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Why Sell Maintenance Agreements
The simple answer from the business side is to build loyalty and increase cash flow, but from the customer service side, It is the right thing to do! Every Customer Care manual from every manufacturer recommends
or requires a yearly maintenance service on their equipment for warranty and or operational integrity. So in reality by not selling maintenance agreements your not giving your customer everything
Maintenance twice a year ?
Why is this the case? Manufacturers only require an annual service so why do we set up two. Outside of having two seasons of operation or front of mind awareness for the
customer. Both make sense, but if you are going to service the system twice a year be sure to charge enough to cover both visits, if both visits take 2 hours charge 2 hours worth of labor plus the material you use.
I cant count the number of contractors in the industry who lose money on maintenance agreements. First who is doing the maintenance, is it a technician that has a breakeven cost of 150.00 an hour, if it is
what are you charging for the maintenance. I was speaking to a friend of mine awhile back about this very subject and he told me that they are charging 255.00 for an agreement, which is in my experience
above average, but his breakeven for a technician is 150.00 an hour. I asked him how much time he was spending on each visit and it was around two hours, at 255.00 billed one time. This means on the first
visit which cost him 300.00 he lost 45.00 which by the way means that on the second visit for the year he will lose 300.00 for a total loss of 345.00 a year per agreement. OH! and don’t forget the materials used.
“If you don’t tell them about it AND ask them to buy it, THEY WONT!
There are many in the HVAC industry that do not believe maintenance agreements are necessary. They are necessary and required for warranty by most manufacturers and just like changing oil in your work trucks
or the family car, if you want them to last it is not an option.
A maintenance technician (not a service technician) should be able to do 240 agreements a year. One for every day minus weekends, vacation and sick days or family emergencies, and at two hours(average) that means
you have him or her for another six hours a day to be trained up as your next top salesperson, lead installer, or certified service technician. This is a great starter position for a high school senior not going to college.
Annual Sales 10 Yr. Sales
240 $375.00 $31.25 $90,000.00 $900,000.00
Commission 5% 0.05
FILL IN Overhead 25% 0.25
Material $15.00 Desired Profit 15% 0.15
Labor Breakeven $200.00
Cost of Goods $215.00
Sale $358.33 COST OF GOODS / MARGIN = SALE
Commission $17.92 SALE * OVERHEAD PERCENTAGE = JOB OVERHEAD
Gross Profit $143.33 SALE - COST OF GOODS = GROSS PROFIT
Overhead $89.58 GROSS PROFIT - JOB OVERHEAD = NET PROFIT
Net Profit $53.75 (Before Taxes)
they need or require.