(Excerpted from Contractor Cents newsletter by Ruth King)
Service agreements are essential for success in most HVAC companies. It is a win-win situation for the customer and the service department. Proper maintenance (which your company provides) is a good benefit for the customer. It helps him decrease his utility bills and increase the life of his system. In addition, he will have the peace of mind that a competent company is taking care of his heating and air conditioning system.
Service agreements also provide many benefits for your service department. They help smooth out the seasonality of your business. Residential maintenance checks are done in the slower season which keeps the service technicians busy. In addition, you have a customer who will call you if his system has problems. By taking care of a customer for many years, you build up a trust level. When it is time to replace his system, your company will probably get the sale. The customer may get another bid to "keep you honest," but he knows the quality level and service you have given him over the years and is likely to trust your quote. In addition, some dealers have customers who simply tell the company to "put the system in and send me the bill." Those are the loyal customers that you'd like to have. You have to earn their trust by taking care of them year after year.
Residential service agreements should be two part forms, which list the features and the benefits of owning a service agreement.
There are two major types of service agreements for residential customers. The first is a full maintenance agreement where you take care of their entire system for a flat fee each year.
The safer type of agreement is one that covers maintenance checks. All repairs are extra. Most companies give a discount on the repairs for service agreement customers. When pricing these agreements, make sure that you are at least covering your overhead and breaking even on the agreement price. There is no sense giving a customer an extremely low price because you think that you will get the repair work...you may not!
Your service agreements should be perpetual service agreements. This means that they are automatically renewable unless canceled in writing with 30 days notice. At the end of the first year you send the customer an invoice for the renewal. If there is an increase in the price of the agreement, you send a letter telling them about the agreement price increase with the invoice.
Obviously, if they don't pay the invoice within 30 to 60 days then you cancel the agreement. However, a telephone call to the customer is important to see if he wants to continue his agreement. Or, you assume the renewal and call to set up the next maintenance check and tell the customer you will renew the agreement while the technician is at the customer's home.
Perpetual agreements save money on printing costs. In addition, your computer system should be able to print out renewal invoices automatically saving you time and money. The most significant reason for perpetual agreements is that you don't have to resell the customer each year. They don't have to question their reasons for buying. They've committed to a service agreement and are simply renewing their commitment.
Copyright 2002, Ruth King, All rights reserved.