What Is a Flat Rate Price? (And Should You Offer It?) 

Every dollar counts. There’s a lot of pressure to get your pricing strategy right. 

In the HVAC industry, businesses have two main options. The first is time and materials. The second is flat rate pricing. This article will focus on strategy number two. 

What is a flat rate price? Should you offer it? Can it help you make more money? We’ll get to the bottom of these questions and more in this guide. 

We’ll start with an introduction to flat rate pricing. Then, we’ll take a deep dive into how flat rate pricing works across common HVAC services. 

We’ll explore the pros and cons of flat rate pricing before comparing it in detail with time-and-materials pricing. 

We’ll give you a step-by-step process on how to calculate flat rates. Then, we’ll help you decide if it’s the right choice for your business and customers. 

To wrap it up, we’ll finish with a few tips on getting started. 

There’s no right or wrong way to run your business. The same goes for pricing. But with a bit of know-how and a few tweaks, you can strengthen your profit margin while delighting your customers. 

Here’s everything you need to know about flat rate pricing. 

Introduction to Flat Rate Pricing 

Let’s kick things off with a definition. 

Flat rate pricing is a pricing model. It’s when you charge a fixed amount for a specific service. You determine the cost of a job upfront, and the customer knows exactly what they will pay before any work begins. 

You set the price based on your labor costs, parts, and profit margin. There are zero surprises for you or your customer. 

Flat rate pricing is different from time-and-materials pricing. In time-and-materials pricing, you charge customers based on the actual time spent on the job and the materials used. 

Costs can fluctuate. For example, a repair job that takes one hour is cheaper than a repair job that takes three—even though they are both repairs. 

RELATED ARTICLE: Why Use Flat Rate Pricing: The Benefits You Need to Know 

How Flat Rate Pricing Works in HVAC Services 

Let’s explain how flat rate pricing applies to different types of HVAC services. 

Flat Rate Pricing for Maintenance 

Maintenance is your bread and butter. The good news? It’s one of the easiest services to use flat rate pricing. 

Why? Because most of your maintenance jobs follow the same predictable routine. You inspect the system, make some adjustments to optimize its performance, and provide any further recommendations. 

For example, let’s say your business offers an annual HVAC maintenance package for $150. This package might include: 

• Inspecting the system 
• Cleaning the condenser coils 
• Checking refrigerant levels 
• Testing the thermostat 
• Changing filters 

Whether you are new to the industry or have been here for decades, chances are you have a good understanding of how long these duties take. You also know what materials you’ll need. 

Flat Rate Pricing for Repairs 

Repairs are a little more complicated because they vary from job to job. That being said, many common issues can be solved at a flat rate. 

Let’s say you have a customer whose air conditioning isn’t cooling. After diagnosing the issue, you know that a new capacitor is needed. 

Instead of charging for time and materials, you offer a flat rate of $300 for the repair. This price includes: 

• The cost of the capacitor 
• Labor to replace it 
• Checking the system to make sure it’s running as expected 

Flat Rate Pricing for Installations 

HVAC installations are typically bigger jobs. Despite this, flat rate pricing can still work. 

For example, when you install an air conditioning unit in a standard family home, you can roughly predict the cost. You know how long it’ll take for your team to complete the job. 

You might charge a flat $6,000 to install a new central air system. This price captures: 

• The cost of the unit 
• Labor for installation 
• Any additional materials (think ductwork, wiring, and so on) 

The Pros of Flat Rate Pricing in HVAC 

Offer flat rate pricing and benefit from the following advantages. 

Transparency for Customers 

Surprise birthday parties? Yes, please! Surprise fees? No way. 

Your customers want to know exactly what they’ll pay before the job starts. That way, they feel more comfortable hiring you. It helps you earn their trust. 

Competitive Edge to Close Sales 

The HVAC industry is fiercely competitive. In small markets, this trend is even more apparent. 

You need to stand out for all the right reasons. One way to do this is with flat rate pricing. 

Even if your flat rate price is higher than a competitor’s estimate, your customers might still choose you. You give them peace of mind. But with the competitor, there’s a risk the price will blow way out of their budget. 

