day rate vs fixed price — which is better?

This is probably the most common argument in any trades WhatsApp group. Some contractors swear by day rate. Others will not touch a job without a fixed price. The honest answer is: it depends on the job. Here is how to decide.

day rate: when it makes sense

Day rate means you charge for your time and the client pays for materials separately. You get paid for every hour you work. Simple.

It works best when:

• The scope is unclear. Nobody knows what is behind that wall until you open it up. Day rate means you are not gambling on what you find.
• The client keeps changing their mind. "Actually, can we move that socket?" On day rate, no problem. On fixed price, that is a variation order and an awkward conversation.
• It is T&M work by nature. Maintenance, repairs, snagging. Jobs where you show up, see what needs doing, and fix it.
• You trust the client. Day rate requires a good relationship. The client needs to believe you are working efficiently, not stretching the job.

The downside: your earnings are capped by hours in the day. You cannot benefit from being fast. And some clients will always wonder if the job could have been quicker.

fixed price: when it wins

Fixed price means you agree a total cost upfront. The client knows what they are paying. You know what you are earning — if you quoted right.

It works best when:

• The scope is crystal clear. A kitchen fit with specified units, a bathroom to a drawn plan, a fence along a measured boundary. No surprises.
• You are competing on price. Most homeowners want to compare quotes. That means fixed numbers. "It depends" does not win bids.
• You are fast at this type of work. If you can do a job in three days that others take five, fixed price rewards your efficiency. Day rate punishes it.
• The client demands it. Some clients — especially commercial ones — will only work with fixed-price quotes. No quote, no job.

The downside: if you underquote, you eat the loss. And every surprise eats into your margin.

protecting yourself on fixed price

Fixed price is riskier. That is not a reason to avoid it — it is a reason to quote it properly. This is where risk-adjusted quoting changes the game.

Instead of adding a flat 10% contingency and hoping for the best, you assign an uncertainty tier to each line item. Things you know are Certain or Low. Things you are less sure about are High or Wild Guess. The simulation then calculates exactly how much buffer you need — not too much, not too little.

Quote at P80 for standard fixed-price work. That gives you 80% confidence the actual cost stays below your quote. For high-stakes contracts with no variation mechanism, go to P95.

the hybrid approach

Smart contractors mix both. Here is how:

You do the first day or two on day rate. Open things up, see what you are dealing with. Then give a fixed price for the main scope based on what you actually found — not what you guessed from outside.

Clients like this because they still get a fixed number for the big stuff. You like it because you are not gambling on unknowns. Everyone sleeps better.

the bottom line

Day rate is safer for you but harder to sell. Fixed price wins more work but carries more risk. The hybrid approach splits the difference.

Whichever way you go, the quote still needs to be right. Build your estimate with honest uncertainty tiers and let the numbers tell you what to charge.