Many residential service business can start, grow, and profit handsomely by implementing a solid maintenance agreement program. It will produce work and steady cash flow year-round. But starting a successful maintenance program takes commitment and consistent focus.
Once a residential firm begins and continues to execute they should experience more:
There’s a big bonus with a planned maintenance program. In 10 years, the company would have the cash saved up that they can use, as well as a valuable client base. They will also have predictable revenue and cash flow that a potential purchaser would covet. If an owner wants to sell their business, they will receive a premium price for the work they have put into it via maintenance agreements.
Maintenance Agreements Cultivate Trust and Loyalty
Maintenance agreements are the real equity of a residential company. With maintenance agreements owners build trust and loyalty with their clients.
During planned maintenance visits the technician should always educate the client. If the client’s heating and cooling equipment is reaching the end of its expected lifespan, he or she should tell this to the client.
Replacing older equipment can make economic sense and be a smart investment. Let the client make the choice. If the trust is there, the client will probably take the suggestion and at least look at the options presented.
The more maintenance agreements a company has, the larger the loyal, committed client base. And this evens out revenue seasonality. The valleys won’t be as low because the company has work to do in taking care of maintenance for their agreement clients.
How many agreements should a company have? As many as possible. Aim for 1,000 agreements for every $1,000,000 in residential service and replacement sales. (This does not include new construction sales or commercial sales.)
The magic number is 3,000 agreements. As the company approaches this number and beyond, they will see more work flow, more even cash flow, and a more stable field employee base. The more maintenance agreements the more loyalty, stability, and cash flow the business will experience. One last benefit of maintenance agreements: The company can be its own bank. Every month, when accounting receives the maintenance revenue, they should deposit that revenue in an interest-bearing savings account. This decreases the company’s dependence on a bank line of credit. These funds accumulate quickly and can be a source of funding when the company is short of cash.
Maintenance agreements can build equity in residential companies by growing the business, cash flow, loyal customers, and intrinsic value. What’s not to like?
Editor’s note: Ruth King contributed to the article and is the author of SMACNA’s Successful Customer Service Practices for HVAC Service and Residential Retrofit and Service Operations Management Program.