You can use this edge as a differentiator. It can help you close more sales. 

RELATED ARTICLE: How to Explain Flat Rate Pricing to Customers (Home Services) 
 

Simplified Billing Process 

Billing becomes simpler when using flat rate pricing. You don’t have to track every hour worked or every part used. 

This reduces errors. Your invoicing process is faster, too. It also makes explaining charges to customers easier. This can dissolve any confusion and lead to fewer disputes. 

Predictable Profit Margins 

In some cases, flat rate pricing gives you more control over your profit margin. 

You can calculate the cost of labor, materials, and other expenses in advance. You can move forward with a job knowing you’re covered. 

Faster Sales Process 

Estimates can take a considerable amount of time to put together—especially if you’re starting from scratch. This process becomes a whole lot quicker with flat rate pricing. 

You don’t have to work out complex calculations for labor and materials. Instead, you can offer an immediate and accurate quote. 

Customers aren’t left waiting either, which can help boost your conversion rate. 

The Cons of Flat Rate Pricing 

Flat rate pricing has its benefits. But there are potential drawbacks, too. 

Underestimating Job Complexity 

Some jobs in HVAC are hard to predict. If you set a flat rate and the job turns out to be way more complicated than expected, you could lose money. 

For example, imagine encountering unexpected problems during a repair or installation. You need more time and resources to overcome it than you planned for. This eats into your profits. 

Fewer Smaller Jobs 

Flat rate pricing applies across the board. This means some jobs feel like a bargain, while others feel a little expensive. 

If you exclusively offer fixed prices, customers might be less inclined to choose you for smaller or simpler jobs. 

For example, say you charge a flat rate for repairs. One job takes 30 minutes. The other takes an hour. Both customers pay the same. 

So, the customer whose repair took half the time essentially paid double. This could lead to fewer calls for minor repairs. 

Less Flexibility for Unique Jobs 

Not every job fits neatly into a flat-rate model. Some jobs need more time. There might be special circumstances, like hard-to-get equipment or unusual repairs. 

Flat rate pricing may not account for these extra challenges. It becomes impossible to adjust your prices fairly. 

Changes in Material Costs 

Material costs and labor rates can change over time. For example, wages in the US rose about 4.4% in July 2024 over July 2023. 

If you’re not regularly updating your flat rates, you could lose money as prices increase. 

On the other hand, changing your prices too often can confuse or frustrate customers. They might be less inclined to stay loyal. 

Flat Rate Pricing vs. Time-and-Materials Pricing 

Flat rate pricing and time-and-materials pricing both have advantages and challenges. 

Flat rate pricing doesn’t change based on how long the job takes or how many materials you use. 

This works best when: You are pricing jobs that you know well. Routine maintenance and common repairs are good candidates for flat rate pricing. 

In time-and-materials pricing, the final price depends on how long the job takes. It also factors in the materials you’ll need. 

This works best when: You are pricing jobs that are unique or have unknowns. For example, you might not know how long it’ll take to fix an issue before it’s diagnosed. If the system is complicated or the problem is unusual, it might be impossible to estimate the cost accurately. 

Flat Rate and Time-and-Materials Pricing Head to Head 

Let’s compare the two side by side. 
 

Feature	Flat Rate Pricing	Time-and-Materials Pricing
Structure	Fixed price per job	Price changes depending on labor hours and materials
Customer Experience	Predictable and transparent	Less certainty but more flexibility
Best for	Routine services, common repairs, installations	Complex, unpredictable jobs
Billing Process	Simplified billing, fewer disputes	Detailed billing, based on actual time and materials used
Profit Margins	Easier to control and predict	Varies based on job specifics
Sales Process	Faster, as customers know the price upfront	Slower, due to uncertainty of final cost
Risk for Business	Risk of underpricing jobs	Risk of customer dissatisfaction with variable pricing

FROM ONE OF OUR PARTNERS: Flat Rate vs Hourly Rate: What’s the Difference? 

How to Determine Your Flat Rates 

Eager to use flat rate prices? Follow this step-by-step guide to calculate your fees. 

