Flat Rate vs Hourly for a Small Electrical Shop: The Math, Not the Opinions

Updated August 28, 2026

For a small electrical shop, flat rate wins on repeatable service work and hourly wins on open-ended troubleshooting, and the shop that does best uses both: a service call fee to diagnose, then a flat price from a book to fix. The argument on the forums is mostly about which one customers like or which one is “honest.” The useful question is which one pays your overhead on the jobs you actually do, and that is a math problem, not a values problem.

Below is the same shop, the same jobs, priced both ways.

The shop we are pricing

To compare fairly we need a shop rate that already includes overhead and margin. Using the worked example from our price book guide: $27,200 overhead, an $85,000 salary with 20 percent burden, 48 weeks at 50 hours with 55 percent billable. That is 1,320 billable hours, a true cost of $97.88 an hour, and a shop rate of $120 after a 15 percent margin and rounding.

That $120 is the hourly rate in the hourly scenario and the labor input in the flat-rate scenario. Same shop, same cost, two ways to invoice it.

What hourly actually means

Hourly, or time and materials (T&M), bills the clock. Sounds simple. In practice it has four hidden rules a one-man shop has to write down:

• Does the clock start at the shop, at the driveway, or at the panel?
• Is there a minimum, and how much? (One hour is common; some shops bill two hours as the service call.)
• How is the time rounded - to the quarter hour, the half hour?
• Is the supply-house run billable?

Every one of those is a negotiation waiting to happen, usually at the end of the job, when the customer has already decided what they think it should cost.

What flat rate actually means

Flat rate, sometimes called upfront pricing, quotes a fixed price per task before work starts. The price comes from a book built on your shop rate, base hours per task, a grade for difficulty, and marked-up material. The customer approves the number, you do the work, the number does not change unless the scope does.

The hidden rules here are different: the book has to be right, it has to be maintained, and you have to be willing to pick a grade and stand behind it.

The same three jobs, both ways

Take three jobs at the $120 rate, 25 percent material markup.

Look at the middle row. The fan took an hour because it was a modern house with a braced box. Hourly, the customer paid $120. Flat rate, they paid $180 and were happy, because you quoted $180 up front and they said yes. You earned $60 more for being fast.

Now the last row. The panel took 7.5 hours because the old feeders were short and you had to splice in a junction box. Hourly, you invoiced $2,025 and had an awkward conversation about why it was more than you guessed. Flat rate, you got $1,845 and ate $180 of your time - unless you graded it Hard on site, which the book allows: 6 x 1.35 x $120 + $1,125 = $2,097, rounded to $2,100. That is the point of grades.

Where each method wins

Flat rate wins when:

• The task is repeatable and you know the hours (receptacles, fans, fixtures, breakers, dedicated circuits, EV chargers).
• You are faster than average. Hourly gives your speed to the customer; flat rate keeps it.
• You quote in the driveway. A fixed price closes on the spot; “I’ll send an estimate” loses a third of them.
• You want fewer arguments at invoice time. The price was approved before the ladder came off the truck.

Hourly wins when:

• The scope is unknown until you open things up: intermittent faults, dead circuits in old houses, “half the kitchen is out.”
• The job is genuinely one of a kind and you have no base hours for it.
• You work for general contractors or property managers who want T&M with a rate sheet, and they pay on time.

Both lose when the shop rate underneath them is wrong. A flat-rate book built on $75 an hour when your true cost is $97.88 just loses money with more confidence.

The forum fight, translated

You will read that flat rate is a rip-off, and you will read that hourly is for amateurs. Both come from the same place: a customer or a tradesperson who saw one price without the math.

“Flat rate rips people off” usually means a big-truck company with TV ads and 40 percent overhead charged $450 for a receptacle. Their book was right for their overhead. That is a different business, not proof that flat rate is dishonest.

“Hourly rewards the slow guy” is true, and it is the strongest argument for flat rate for a good electrician. If you finish in forty minutes what takes the next shop ninety, hourly billing hands your skill to the customer for free.

The honest framing for customers: flat rate is the price of the job done right; hourly is the price of your time. Both have to cover the same overhead.

The hybrid most good small shops end up with

1. Service call fee of $100 to $200, covering the drive, the first 30 to 60 minutes and the diagnosis. This is effectively hourly with a minimum, and it protects you on unknown-scope calls.
2. Flat price from the book for the repair, picked by grade on site, approved before work starts.
3. T&M only for jobs you could not price from the book, with a written rate and the clock rules agreed in advance.

That structure gets the certainty of flat rate on 80 percent of work and the protection of hourly on the 20 percent that could go sideways.

How to switch from hourly to flat rate without losing customers

• Build the book first. Not a price list copied from someone else - a book that comes from your rate. Our Flat-Rate Price Book Builder does the engine and 75 tasks if you want a running start; the guide linked above shows how to do it by hand.
• Start with new customers. They have no anchor. Existing customers can move over as their next jobs come up.
• Present one price, not a rate. The moment you say “$120 an hour” the customer starts a stopwatch in their head. Say “$180 to replace the fan, parts included.”
• Keep the service call fee. Customers understand paying for a diagnosis; it also filters the ones who wanted a free opinion.
• Expect your effective rate to rise. Shops that switch commonly find their realized rate goes up - one forum example doubled to $100 an hour - because flat rate stops giving away speed.

Next step

Whichever way you bill, the number underneath has to be right. Run your overhead, salary and billable hours through the free Trade Hourly Rate Finder. If the rate it gives you is a surprise, the billing method was never the problem.

Frequently asked questions

Is flat rate legal or is there a rule about showing hourly rates? Flat rate is standard practice in residential service. Some states require written estimates above a dollar threshold or specific disclosures on invoices; check your licensing board. A flat price on a signed quote generally satisfies written-estimate rules better than an hourly guess does.

What do I do when a flat-rate job goes badly over? Grade it Hard before you start when you can see the risk. When you cannot, eat it, then fix the base hours or add a “hidden conditions” line to the quote that lets you stop and re-quote if you find something unexpected behind the wall.

Can I do flat rate for commercial work? Small commercial service, yes - the same book with a commercial rate column that runs 20 to 40 percent higher. Bid work for general contractors is usually estimated per job, not priced from a book.

Does flat rate mean I stop tracking my hours? No. Track them harder. Actual hours against base hours is how the book stays honest and how you find out which tasks are underpriced.