Maintenance Agreements, A Good Business Decision - Part 1

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    By Jim D'Amico

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    Over the last thirty years or more, maintenance agreements have been promoted by consultants and successful contractors to HVAC service business owners to help them grow their businesses and continue their success.  This blog series will be giving you a great deal of information about maintenance agreements. By the end of the series we think you’ll be convinced that a well-designed maintenance agreements program will provide added value for your customers and increase your company’s net worth.

    And, like the consultants in the industry, we believe there are some very important reasons to offer maintenance agreements.  We’ll be covering all of those reasons in this and future blog posts.

    Perhaps the best place to start is by mentioning where your company will experience the most gain by offering maintenance agreements.

    It has been proven through the years that customers are much more likely to call you for all of their needs if they have paid for a maintenance agreement.

    On the other hand, customers that are not locked in by an agreement, can be lured away by the next interesting offer or discount from one of your competitors.  If fact, you may never know it, but customers may switch to another company simply because they like the color of their trucks better than the color of your trucks.

    Therefore, the most compelling reason to offer maintenance agreements is that you will retain more business and gain customers for life.

    Wouldn’t it be nice to know that as long as a customer owns their home, you’ll continue to receive their work requests.  And, as long as you provide top-notch service, those maintenance agreement customers will likely continue to pay for their maintenance agreement as well as their other service needs.  You will also likely be the first company they call for add-on and replacement equipment estimates as well. In fact, maintenance agreement customers may never shop your estimate against the competition.  That’s worth a lot!

    Here’s the value of a maintenance agreement customer.  Over a ten-year period, a service company can expect to gain seven thousand dollars or more in service and equipment sales.

    Here’s how the numbers stack up.  As you can see in this chart, using an average price of $200 per agreement sale for just 100 customers, an HVAC company can expect sales of $89,000.00 per year.  By increasing the number of agreements sold to 500 the anticipated annual sales climbs to $445,000.00!

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    Now, results will vary, but these number indicate the real value of a maintenance agreement program with the potential recurring revenue that can be achieved.  Considering the cost of acquiring a new customer, keeping existing customers becomes a very important strategy for success.

    When you gain a customer for life, your costs associated with that customer are drastically reduced because there is no customer acquisition expense. That’s big!

    For more information on maintenance agreements, please follow this series.  Maintenance Agreements, A Good Business Decision - Part 2 will discuss the importance of the terminology you use.

    Already have a maintenance agreement program and want to grow it?  Check out our maintenance agreement marketing and management system, Coolfront Agreements at www.CoolfrontAgreements.com.

     

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