Day rate or fixed price?

Every trade eventually settles into one of these and defends it firmly. Both are right, for different work, and using the wrong one is where the bad jobs come from.

The distinction is not about the size of the job. It is about how well you can predict it.

What a day rate really is

A day rate transfers the risk of the job overrunning from you to the customer. That is its entire function and it is a perfectly reasonable thing to do when neither of you can know how long something will take.

It suits work where the scope genuinely cannot be pinned down. Chasing a fault, opening up an old building, anything where the first hour tells you what the next three days look like.

Its weakness is that it caps your upside and it punishes competence. Getting faster at something, buying a better tool or knowing the trick that saves two hours all reduce what you earn. A day rate pays you for time rather than for outcome, and time is the one thing you cannot make more of.

It also creates an unspoken suspicion. Customers on a day rate watch the clock, and some of them will read a slow morning as a slow worker rather than as a difficult joist.

What a fixed price really is

A fixed price transfers the risk to you and pays you for being good. If you can do in four hours what the price assumed would take six, that is your reward for skill, preparation and experience.

It suits work you have done many times, where you know the variables and anything where the customer needs certainty in order to say yes. Most domestic customers strongly prefer a fixed price, because they are budgeting rather than buying time.

Its weakness is obvious. Underestimate and you work for nothing, and you will underestimate occasionally no matter how long you have been doing it.

How to choose

• Have you done this exact job at least five times? Fixed price.
• Is there anything behind a wall, under a floor or inside a machine that you cannot see today? Day rate, or a fixed price for the investigation and a quote afterwards.
• Is the customer nervous about cost? Fixed price, even if it means pricing in more contingency and being open about that.
• Is it a long project with stages? Fixed price per stage, which gives certainty without asking you to guarantee something you have not uncovered yet.
• Is another trade's work going to determine yours? Day rate, or a fixed price with a written dependency and what happens if it slips.

Where the day rate number comes from

Most day rates are set by asking around and landing near the middle. That tells you what the area charges. It does not tell you whether it covers you.

Work it from the bottom instead. Take everything the business costs in a year. Van, fuel, insurance, tools, phone, accountant, software, workwear, the lot, plus what you need to pay yourself. Then count the days you can actually charge for.

That second number is the one people get wrong. There are about 250 working days in a year. Take off holiday, bank holidays, the days you are ill, and the days spent quoting, chasing materials, doing the books and driving to jobs that never happened. A one-van trade that charges for 180 days a year is doing well, and plenty are nearer 160.

Costs and drawings of £54,000 over 180 chargeable days is £300 a day before a single penny of profit. If the going rate round your way is £250, the going rate is wrong, or those businesses are charging for more days than you are, or they are quietly not covering themselves.

Do the same arithmetic before you agree a fixed price. A fixed price is only a day rate with the days hidden inside it, and if you do not know what a day costs you cannot tell whether the quote was any good until it is too late to change it.

The hybrid that solves most arguments

Charge a fixed price for a defined scope, with a stated hourly or daily rate for anything found outside it, agreed in writing before it goes ahead.

The customer gets a number they can plan around. You are protected against the thing nobody could have known about. The critical part is agreeing in advance how variations are handled, because the argument is never about the extra work, it is about the fact that nobody discussed it.

The rule for both

Whatever the shape, write down the scope before starting. Most disputes on both models come from a difference in what each person believed was included, and that difference is completely invisible right up until the invoice.

Two paragraphs of scope, sent and acknowledged, prevents more trouble than any amount of careful pricing.