Step 1: Determine Labor Costs 

How much will labor cost you? 

Consider the hourly rate. Make sure to include wages, taxes, and employee benefits. The average HVAC technician gets paid $31 per hour. 

Here’s a basic formula to use: 

Labor Cost = Hourly Rate × Estimated Time for Job 

If the hourly rate is $31 and the job will take 3 hours, the labor cost will be: 

$31 x 3 = $93 

Step 2: Estimate Material Costs 

How much will the materials cost? 

Think about replacement parts and installation materials. 

Let’s say you’re replacing a 1/4 horsepower blower motor. It costs $200. 

Step 3: Add Your Overhead Costs 

How much do you spend running your business? 

Account for all costs, like: 

• Utilities 
• Vehicle expenses 
• Office supplies 
• Insurance 

You need to make sure your flat rate pricing covers these overheads. 

A popular way to do this is to add a percentage to each job. For example, if your overhead is 30%, you’d multiply the labor and material costs by 1.3 to cover those expenses. 

Overhead Cost = (Labor Cost + Material Cost) × Overhead Percentage 

Let’s go back to our example: 

($93 + $200) × 0.30 = $87.90 in overhead costs 

Step 4: Include Your Profit Margin 

How much profit do you need to make? 

A healthy profit margin is an essential ingredient in sustainable success. To achieve this, add a percentage to the total cost of the job. 

For example, you might aim for a 20% profit margin. Use this calculation: 

Profit Margin = (Labor + Materials + Overhead) × Profit Percentage 

($93 + $200 + $87.90) × 0.2 = $76.18 

Step 5: Set Your Flat Rate 

Now, add up all the costs and the profit margin to get your final flat rate price: 

Labor + Materials + Overhead + Profit = Flat Rate Price 

In this case: 

$93 + $200 + $87.90 + $76.18 = $457.08 

You can round up or down to keep the price simple for customers. For example, you might set the price to $460. 

Make It Easier with Tech 

Not too keen on all the math? Technology can be a huge time saver. It can reduce the risk of errors, too. 

Many HVAC businesses use flat rate price books like Service Fusion’s Flat Rate Pricing tool. This type of software allows you to set standard prices for common services. It calculates the cost of labor, materials, and overhead automatically. 

It can also adjust your rates throughout the year as materials or labor costs change. This keeps your pricing up to date and protects your profit margin. 

FROM ONE OF OUR PARTNERS: Why to Use a Prebuilt Flat Rate Price Book vs. Creating Your Own 

Should Your HVAC Business Offer Flat Rate? 

Flat rate pricing can simplify operations—no doubt about it. But it’s not the right fit for every company. 

Ask yourself these questions: 

• Do you handle a lot of routine services? If so, flat rate pricing could make sense. These types of jobs are easier to estimate. 
• Can you accurately estimate job costs? Flat rate pricing demands accurate estimates. If your team is experienced and you understand costs, flat rate pricing can be profitable. But if jobs often take longer than expected or materials vary, you might run the risk of underpricing. 
• How do your customers prefer to be billed? Many customers like the transparency of flat rate pricing. Offering flat rates could improve customer satisfaction. 
• Are you prepared to adjust rates regularly? If you offer flat rate pricing, you’ll need to keep an eye on it. If you don’t have a system in place to help with this, flat rate pricing might not be the way to go. 
• Do you handle a lot of complex or unpredictable jobs? If you do, flat rate pricing might not be the best fit. Time-and-materials pricing could give you the flexibility you need to keep profits up. 

Where to Start with HVAC Flat Rate Pricing 

Simpler estimates and faster billing—that’s what flat rate pricing offers. It also appeals to customers who value honesty and transparency. 

Ready to take advantage? Get started with these three steps: 

• Think about your most common jobs. Decide which services are a good fit for flat rate pricing. 
• Accurately calculate labor, materials, and overhead. Follow our guide above. Take your time to make sure the price covers all costs and leaves room for profit. 
• Test flat rate pricing on select jobs first. That way, you can see how well it works in the real world. Make changes as needed.