Hourly or Flat Rate for Small Jobs: How to Decide and Stay Profitable

Should I charge hourly or flat rate for small jobs?

Charge a flat price when the job is small, clearly defined and one you have done many times, and charge hourly when you can't see the end of the work.

Both can keep small jobs profitable. What loses money is a price built on a bad number or a scope that was never written down. Use these rules to sort a job in a couple of minutes:

• Flat price if you can describe the finished job in one sentence, you have done it at least five times, and a photo shows you everything you need.
• Hourly (or time and materials) if the problem is hidden, the customer is still deciding what they want, or you are fixing something rather than installing something.
• Either way, set a minimum charge so a short visit across town still pays.

Flat pricing also fixes two common complaints. The customer who argues about the hours gets one number up front, and you stop being punished for working fast. For example, Housecall Pro defines flat-rate pricing as quoting one simple price for the service, such as $130 to replace an appliance cord (Housecall Pro). Software can hold either approach: ServiceTitan's pricebook can be set up for both flat rate and time and materials billing (ServiceTitan), and field service tools like Jobber are used to send quotes and invoices either way.

If a customer asks for your hourly rate on a flat job, try this: 'I price by the job so you know the total before I start, and it covers everything on the list I sent you.' Most people ask because they don't want a surprise at the end.

How do I figure out my hourly rate so I actually make money?

Add the pay you want to your yearly overhead, then divide by the hours you can really bill, which is far fewer than the hours you work.

Work through it in this order:

1. Write down the yearly pay you want before taxes.
2. Add overhead: truck, fuel, insurance, tools, phone, software and advertising.
3. Estimate billable hours. Driving, estimating, supply runs and paperwork are hours you work but can't bill.
4. Divide the total by the billable hours.

Say you want $60,000 in pay and your overhead is $24,000. If you can bill 1,000 hours, then $84,000 divided by 1,000 hours gives you an $84 hourly rate. If you had guessed 1,800 billable hours, you would have landed near $47 an hour and been underpriced all year.

ServiceTitan offers a free Labor Rate Calculator on its website (ServiceTitan), and its contractor playbook says that working out direct labor cost can confound the most seasoned contractors (ServiceTitan). So if your number feels shaky, you are in good company. Our free job cost calculator can help you check a job against your rate.

This matters most on small jobs. Say a $150 job takes 1 hour on site and 80 minutes of driving, then at an $84 rate your time alone is about $196 before gas. That is why a minimum charge, or a trip charge for far addresses, belongs in every small-job price.

What jobs should I never give a fixed price on?

Don't fix a price on work where you can't see the problem, such as leaks, rot, electrical troubleshooting or anything behind an old wall.

The risk is simple: the price gets locked in before you know the job. A few jobs to keep off the flat-price list:

• Anything where opening it up changes the work (water damage, old framing, plumbing in a wall).
• Troubleshooting, where finding the problem is half the job.
• Jobs for a customer who keeps changing the plan.
• Work in an old house where you have never seen what's behind the finish.

You still have two ways to protect yourself. One is hourly with a not-to-exceed number, where you stop and call the customer before you pass it. The other is two steps: charge a flat diagnosis visit first, then give a flat price for the repair once you know what it is.

For a flat-price job that runs long because you misjudged it, that one is on you. Write down the actual hours, eat the loss, and raise that item on your menu so the next one is right.

How do I build a flat-price menu for my most common jobs?

Pick your five to ten most common jobs, time them honestly, multiply by your hourly rate, add materials, and round up to a price you can post.

Here is how to do it:

1. Pull your last few jobs of each type and use the real hours, including driving, loading, cleanup and the supply run.
2. Use your slower typical time, not your best day.
3. Multiply the hours by your hourly rate.
4. Add materials at cost, plus a markup if you source them and stand behind them.
5. Round up, and write what is included and what is not.

Say your rate is $84 an hour. The numbers below are an example of how it works out:

For measured work like painting or flooring, Housecall Pro's help center uses the formula Price per Sq Ft = Hourly Labor Price ÷ Production Rate (Housecall Pro). Its documentation also covers entering your labor rate, hourly cost and hourly price for pricebook items (Housecall Pro). A spreadsheet or a note on your phone works just as well when you are starting.

ServiceTitan's Dynamic Pricing adjusts flat-rate prices for things like after-hours work and add-ons (ServiceTitan). You can do the same by hand: add a set amount for evenings, weekends or rush jobs.

Should I take a deposit on a small job, and how much?

Yes, take a deposit on any job where you buy materials or hold a day on your calendar, and size it to at least cover the materials.

A deposit stops you from fronting money and cuts down on no-shows. Say a job has $180 in materials and a $450 price, then a $200 deposit means the customer has already paid for the materials before you buy them. If it is a same-day repair with no special-order parts, you can skip the deposit and collect when you finish.

Rules on deposit limits and what must go in a contract vary by state, so check with your state's contractor registration office before you set your policy. For a deeper look, see our post on contractor deposits in the blog.

In MagicBuild, Magic can build an estimate from a photo and a description at your own prices. The client gets it by email, signs on their phone and can pay the deposit by card or bank, and the signed estimate becomes a project automatically.

How do I handle a customer who keeps adding things to a fixed-price job?

Stop and write it down before you do it: every extra gets a short change order with a price that the customer approves before you pick up a tool.

The change order does not need to be fancy. Use three lines: what the extra is, the price, and the customer's reply of 'OK' by text or email. Here is how to say it on site: 'Happy to do that. Let me price it so we're both clear, and I'll text it over.'

Price extras from your menu or your hourly rate with a one hour minimum. Say you quoted a $300 door hang and the customer asks you to trim a second door. If that is about an hour at an $84 rate, write 'Trim second door, $84' and wait for the reply.

If the extra really is 15 minutes, you can choose to do it free, but write it on the invoice as a courtesy so the customer sees the value. A free change order used on purpose builds goodwill, while one you do out of awkwardness teaches people to keep asking.

At the end, send the final bill with the original price and each approved change listed. Our free invoice template is one way to lay that out.

Put it to work on your next small job

Sort your next job with the rules above, price it from your own rate, take a deposit and put every extra in writing.

If you want the estimate, signature, deposit and job profit in one place, start a free trial of MagicBuild and use it free for 14 days. You can also see what MagicBuild does or just run your numbers through the free job cost calculator first.