Most customers prefer to know the exact price of a product or service before they buy it, which is why contractors often use a flat rate pricing strategy. They argue that many industries have already moved to the flat rate model, and customers are used to paying one price for everything from cell phone service to shipping packages. In addition, contractors say a flat rate approach makes it easier to close sales because it is not necessary to calculate the price of labor and materials on every job.
Others prefer the time and materials (T&M) approach, which usually involves charging a standard hourly fee for labor, along with the cost of any materials or equipment used for the job, plus a markup to cover overhead and profits. Contractors using this method say it is more transparent and fair, as customers can see exactly how much time was spent on the job and how much the parts cost.
There are pros and cons to both pricing strategies, which is why many contractors have determined a combination of the two makes the most sense.