Whether a job goes out flat rate or time and materials comes down to how well you already know what the work costs before anybody starts it. Work you have done enough times to price from a book goes flat rate. Work nobody can scope until an electrician is standing in front of it goes time and materials, with a ceiling on it the customer has approved.
What most shops are missing isn’t a preference between the two. It’s a rule that picks one before a number goes in front of a customer, and a line on the estimate that records which one got picked. Do that for a few months and job costing can finally tell you whether the price in your book is right.
Which work fits which model
Flat rate fits repeat work with small variation. A panel swap on the kind of house you have done fifty versions of. A ceiling fan on an existing fan-rated box. Adding a dedicated circuit in a garage with the panel on the other side of the same wall.
You know the hours, you know the material, and you know what goes sideways often enough that it’s already priced in. The customer gets a number before anything starts, and any efficiency you have built stays with you.
Time and materials fits work where the scope isn’t knowable from the office. Troubleshooting that could be a loose connection in one J-box or a damaged conductor behind finished drywall. Correcting somebody else’s work. An older house where the panel schedule and the actual circuits stopped matching a long time ago.
You can’t put a fixed price on hours nobody can count yet. What you can do is say that to the customer up front, and give him a number the bill will not go past without him agreeing to it first.
Why does the same job go out priced two different ways?
Because nothing in the shop assigns it. There’s no rule that says which model this work gets, so the assignment falls to whoever is building the estimate that afternoon, with the information and the schedule they have that day.
Busy week, the number goes out hourly, because hourly doesn’t require sitting down with the material list. Slow week, it goes out flat to win the job. Customer sounds price-sensitive on the phone, and it hedges back to hourly.
Every one of those calls is defensible on its own. None of them is written down anywhere, so next month the same work goes out the other way and neither version is wrong. The customer sees a shop that prices the same job two different ways. You see a set of numbers you can’t learn anything from.
What that costs you at job costing
If half your panel swaps went out flat rate and half went out hourly, you don’t have a group of jobs to compare. You have a pile of one-offs.
Job costing can tell you what any single job made. It can’t tell you whether the price in the book is right, because there aren’t enough jobs priced from the book to say.
So the book stays where you first set it. The only signal you ever get is the occasional job you clearly ate.
Let the price book decide, and write it on the estimate
The rule is short enough to say in one line. If the task is in the price book, it’s flat rate. If it isn’t in the book, it’s time and materials.
That takes the decision off the person building the estimate and puts it on a document. It also tells you what your price book is actually for. Not a nice-to-have list of common jobs, but the thing that decides how every piece of work gets sold.
Then the estimate has to carry the decision, not just the number. A required field with two values, flat rate or T&M, filled in before the estimate leaves.
The office knows what was sold. Your guy on site knows whether he’s working against a fixed price or against a clock. The invoice comes out matching what the customer agreed to, because both are reading the same field.
Anything going out as time and materials needs a ceiling on it that the customer approves in writing, and a rule that nobody works past that ceiling without calling the office first. On a commercial work order it’s the not-to-exceed amount, sitting next to the purchase order number. Residential time and materials needs the same thing, for the same reason. A customer will agree to hourly billing again on the next job if he knows in advance where the bill stops.
Any task you have quoted T&M three times that comes in around the same place goes into the price book. That’s the book growing out of real jobs instead of guesses, and it’s how work you couldn’t price last year becomes work you can price this year.
FAQ
Should service calls be flat rate or hourly?
The diagnostic and the repair are two different things. Diagnosing an unknown fault is time you can’t count in advance, so it goes hourly or gets covered by your diagnostic charge. The repair, once it’s identified, is usually a task you have done many times, and that belongs in the price book at a fixed price.
How do I price a job I can’t scope until somebody is on site?
Time and materials with a ceiling the customer approves before work starts, and a standing rule that nobody passes the ceiling without calling the office. That gives the customer a number he already agreed to. It gives you a phone call in the middle of the job instead of an argument at the invoice.
Do I need a price book if I’m a small shop?
You need one more than a big shop does, because with fewer people building estimates, the pricing lives in one or two heads and leaves when they do. It doesn’t have to start large. Ten tasks you perform every week, priced once, is a working book.
What’s a not-to-exceed and when should I use one?
It’s a dollar ceiling on time-and-materials work that the customer approves before you start. You’ll see it on commercial and property-management work orders, listed alongside the purchase order and work-order number. It’s worth putting on residential time and materials too, because it’s the thing that keeps an open-ended bill from turning into an argument at the end.
