Flat-rate pricing increases average ticket 15-30% compared to time-and-materials billing, according to ServiceTitan's industry data. Customers prefer flat-rate because it eliminates surprise costs. You benefit because faster techs make you more money instead of less.

Flat Rate vs Time and Materials

Time and Materials: You charge for hours worked plus materials. Simple but penalizes efficiency - a tech who finishes in 1 hour earns you half what a tech who takes 2 hours earns.

Flat Rate: You charge a fixed price per job type based on your pricebook. A water heater installation is $X whether it takes 2 hours or 4. Faster techs mean higher margins.

ServiceTitan data shows contractors who use pricebooks close 20% more estimates because customers know the exact cost upfront.

Building a Pricebook

1. List your 50 most common jobs

2. Calculate true cost for each: average labor time x your loaded labor rate + average material cost + overhead allocation

3. Add your target margin (typically 50-65% gross margin for residential service)

4. Round to clean numbers ($279 looks better than $267.38)

5. Review quarterly and adjust for material cost changes

Good/Better/Best Pricing

Offering three price options increases average ticket by 15-25%. Most customers choose the middle option.

Example for a water heater replacement:

  • Good: Standard tank water heater, 6-year warranty - $2,200
  • Better: High-efficiency tank, 10-year warranty, expansion tank included - $3,100
  • Best: Tankless water heater, lifetime warranty, whole-house water line flush - $4,800

The psychology works because: The "good" option feels bare minimum. The "best" feels expensive. The "better" option feels like the smart choice.

Pricing Mistakes

1. Pricing based on competitors instead of your actual costs - competitors might be losing money

2. Not including overhead in your cost calculation - trucks, insurance, tools, office, and marketing are real costs

3. Discounting to win jobs instead of selling value - low prices attract low-quality customers

4. Not raising prices annually - if you haven't raised prices in 2+ years, inflation has eaten your margins

Build your pricing strategy

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How to Raise Prices

Raise prices 5-8% annually. Communicate the increase proactively:

"Effective [date], our service rates will increase by [X]% to reflect increases in materials, fuel, and wages. We remain committed to providing the highest quality [trade] service in [area]."

Most customers won't notice or care. The ones who leave over a 5% increase were likely unprofitable anyway.

Worked Example: Flat Rate vs T&M Revenue Comparison

10 water heater installs/month. T&M pricing: average 4 hours × $85/hour labor + $800 materials = $1,140/install × 10 = $11,400. Flat rate pricing with good/better/best: Good $2,200 (20% choose), Better $3,100 (55% choose), Best $4,800 (25% choose). Weighted average: $3,255/install × 10 = $32,550. Revenue increase: $21,150/month = 186% more revenue from the same 10 jobs. Materials cost remains similar - the increase is margin.

What Not to Do

  • Don't price based on competitors. Your costs, overhead, and value are different. A competitor charging $150/hour might be losing money. Price based on YOUR costs + YOUR target margin.
  • Don't give verbal estimates. Written estimates with 3 options close 20% more than verbal. The customer needs to see the value breakdown to make a decision.
  • Don't discount to win the job. Discounting trains customers to expect lower prices and attracts price shoppers. If you lose on price, you lost a customer who would have complained about the bill anyway.
  • Don't forget to update your pricebook quarterly. Material costs change. If you're using prices from 6 months ago, your margins are shrinking without you realizing it.

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