If you are used to day rates, moving to fixed price work can feel like a gamble. Get it wrong and you are working evenings and weekends for free. Get it right and you earn more, keep clients happy and have a steadier pipeline of jobs.
When fixed price work makes sense
Fixed price work suits jobs where you can clearly define the scope and there are fewer unknowns. Good examples include fitting a standard kitchen, decorating a couple of rooms, laying a patio in a clear back garden, or swapping a boiler like for like. The more repeatable the job, the easier it is to price.
It is less suitable where you cannot see what you are dealing with, such as major refurbishments in old properties, hidden structural issues, or anything involving buried services. In those cases, you can still win the work, but you are better off using a mix of fixed prices for the known bits and day rates or provisional sums for the unknowns.
A simple rule: if you can write a clear list of what is included and what is not on one side of A4, fixed pricing is probably realistic. If you are guessing, you should build in more protection or stick to time and materials.
How to estimate time realistically
The biggest risk with fixed price work is underestimating time. Start with how long the job would take you in the real world, not in a perfect world. Think about set up, moving materials, tea breaks, client chats, and clearing up.
Break the job into stages: strip out, first fix, second fix, finishing, snagging. Estimate hours or days for each stage. Then compare that to similar jobs you have actually done. If you thought a bathroom would take five days but the last three all took seven, use seven as your base, not five.
Once you have a realistic figure, add a buffer. Many tradesmen add 10 to 20 percent to cover minor delays like traffic, awkward access or waiting on other trades. Be honest with yourself – if you are always running over, your buffer is not big enough.
Building materials and labour into fixed price work
Materials can make or break your margin. Start with a full list: core materials, fixings, consumables, waste disposal and plant hire. Get current prices, then add a sensible percentage for increases and wastage. Ten percent is a common minimum, more if prices are volatile or the job is months away.
For labour, multiply your realistic time estimate by your day rate, then add your overheads and profit. Overheads include fuel, insurance, tools, admin time and downtime between jobs. Profit is what is left after all that, not the same as your wage.
Put it together as a simple build up: labour, materials, overheads and profit. If the final figure looks high, do not just chop it down. Recheck your assumptions. You are better off losing a job than winning it and working for nothing.
How to build in contingency for unknowns
Even with the best planning, surprises happen. To protect yourself, use clear wording and structured contingency. Common options are a general contingency percentage built into your price, provisional sums for specific risks, or exclusions for things you cannot see or control.
For example, you might include a provisional sum for dealing with rotten joists or unknown pipework, making it clear that extra work will be charged once uncovered. You can also state that your price is based on what is visible at the survey and that any hidden defects are extra.
Whatever approach you use, keep it simple and explain it in plain English to the client before they sign. Most reasonable people accept that you cannot price what you cannot see.
Sample wording for quotes and variations
Here is some sample wording you can adapt for your own quotes:
Scope of works: “This fixed price covers the labour and materials listed above only. It is based on a standard installation with clear access and no hidden defects.”
Fixed price work FAQs
How do I set my first price for fixed price work?
Start by working out how long the job would take you on a day rate, then add a realistic buffer of 10 to 20 percent. Cost all materials with a bit on top for wastage and price rises, then add something for overheads and profit. Check that the final figure feels right for the market and for the risk you are taking. If the margin is too thin, adjust the scope or be prepared to say no.
What if a client wants fixed price work on a job full of unknowns?
In that situation, protect yourself by splitting the job. Offer fixed prices for the parts you can clearly see and define, and use provisional sums or day rates for the risky areas. Explain that you cannot sensibly fix a price for hidden issues until you open things up. Most clients understand this if you explain it clearly before work starts.
How can I explain contingency on fixed price work to customers?
Keep the language simple and honest. Tell them your price includes a small allowance for minor issues, but that serious hidden problems are not covered and will be priced separately. Put this in writing in your quote, use headings like Hidden Issues or Exclusions, and talk it through with them so there are no surprises later.
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