TRC Blog

Maintenance Agreements, or Whatever you Want to Call Them

Posted Jul 17, 2014 by Ryan Kiscaden

Service contracts, maintenance agreements, extended service plans.  Call these what you may but they are imperative to continuing a steady stream of income for your HVAC/r contracting business.  When times are slow, these little contracts keep your employees busy and continue top of mind activity with your customers.  A wise businessman once said, that it is easier to keep a customer than to acquire a new one.  These agreements are true and recession proof.

HVAC contractors are in the comfort business.  They provide a product and service for those whom wish to be comfortable.  These agreements offer the opportunity to provide comfort to homeowners.  When Johnny needs to be shuttled to soccer practice, Betsy wants to go to dance lessons, and Jimmy is working a new job, the last thing a family has time for is to remember when the last time their HVAC equipment was serviced.  OEM manufacturers recommend that HVAC units be serviced twice a year.  Sometimes HVAC manufactures won’t even honor a warranty if there isn’t proof of recurring maintenance.  As a contractor in this business, you have an obligation morally to offer them or lest you leave profit on the table! 

WHAT ARE SERVICE CONTRACTS?

Service contracts are agreements between the homeowner and an HVAC service provider wherein the homeowner pays a set fee and receives guaranteed services for the HVAC system.  With the most basic contracts, the service is a checkup and tune-up for your system during the shoulder seasons (winter and summer).  As an HVAC contractor you can offer contracts that include parts and service for problems found during those checkups, and some options could include emergency service. The more services the contract includes, the more you will charge the homeowner.  Offering differing tiers for them would be beneficial and could lead to higher close rates when you ask for the sale.

By offering these agreements will improve the system’s energy efficiency.  This will continue to build positive brand perception of your HVAC contracting business.  By improving the system’s efficiency will also help the system to work more affordably overall for the homeowner.  The main reason homeowners do not purchase a service contract is the cost. They can cost them between $150 and $500 a year depending on the amount of services offered. If the system is new and still under a manufacturer's warranty, the cost may not be worthwhile to them.  Most major repairs are going to be covered under the warranty and you should be completely transparent about this when offering the service.

RESEARCH BEFORE ENTERING INTO THE SERVICE CONTRACT BUSINESS

Just like any aspect of the business you are running, when you investigate the market viability, you will find if service contracts will work for you given your business’s culture, flow of work, and how crowded the marketplace is.  Ask around, look at competitor’s advertisements, and even ask the next few homeowners if they would want a service contract.  The worst thing you can do is offer something that you really don’t know how to fulfill or the market is already flooded with them.  Do a little research before jumping in headfirst. 

There are many reasons to offer a service contract to homeowners.  Make sure you think through what those reasons are before you offer it.  This is important in drafting how you will sell it to the homeowner.  Some examples include being able to ensure the system is operating as efficiently as possible, identifying a problem with the system under warranty before it goes out of warranty, extending the life of equipment by ensuring that refrigerant pressures are correct, cleaning the coil so that air flow is not diminished, or unclogging drains that can damage your ceiling and furnishings.  All of these reasons specifically target peace of mind to the homeowner that is busy.  If you purchased a new vehicle and did not get the oil changed, would you not feel that you were harming the vehicle that you expect to last you for a good amount of time?  The same thing is true with a heating and cooling system.  Preventative maintenance is a good practice for our vehicles, our health and our heating and cooling systems. When we value the things that we depend on in our lives, they give us much better service and saves us money in the long term.  Neglect them at your own peril.