From boosting company value to providing customers with peace of mind, HVAC and plumbing service contracts are one of the keys to business longevity. In a market where a new hot water heater can cost the average customer between $1,378 and $3,512 and a new AC unit can run them between $3,910 and $7,983, service contracts are a profitable way to protect these investments.
However, contractors may be unsure how to craft HVAC and plumbing service contracts that benefit customers and their equipment, company profits, and the field technicians performing routine maintenance. Keep reading to explore the mutual benefits of HVAC and plumbing service contracts and the key tips contractors need to know when constructing them.
What are HVAC and Plumbing Service Contracts?
A service contract, also known as a maintenance agreement, is a legally enforceable agreement between a customer and an HVAC or plumbing to provide regular maintenance on a unit, such as an air conditioner or water heater. This routine maintenance helps support system longevity and reduces the chance of costly unexpected breakdowns and repairs, especially during peak season.
To enroll in a contract or service agreement, customers must sign and agree to contract terms — which typically occur after purchasing HVAC or plumbing equipment — and provide a lump-sum payment upfront alongside equipment and installation costs. From here, the contractor manages routine service and establishes a maintenance schedule in accordance with the contract terms.
How Are Service Contracts Different from Extended Warranties?
Although similar in certain ways, HVAC and plumbing service contracts are separate from extended warranties. Extended warranties are another type of add-on service often purchased alongside new HVAC or plumbing equipment. Rather than routine maintenance, an extended warranty covers unexpected labor and repair costs not covered under the original manufacturer's warranty.
Like extended warranties, most service contracts are transferable agreements that can be passed over to new homeowners in the event of a sale (dependent upon the terms and conditions). This continuous protection against future issues with long-term customer relationships makes offering either service contracts or extended warranties a win-win situation for clients and contractors.
The Business Benefits of HVAC and Plumbing Service Contracts
The primary benefit of service contracts is enhanced customer engagement that extends customer relationships. With each service contract, you become locked in as a customer's service provider for routine maintenance and repair needs in the event of HVAC and plumbing issues. These continuous customer interactions help forge strong brand loyalty that can also encourage referrals.
Likewise, extended customer relationships come with additional upsell opportunities. The ability to offer service contracts provides field technicians with organic upsell opportunities that drive up recurring ticket prices and further lock in your business for continued services. Each upsell also comes with an opportunity to boost profits, customer satisfaction, and overall reputation.
Lastly, HVAC and plumbing service contracts help maintain sales during slow seasons. For contractors in areas where ACs or furnaces aren’t running year-round, service calls can dwindle with seasonality. By offering HVAC and plumbing service contracts, you can keep technicians busy, reduce employee churn, and keep your sales pipeline full, no matter the time of year.
How to Create HVAC and Plumbing Service Contracts
To reap the benefits of offering HVAC and plumbing service contracts, it’s important to understand how to create them, especially what details to include. Considering these are legally binding agreements, failing to include the appropriate details could result in profit loss or even liability concerns. Here’s what to include when drafting an HVAC or plumbing maintenance agreement.
Decide on Payment Terms and Contingency Clauses
The first step to crafting a profitable agreement is to decide on the contract terms. To protect both parties, nail down your payment terms and write them out as simply and clearly as possible. This will include the price of the agreement, accepted payment types — like flat upfront fees or monthly payment options — and any potential labor and/or material costs not included in the agreement. If your services will be discounted, also include the non-service agreement standard price.
Similarly, you will need to settle on various contingency clauses to outline your business’ service obligations and protect the rights of both your customers and your company. Oftentimes, service contracts will include a termination clause outlining the conditions of an agreement termination and the process of doing so, such as a one-month notice. Contracts may also include a liability clause that outlines customer protections in the event of damage costs caused by the provider.
Establish Maintenance Tasks and Schedules
In addition to payment terms and contingency clauses, an HVAC and plumbing service contract must also outline the maintenance schedule and services to be performed as part of the agreement. From maintenance inspections to system tune-ups, each contract should outline the specific maintenance tasks that will be completed and at what frequency. This frequency may vary depending on the unit’s needs, so it may be wise to leave this section open for modification.
Create a Contract Template to Deliver to Homeowners
Now that you’ve nailed down the critical components of your HVAC or plumbing service agreement, you’ll want to craft a contract template. A contract template will help streamline the contract management and selling process for you and your technicians so that you’re not consistently starting from scratch. So, HVAC and plumbing contract templates should include details like:
- Payment terms
- Contingency clauses
- Maintenance services offered
- Schedule for routine maintenance
- Business contact details in the event of questions or cancellations
Bear in mind that maintenance needs will vary depending on the given HVAC or plumbing equipment. Field service management software like ServiceTitan helps simplify contract management by allowing users to create templates directly in the software and adjust details, such as pricing and maintenance schedules, as necessary depending on unit specifications.
Lock in Customers with Extended Warranty Agreements
HVAC and plumbing service contracts are a profitable means for business owners and field technicians to forge long-lasting customer relationships that protect the (often costly) investments home and business owners make on equipment. Beyond service contracts, extended warranty agreements are a reliable method to lock in customers, provide peace of mind, and boost sales.
Extended warranty agreements can become a beneficial upsell opportunity for HVAC and plumbing contractors alike. At JB Warranties, our industry-leading extended warranty plans are structured for parts, labor, or both, with multiple price levels laid out to accommodate contractors’ varied needs nationwide Contact us today to schedule a meeting with a JB Warranties Representative.
Tommy Cue
Vice President of Strategic Partnerships at JB Warranties
