn from completed jobs. Stale prices kill margin.
- Trained technicians
Your techs need to be able to diagnose correctly, present options confidently, and complete work at the pace your pricing assumes.
- A process for exceptions
What happens when the "simple" job turns complex? You need a clear policy for scope changes.
The Hybrid Approach
Many contractors use a hybrid: flat rate for diagnosis, then T&M for repairs. Or flat rate for standard work with T&M for anything non-standard.
Example plumbing approach:
Diagnostic call: $89 flat rate
Standard repair (e.g., faucet replacement): Flat rate from price book
Complex repair (e.g., re-pipe): "Here's a range. Final depends on what we find. We'll communicate throughout."
This captures the benefits of both models while managing customer expectations.
Frequently Asked Questions
What is flat rate pricing for contractors?
Flat rate pricing means quoting a fixed price for a job before work begins. The customer knows the total cost upfront, regardless of how long the work takes or complications that arise.
What is time and materials (T&M) pricing?
Time and materials pricing charges customers for actual hours worked plus the cost of materials used. The final price depends on how long the job takes and what parts are needed.
Which is more profitable, flat rate or T&M?
Flat rate is typically more profitable for service work when you have good estimating systems. You capture efficiency gains when jobs go faster than expected. T&M is often better for complex or uncertain scope work.
How do I transition from T&M to flat rate?
Start by tracking actual job times and materials for 3-6 months. Build a price book from real data. Train technicians on presenting prices. Start with your most common services, then expand.
Do customers prefer flat rate or T&M?
Residential customers generally prefer flat rate—they want to know the cost before saying yes. Commercial customers are often more comfortable with T&M, especially for maintenance contracts.
Related Resources
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