Flat Rate Pricing FAQ & Glossary: 29 Terms Defined

Flat rate pricing comes with its own language: price books, billable hours, task codes, menus, options. Half of it gets used three different ways depending on who's talking. This page puts every term in one place, in plain words, the way a shop owner would explain it to a new service manager. Where The New Flat Rate does things differently from the rest of the industry, we say so.

Last updated: October 23, 2026

What do the basic flat rate pricing terms mean?

Flat rate pricing

Flat rate pricing is a method where each task has a fixed price that the customer agrees to before work starts. If the job takes 40 minutes or two hours, the price doesn't change. The contractor carries the time risk, so the price has to be built from what an hour of your shop really costs.

Upfront pricing

Upfront pricing is another name for flat rate pricing that puts the focus on timing: the customer sees the price up front. TNFR founder Rodney Koop has argued it's the more honest name, because the whole point is no surprises on the invoice (see Flat Rate Pricing 101).

Time and materials (T&M)

Time and materials is a billing method where the customer pays an hourly labor rate plus the cost of parts, usually marked up. The final number isn't known until the job is done. In residential service it leaves the homeowner watching the clock. We cover the trade-offs in why hourly pricing is costing you.

Menu pricing

Menu pricing is flat rate pricing with options: instead of one price for a task, the customer sees several priced choices and picks one. TNFR's position is that the menu does the asking, so the tech doesn't have to sell. Our beginner's guide to HVAC menu pricing walks through it.

Task

A task is one priced unit of work in a price book, like replacing a capacitor or a toilet fill valve. Most systems give each task a short code so techs can find it fast in the field.

Single-price quote

A single-price quote is one number for one fix, which turns the call into a yes-or-no question. When the answer is no, the tech leaves with nothing, and that's the gap menu pricing was built to close.

What goes into building a flat rate price book?

Price book

A price book is the full list of tasks your shop performs, each with its fixed price, parts and labor built in. A good one is built from your own numbers, not copied from a national average.

Billable hour

A billable hour is what each hour a tech spends on paid work has to bring in to cover their pay, burden, overhead and profit. It is not the tech's wage, and it is not the same as the hours they're on the clock. Billable hour is the first of TNFR's four foundation numbers; here's how to calculate yours.

Labor burden

Labor burden is everything a tech costs you on top of their hourly wage: payroll taxes, workers' comp, insurance, benefits and paid time off. Leave it out and every price in the book comes in low.

Overhead

Overhead is the cost of running the shop that isn't tied to one job: rent, trucks, fuel, software, office staff, marketing. It has to be spread across the hours your techs bill.

Markup

Markup is the percentage you add to a cost to get a price. As an illustrative example, a $10 part with a 100% markup sells for $20.

Margin

Margin is the share of the selling price that's left after cost. In the same example, $10 profit on a $20 sale is a 50% margin, not 100%. Mixing the two up is one of the most common pricing mistakes; see why your markup looks right on paper.

Parts pricing

Parts pricing is how the cost of materials shows up in the customer's price. Homeowners can look up a part on their phone in seconds, so a price that loads everything onto the part looks inflated. TNFR's view is that the customer should be buying a finished repair, not a marked-up part (labor and parts explained).

What do the terms for presenting options mean?

Options

Options are the different priced ways to solve the same problem, from the minimum fix up to a full repair with protection added. The customer picks the one that fits their home and budget.

Good, better, best pricing

Good, better, best is a tiered model where the customer is offered three levels of service, each priced higher than the last. It's what most contractors have been told to do, and it beats a single price. TNFR does not use it.

Five-option menu

A five-option menu gives the customer five priced choices for every task, starting with the cheapest fix and building up. This is the TNFR method. A wider range gives the customer a real choice instead of a pitch, and on TNFR menus 80% of customers choose an option above the cheapest one.

Cheapest option

The cheapest option is the minimum repair that gets the system running today. It should always be on the menu, because a customer who can only afford that still deserves a fair, honest choice.

Price anchoring

Price anchoring is the way the first price a person sees shapes how they judge every price after it. A single low quote anchors the whole call low. A full menu lets the customer see the range before they decide.

Presentation script

A presentation script is the words a tech uses to walk a customer through the menu without sounding like a salesperson. The TNFR app has 14 presentation scripts, starting with the Demand Service Script, plus Training Lab Steps 1–9.

Field Support

Field Support is TNFR's live phone line techs can call during a real service call to get help picking the right task or menu. It's included during the free trial, so nobody runs their first menu alone.

Which numbers run a flat rate business?

Four foundation numbers

The four foundation numbers are the inputs TNFR builds every member's menu from: billable hour, service fee, tax % and discount %. Get these four right and every price in the book follows from them. Get one wrong and it's wrong on every call.

Service fee

The service fee is what the customer pays for you to show up, diagnose the problem and present their options. It covers the cost of sending a truck even when no repair is approved.

Tax %

Tax % is the sales tax rate your prices have to account for in your state and local area. Rules on taxing labor versus parts vary by state, so check yours with your accountant.

Discount %

Discount % is the set percentage off menu prices you give certain customers, most often service agreement holders. Because it's built into the book, every tech gives the same discount and nobody has to negotiate at the kitchen table.

Truck roll cost

Truck roll cost is what it costs your shop to send one truck to one call, before any repair is sold. It's the floor your service fee should never fall below.

Average ticket

Average ticket is total revenue divided by the number of jobs. It's the quickest way to see whether your techs are presenting the full menu.

Close rate

Close rate is the share of calls or estimates that turn into approved work. A menu raises it because "which one?" is easier to answer than "yes or no?"

Option mix

Option mix is the breakdown of which options customers chose across your calls. TNFR measures it against the 80% benchmark: if far fewer of your customers are choosing above the cheapest option, the presentation needs work, not the prices. For more on the numbers, see the HVAC pricing guide.

Callback

A callback is a return trip to fix a job you already did, usually unpaid. Callbacks often come from selling only the minimum fix when the customer would have chosen a more complete repair if they'd been shown one.