This is one of the oldest debates in the trades. Some guys swear by hourly. Others won't touch a job unless it's a flat bid. The truth? Both models work — but each one works best in specific situations. Using the wrong one will cost you money.
Flat Rate (Fixed Price) Bidding
You estimate the total cost of the job — materials, labor, overhead, and profit — and give the client one number. That's the price regardless of how long it takes.
When Flat Rate Works Best
- Jobs you've done many times before (you can estimate accurately)
- Well-defined scope with clear start and end points
- Clients who want cost certainty upfront
- Competitive bid situations where clients are comparing prices
- Larger projects where hourly would scare the client off
The Pros
- You get paid for efficiency — the faster you work, the higher your effective hourly rate
- Clients know exactly what they're paying, which reduces friction
- Easier to sell because the client isn't watching the clock
- More professional appearance on proposals
The Cons
- If you underestimate, you eat the loss
- Surprises (rot, hidden damage, difficult access) come out of your pocket
- Requires accurate estimating skills
- Change orders are essential to protect yourself
Hourly (Time and Materials) Pricing
You charge a fixed hourly rate plus the cost of materials (usually with a markup). The client pays for the actual time spent.
When Hourly Works Best
- Repair and diagnostic work where the scope is unknown
- Small handyman-style jobs (a few hours or less)
- Jobs with a high chance of hidden conditions (old homes, water damage)
- Ongoing maintenance or punch list work
- When you're new to a type of work and can't estimate reliably
The Pros
- You always get paid for your time, even if the job takes longer
- Less risk of eating unexpected costs
- Simpler to quote — just give your rate
- Works well for ongoing client relationships
The Cons
- No reward for working efficiently
- Clients get anxious watching hours add up
- Harder to win competitive bids
- Some clients will question every hour on the invoice
The Hybrid Approach
Many experienced contractors use both. They bid the main job at a flat rate and handle extras at an hourly rate. This gives the client cost certainty on the core work while protecting you on the unknowns.
- Flat rate for the defined scope of work
- Hourly rate stated in the estimate for any additional work
- Change orders for anything outside the original scope
- Weekly or milestone billing to keep cash flow healthy
Know Your Numbers First
Regardless of which model you use, you need to know your true cost per hour — what you need to earn after taxes, insurance, overhead, and expenses. If you don't know that number, neither pricing model will save you. Do the math once, write it down, and let that number guide every bid you send.