Ask the Experts | Adding Service Agreements to New Installs

Question: What’s the best way to build in a service agreement with a new install?

Weldon Long, New York Times Bestselling Author:

I think this question is as simple as it seems. Certainly, I would recommend building in two or three years or so of the extended service agreement with the sale of that new install. It’s going to be a very, very small percentage, obviously, of a $10,000 or $15,000 or $20,000 system – add in a few hundred bucks.

But you want to maintain that relationship with the homeowner. And there won’t be a whole lot of maintenance, obviously, in the first few years other than just keeping it clean. But what it does is presents an opportunity to look for other problems, potentially, that you can solve for your homeowners.

We were just talking about ductwork and attic insulation. I’ve got a client I’m working with now that just decided last year—last October, November – that they wanted to make attic insulation and ductwork a major priority this year, because they’re extremely profitable high-margin services. And so we set some pretty ambitions benchmarks: $1750,000 in attic insulation and $200,000 in ductwork. January was the first month, we went out there with this initiative and we hit it! So that’s an additional, you know, almost $400,000 revenue just by really making that a priority.

So the service agreements really give you the opportunity to do that. Ideally, in a perfect world, our sales advisors are selling that with the system. The reality is sometimes that’s overlooked. Unfortunately, sometimes comfort advisors are intimidated to try to go for an additional $5,000, $6,000, $7,000, $8,000, $10,000 for ductwork and attic insulation when they’re selling a $20,000 system already. That’s unfortunate but sometimes it happens. But the good news is that if you have your service techs in there afterwards, they can look for those opportunities and turn those leads back to the sales department.

So I would simply just build it in. Add a few hundred dollars – whatever it is, depending on the nature of your service agreement – and I wouldn’t even mention it, except to say that: “By the way, with this new investment, we’re going to cover you for the next three years or five years (or whatever it is). We’ll be out twice a year to inspect the furnace or inspect the air conditioning system.”

I have another client that, they do plumbing, so they include at no charge a free plumbing inspection with that every year as well. So they get their plumbing inspectors – what they call PSI techs: plumbing service inspection techs – in the house once a year to look for water heaters, water treatment problems, that sort of thing.

So the real opportunity is to get some type of service agreement so we can get back in front of the homeowner on a regular basis. Just build it in to the agreement and tell the homeowner this system includes three years of bumper-to-bumper service. I think the question is that simple, and I think the answer is that simple as well.

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