Hourly or Flat Rate: Which One Fits Your Work

The short version

• Hourly transfers risk to the customer. Flat rate transfers it to you.
• Flat rate only works on jobs you have done enough times to predict.
• Getting faster raises your effective rate on flat work and lowers your revenue on hourly work.
• Most healthy service businesses run both, split by job type.

The hourly versus flat rate argument gets treated like a personality test. It is not. It is a question about who carries the risk of the job taking longer than expected, and the right answer changes from one job type to the next inside the same business.

Here is how to decide, job type by job type, instead of picking a side.

What each model actually does

Hourly means the customer pays for time. If the job runs long, they pay more. You are protected and they carry the uncertainty. That is why hourly is standard on diagnostic work, repairs behind walls, and anything where the scope is genuinely unknown at the start.

Flat rate means you name a number and live with it. If the job runs long, you eat it. If it goes fast, you keep the difference. You carry the uncertainty, and in exchange you get a clean yes or no from the customer and a reward for being good at your trade.

Flat rate punishes you for unfamiliar work

The only way to quote a flat price safely is to know the distribution of outcomes. You need to have done the job enough times to know that it usually takes two hours, sometimes three, and occasionally five when the previous installer did something creative.

If you have done a job type twice, you do not know that distribution. You know two data points. Quote those jobs hourly until you have enough repetitions to price the average with confidence, then move them to flat rate. Treat it as a graduation, not a philosophy.

Hourly quietly punishes you for getting good

An owner who takes four hours on a job earns more than one who takes two, if both bill hourly at the same rate. That is the structural problem with hourly work. Every efficiency gain you make hands money back to the customer.

This is why experienced trades move their bread and butter jobs to flat rate as soon as they can. The tool you bought to cut the job in half should pay you back, not the customer.

Customers hear the two models very differently

A flat price is a decision the customer can make once. An hourly rate is a decision they keep making, silently, the whole time you are in their house. Owners who bill hourly know the feeling of a customer hovering, checking the time, mentioning that the last person did it faster.

That tension costs you referrals and review stars even when the bill is fair. On routine work, a flat number buys you a calm job site, and a calm job site is worth real money.

• Flat rate: one decision, no clock watching, easy to compare
• Hourly: fair on unknowns, but the customer is doing math the whole time
• Hybrid: a flat diagnostic fee, then a flat price for the repair once you can see it

The hybrid most service businesses land on

The common landing spot is a flat diagnostic or trip fee, credited toward the work if the customer proceeds, followed by a flat price for the actual repair once you have eyes on it. The customer gets certainty at each step. You never quote blind.

Set up your catalog this way and quoting stops being a negotiation. You are picking a diagnostic fee, then picking a repair from a priced list.

Choosing a model by job type

| Job type | Model that fits | Why | | --- | --- | --- | | Routine install you do weekly | Flat rate | You know the time distribution cold | | Diagnostic or troubleshooting | Flat fee, then flat repair price | Scope is unknown until you look | | Repair behind finished surfaces | Hourly or time and materials | Conditions can change everything | | Recurring cleaning or maintenance | Flat per visit | Predictable scope, predictable time | | A job type you have done twice | Hourly for now | Two data points is not a distribution |

Do this before your next job

Sort your job types into two columns before you quote anything else.

1. List every job type you sold in the last ninety days and count how many times you did each.
2. Move anything you have done often and can time confidently into the flat rate column.
3. Leave diagnostics, concealed repairs and unfamiliar work in the hourly column for now.
4. Set a flat diagnostic fee that is credited toward the repair if the customer proceeds.
5. Revisit the columns every quarter and graduate the job types that have earned it.

Common questions

Can I charge flat rate and still bill for extras?

Yes, through a change order. The flat price covers a written scope. Anything outside that scope is quoted separately and approved before you do it.

What if I lose money on a flat rate job?

You will, sometimes. That is the deal. What matters is the average across a job type. If a job type loses money on average, the flat price is wrong, not the model.

Do customers ask for an hourly rate anyway?

Often. The answer is that you price by the job so they know the number before you start. Most people prefer that once they hear it framed that way.

How many repetitions before I move a job to flat rate?

There is no magic number, but you want enough that a bad one does not surprise you. If you can describe what goes wrong on this job type and how often, you are ready.

Keep reading

• How to Price a Service Job Without Guessing
• How to Raise Your Prices Without Losing Your Best Customers
• Invoicerus for electricians
• Invoicerus for cleaning companies

Try it on your next job

Open the job price calculator and run one real job through it. No account, no card, nothing to install. If it saves you time, the free invoice generator is the next one to try.

Invoicerus does the same work on autopilot once your services and prices are set up. Start free and bring one week of jobs with you.