Flat-Rate vs. Time-and-Materials: Choosing and Building Your Pricing Model
Flat-rate or time-and-materials? Most repair shop owners never actually choose. They inherit whichever pricing model their first boss used and run it for decades.
The difference matters more than most owners think. A flat-rate book is a menu of task codes, each priced from a standard labor time, a fully loaded hourly rate (wage plus taxes, truck, insurance, overhead, profit), and parts markup baked in. The customer sees one number, quoted before the wrench comes out.
T&M looks simpler and leaks everywhere. Diagnostic time gets under-logged. Drive time goes unbilled. Clock rounding always goes down. And when the customer can see the meter, they negotiate the meter. An illustrative case: a shop billing $140/hr that under-logs 25 minutes per job across eight daily jobs walks away from roughly $14,000 a year per truck. On work the tech actually did.
Both models get gamed by techs, in opposite directions. Flat-rate plus commission pay invites cherry-picking the fat task codes. T&M invites slow-walking, because nobody gets paid more for finishing early. You manage whichever distortion you can measure.
And customers? Homeowners want a fixed number up front. Commercial accounts often want the hourly meter and read flat-rate as padding. That's why a lot of healthy shops run hybrids: flat-rate residential menu, contracted hourly for property managers, disclosed T&M for genuinely unpredictable jobs.
The full guide covers how to build a price book from your own job history, a month-by-month migration path from T&M to flat-rate, and a worked example showing the per-ticket difference: Flat-Rate vs. Time-and-Materials on ServiceMag