Six Reasons Service Agreements Work

CORP Blog 6 Reasons Service Agreements Work LP Header 2021

Successful HVAC, electrical, plumbing, and other service providers with long-term solid business plans almost always share one key component: prioritizing maintenance (or service level) agreements over other practices in customer acquisition and retention. These agreements can be the lifeblood for residential service providers, ensuring a steady income regardless of seasonal and cyclical buying cycles. Below are six benefits of maintenance agreements that will have you wondering why you haven’t considered them before.

Guaranteed steady work for your technicians and cash flow for your company. Service businesses need to create opportunities for their techs to demonstrate the quality of their and the company’s service. Contracts are the best way to establish trust, reliability, and professionalism with guaranteed maintenance and repair visits that keep techs busy, produce expected returns, and ensure that you keep quality employees.

Ancillary labor and parts purchases and future replacement equipment sales help maintain steady cash flow, better customer relationships, and higher customer lifetime values.

An underestimated benefit is the ability to attract and retain better service technicians. If you’re keeping your technicians working consistently and giving them the opportunity to learn, they earn more. By developing deeper customer relationships, they will enjoy the service in addition to the technical aspect. Having technicians who are masters at both will drive customer loyalty and job satisfaction.

Maximize the life of customer investments. According to manufacturer recommendations, most equipment needs some sort of maintenance to ensure its longevity and reliability. Instead of being the company they call when something breaks down, be the reason they don’t have to call for service. Maintenance agreements that follow manufacturer guidelines reduce the possibility of service calls and help build long-term loyalty.

Build your business by tracking service level metrics. Once you commit to a service level agreement program, the next step you will want to take is implementing metrics to track your progress. As you become methodical in tracking metrics, including weekly sales per technician and gross profit dollars per day by each crew, you can focus on making minor, incremental improvements that will grow your business and make it resistant to competitors.

Organize and digitize paperwork. Using a contract management software for service level agreements as part of a complete contractor management solution enables you to reconcile and correlate data between all business systems. The system creates built-in accountability in the contract management process. Data entered once flows through the system and is dispersed to the various functional departments within your company for reliable accuracy, optimized workflow, and increased productivity. The increased visibility allows stakeholders to maintain transactions and audit trails, analyze progress in the contract lifecycle, and refine spending and cost allocations.

Speed work approvals. Gone are the phone calls or texts back to the office for approvals. With a service agreement, the work to be performed is in the contract and everyone is on the same page from the time the appointment is set. With integrated contract management software, techs can take a simple maintenance job to the next level by adding notes to the contract, tracking products on their truck, noting any issues, and even ordering parts and getting on-location, electronic customer approvals.

Attract and retain higher lifetime value customers: All customers are not equal in value to your business. Penny pinchers who search for the best deal on a specific maintenance or repair service typically only call when they are having a crisis. Even worse, they are price-motivated, so they won’t necessarily call their last service provider. They’ll go back to the web and search again for the best deal for their current situation.

If you focus on attracting and retaining customers that value service over price, you won’t be in a constant search for new customers to replace one-and-done coupon cutters, and you will be able to earn loyalty by demonstrating quality of service and work over time. Of course, the greatest benefit is that maintenance agreements lock in your existing customer base once you’ve earned their business.

Service businesses ultimately succeed or fail based on their ability to acquire and retain valuable customers. In terms of customer acquisition, it costs 6 to 7 times more to sign a new customer than to retain a current customer. And in terms of customer retention, lowering your churn rate by a mere 5% can boost your profitability anywhere from 25% to 125%!

Recurring revenue is predictable, and contracts that create it deepen customer relationships and allow your business to build its brand on quality of service. Implementing maintenance or service level agreements is something most organizations are able to do within a few months and are immediately impactful and lasting.

Read more about service maintenance agreements here.

ECI Staff Contributors

About the Author

ECI Staff Contributors love to share their insights and expertise on a variety of topics including sales, marketing, cloud, ERP, and SMB development as well as on product specific education. With offices throughout the United States, Mexico, England, the Netherlands, Australia, and New Zealand, more than 40 employees contribute to blog on a regular basis.