Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

What type of pricing structure may allow a new business owner to scale quickly but risks overcommitment on services?

1. Percentage of rent

2. Flat-fee pricing

3. Hourly rates

4. Commission-based pricing

The correct answer is: Flat-fee pricing

The correct choice is flat-fee pricing because this structure allows a business owner to offer a defined service or package at a fixed price, which can be attractive to clients seeking certainty in costs. This pricing model can facilitate quicker client uptake and growth, as customers may be more willing to engage when they know exactly what they will have to pay upfront. However, the flat-fee structure poses a significant risk of overcommitment. If the demand for services exceeds the business owner’s capacity to deliver, or if the cost of providing those services is underestimated, the owner may find themselves stretched thin, providing more service than what the fee covers. This can lead to financial strain if the revenue generated does not match the operational costs incurred. In contrast, other pricing models like percentage of rent or commission-based pricing align revenue with the scale of business operations and performance, which can mitigate such risks. Hourly rates provide a variable income based on actual time spent, further reducing the likelihood of overcommitment.