How work is priced determines who carries the risk when it takes longer than expected.
Time and materials
Charged at an hourly rate plus parts at cost with a markup.
The customer carries the risk: an overrun is billed. The business is protected but cannot benefit from working efficiently, and the customer has no certainty, which makes larger jobs harder to sell.
Fixed price
One price for the defined job, quoted in advance.
The business carries the risk, and in exchange keeps the gain when work goes well. This makes accurate estimating essential — a fixed price set from a wrong estimate loses money on every job it is applied to, and the loss is only visible through job margin.
What is excluded matters as much as what is included, which is why scope and change orders belong in writing — see change orders.
Flat rate
A published price per task, the same for every customer regardless of how long it takes.
It is quoted before work starts, removes the argument about hours, and rewards the efficient business. Building the book requires knowing the true average time and labour cost per task, which is why it suits established trades with repeatable work.
Cost plus
Documented cost plus an agreed percentage. Used on large or open-ended work where the scope genuinely cannot be fixed.
It requires cost records the customer will accept, and the margin is capped at the agreed percentage.
Choosing
Repeatable work suits flat rate. Well-specified projects suit fixed price. Genuinely unknown work suits time and materials.
Whichever is used, the price has to cover labour at its full cost, materials, a share of overhead, and profit — see pricing adequacy. The model changes how the price is presented; it does not change what it has to cover.