Pay by the Job or Hourly – What’s Better for Your Business?

Most businesses charge by the hour. When charging by the hour, the customer is given an estimate, and the work isn’t completed in the allotted time, there’s a chance that the customer will have to pay more depending on the contract that’s in place.

But it’s more attractive for the client to know exactly what they’ll be paying for.

You may have a contract in place that has a clause that the price of the job goes up if a new condition is met. For example, if the project goes over the estimated time or more problems are found, the price goes up based on certain conditions.

The good news is that these clauses shouldn’t have an impact on the project because paying by the job means that more due diligence is performed on per the job projects.

What does pay by the job do for your business?

Businesses Are Forced to Provide Accurate Estimates

Contractors provide estimates every day, but that doesn’t mean that the contractor is being truly diligent. You see, the contractor has everything to gain if the job goes over the estimated time limit.

But when the estimate is based on the entire project and is pretty much ironclad, this means:

  • A thorough analysis is performed
  • Estimates are far more intricate

Accurate estimates are essential in the contract world, and this will provide your business with a thorough approach to estimating job prices. Workers and owners will have a better understanding of the work that’s needed to complete a job, too.

You may base the job’s price on an hourly cost, too.

Let’s say that you internally estimate the job to take 5 hours and normally charge $80 an hour, you might charge the job at $400 or $500 if you want to account for incidentals.

Customers Prefer By-the-Job Pricing

Customers are often willing to pay more for a solid price. When a customer pays hourly, they may be charged for several hours of work because the job ran over the time allotted in the estimate. When choosing by the job pricing, this means that the entire project, no matter what may occur, will be completed at an agreed-upon price.

“We charge by the job, not the hour,” states Option One.

The company proudly displays this on their plumbing site because they know that customers, especially in the commercial industry, would much rather work with a contractor that offers a by-the-job price.

It’s better for the client.

Contractors May Earn More

Of course, businesses need to provide a competitive price to lure in customers. Customers will price shop your service, and they’ll know if you’re grossly overcharging for a project. But what benefits businesses that follow this pricing structure is that there are times when the job is completed faster.

Let’s say that the five-hour job quoted earlier takes just four hours to complete.

You’ll earn $100 an hour instead of $80 an hour, but as a business that charges hourly, you would earn $80 an hour. There are times when this is advantageous and times when this works to your disadvantage.

But a smart business knows that they’ll always make money if they perform a proper estimate.

This comes full circle. The key is always in the estimate. If a business’s estimate is thorough, they’ll ensure that the job is done faster and more efficiently.

The by-the-job structure forces businesses to focus on performance so that every job is completed as quickly as possible.

It’s difficult for many new business owners to accurately price jobs, and in this case, an hourly structure may be best. If you have no idea how long a job will take, hourly is often best because it allows your business to remain profitable.

Anyone that has experience and has a relatively good idea how long it will take to swap out a transmission on a 2010 Civic or to replace a sewer line may find it best to offer estimates based on the entire job.

You also have the option of offering a mix of estimates depending on the job.

If a simple faucet replacement is a standard job that’s straightforward but a sewer line repair has a lot of variables to consider, you may offer an hourly price for the sewer line and a by-the-job price for the faucet.