Business Insider

Why service contracts work for any HVAC business


It’s fair to say that if HVAC contractors are not selling service contracts, then they may have more of a job than a business. HVAC service contracts, also known as maintenance agreements, are the lifeblood of any great HVAC company. If a contractor eventually would like to sell their business, including service contracts in the sale are most times the most valuable part of the equation. While there are numerous benefits offering HVAC service agreements, these are the top three.

Top 3 reasons to sell HVAC service agreements

hvac tech installing thermostat ferguson
  1. Helps business during the slow times.

    Service agreements keep technicians busy during the slower seasons when there are fewer jobs for a company. Butch Welsch, a St. Louis, Missouri contractor whose company has around 5,000 maintenance agreement customers, sees great value in service agreements in terms of productivity.

    “Maintenance agreements provide us with a more steady flow of service work specifically in the slower months like September, October, March and April. With the maintenance agreements we have, during those periods we are nearly able to keep full crews working,” Welsch said.

    This does not just help the bottom line of the business but also helps in employee retention which is a constant issue for contractors. Technicians appreciate that they will not have the hours cut — or worse get laid off — when the inevitable slow seasons come around. This is invaluable for an HVAC contractor who is constantly trying to find qualified technicians. It helps build the level of trust and loyalty between a contractor and technicians.

  2. Customer relationships.

    Statistics show that on average, a homeowner only purchases 1.5 HVAC systems during their lifetime.That is not nearly enough to have a “go-to” contractor. Compare that to the average 9.4 cars individuals purchase in their lifetime and you will see that contractors have a much harder time building a long-lasting relationship with their customers compared to other types of industries.

    HVAC service agreements can change that. These agreements make sure that the homeowner stays connected with the company by having a member of the company in their home every few months. The homeowner will associate the specific contracting business to their air conditioner and furnace.

    Michael DeRitis is a contractor in Parkland, New York and has HVAC service agreements for both his commercial and residential clients. “Seeing our customers face-to-face every few months is a blessing in disguise,” DeRitis said. “We make sure to pick their brains about the HVAC system. What they like. What they don’t like. What they wish they can change. This first-hand conversation allows us into their world and enables us to help them with what they need.”

    HVAC service agreements get homeowners thinking about their HVAC systems when they normally would not. Plus, you can make your customers aware that regular HVAC system maintenance can reduce energy use by up to 15% as a value-added benefit. Learn more about how to sell HVAC service agreements by promoting energy savings.

    Seeing our customers face-to-face every few months is a blessing in disguise
  3. Selling more ancillary products.

    If homeowners only purchase 1.5 HVAC systems during their lifetimes, some might ask why do HVAC contractors need to be in their homes a couple times a year? The answer is because they purchase other products that the contractor is selling. These are items such as thermostats, humidifiers, dehumidifiers and water heaters. All these smaller products soon add up to real dollars.

    And it does not have to be items this big. A good percentage of homeowners do not stay on top of a simple item like changing their filters. Instead of buying filters at a hardware store, many would be willing to purchase them from the contractor who is checking on their system.

    Selling more HVAC accessories can also mean repairs. “Our maintenance agreements make the customers feel like we are their contractor. They will look to us if they have a breakdown rather than just randomly calling someone else,” Welsch said. “Because they consider us their contractor, if they do have other HVAC needs like humidification or air cleaning they are more likely to contact us.”

    When a contractor is in a customer’s house, they have the chance to observe other opportunities for improving their HVAC system. Perhaps they see pets that are affecting indoor air quality or a kid that is battling allergies. Maybe they notice a smart product like Alexa that does not have a smart thermostat to talk to, which is an easy opportunity to grow sales through smart home technology. These are all great opportunities to sell more products to the homeowner.

    Pro tip: In order to sell HVAC service agreements, contractors need to make them attractive to the homeowner. The HVAC maintenance agreements can include some or all of the following: 10% discount on parts, 24/7 service, and priority on service calls over nonmembers.

Service agreements are important not only for keeping customers’ HVAC systems in working order, but also for increased revenue for HVAC contractors. By selling service contracts, you’re making an investment in the overall value of your business.