Flat rate pricing works, according to Ken Cederquist of Profit Strategies, Inc. Gone are estimates done on the fly by your technician in the field, or work orders with parts and labor charges that invite argument from customers.

Flat rate pricing allows technicians to instantly quote a rate that guarantees a profit, and yet brings a smile from the customer at the fair price and easy to understand arrangement.

"Don’t charge by the hour, charge by the repair," Cederquist said. "Your tech will go out and see what’s wrong and quote your customer a price to fix it." The idea is to establish your company’s flat rate based on your expenses, your costs, and your desired profitability. The rate includes the repair, parts, labor, and a guarantee.

Making it work begins with establishing value.

"Think of what Las Vegas would be like without air conditioning," he said. "We have a magic commodity here, but how many times do we forget what we are about? The whole thing comes down to worth."

There are approximately 80,000 A/C contractors in the United States, and Cederquist said that only about 10,000 are currently on flat rate pricing. "How many of the 70,000 are your competitors?"

Profit Strategies has developed a flat rate pricing program that includes a computer program and field manuals that allow a technician to instantly quote any job’s complete price.

"What’s the most profitable part of your business?" Cederquist asked. "Service/replacement or ads? Which is the best source of a proven sale?" The contractors answered that, by far, their service departments were the best source of more sales, a fact to which Cederquist readily agreed.

"Of course it’s your service department." he said. "So how do you structure the tools your technicians use? We have only one entity to work with, and that’s time." He questioned the wisdom of having the same diagnostic fee all year long. He said it makes sense to charge a higher fee when it’s 105 degrees and everybody is busy.

Concern about flat rate pricing causing a company to be over priced, and thus see sales falter, were addressed as unlikely. Cederquist outlined the three ingredients that go into an individuals company’s flat rate price: 1) labor; 2) parts; 3) tax. He said it’s not very likely that a company will be higher across the board in all three of those. By the same formula, it is unlikely that competitors in the same area of town will show exactly the same pricing.

One of the benefits of quoting a flat rate to a customer is the communication factor. Cederquist said that using a work order gets your technician thinking "backwards." He lists all the parts, the labor, adds the tax, and then presents all of that to the customer, whose eyes may bug out of his head and smoke from the ears.

In flat rate pricing, he will lead the customer through the process from the beginning, and get the customer on his side in the process. "The more they communicate, the more receptive the customer will be to the final price," Cederquist said.