Selling maintenance agreements can take your contracting business to the next level. Agreements keep extra work and revenue flowing throughout the year. Customers under contract have no reason to call your competitors, ensuring loyalty. They also increase the opportunity to sell add-ons, such as accessories. But it’s not enough to just sell agreements. Before you sell you’ll want to make sure to price your agreements right.
Traditionally, the bulk of agreements are sold annually. The industry has been shifting recently. I recommend leveraging modern technology to sell agreements on a month-to-month basis, particularly during service calls to residential customers.
Annual vs. Monthly Agreements
Example: Imagine your customer requires a $425 repair. Your technician explains the benefits of a maintenance agreement and asks for another $200, bringing the total to $625. Now imagine adding only $17 to the repair price for a total of $442. Which do you believe would be easier for your technician to sell? Which is more likely for your customer to buy? Note: If you decide to sell monthly, be sure to ask your credit card processing company to help set up recurring payments.
Now, how much should your charge for your agreements? It’s important to know your market. Have an idea what your competitors charge to make sure your prices are within reason. It’s also essential to never be the lowest price. With maintenance agreements, your pricing should cover your costs and desired profit. Any growing service business, especially early on, should avoid losing on any transaction. In the pricing calculator below, we’ll consider your cost of providing maintenance:
- Average time it takes to perform maintenance
- Average travel time in one direction
- Number of maintenance visits per year
- Cost of highest paid field staff
- Average material cost per visit
- SPIFF or commission paid for each sale
- Department overhead rate
- Desired gross profit margin
The goal is to sell as many maintenance agreements as possible. Keep in mind, the more agreements you sell the harder the program becomes to manage.
Click here for the Agreements Calculator.