How a flat rate is built
Each task in a price book gets one price. A common build is the expected time for the task at your billable rate, plus the usual parts with their markup, plus a margin for the cost of mistakes and callbacks. The customer sees one number, agreed before work starts.
Example
Illustrative numbers only. A seasonal tune-up usually takes 1.5 hours and uses $12 of supplies. At a billable rate of $95 an hour, the labor is $142.50. With the supplies marked up to $18, the flat rate is $160.50, which a business might round to $159 or $165.
When it works
- The task is repeatable and you know how long it takes.
- The customer wants a firm price up front.
- Your technicians finish faster than the standard time, because the saving is yours to keep.
When it does not
Diagnostic, emergency and open-ended work is hard to price in advance, so a flat rate either overcharges or leaves you absorbing the overrun. That work is often better billed as time and materials. A flat rate also only stays profitable if the underlying task times and costs are accurate.
Related
Definitions here are general and educational. Exact meanings can vary by trade, region, and software.