Maintenance Agreements Make Sense. Not Having Them Doesn't.

May 15, 2005
A strong maintenance agreement program produces wealth. Even among those of you with strong annual sales, if you dont grasp the glorious benefit of recurring

A strong maintenance agreement program produces wealth. Even among those of you with strong annual sales, if you don’t grasp the glorious benefit of recurring revenue streams from a captive audience, you’re always going to be creating originals instead of making copies.

I’d like you to be in the copying business, where you “print” future sales by generating legitimate repeat sales with existing clients.

This is done quite handily with a maintenance agreement program. If you’re thinking either, a) maintenance agreements are just a form, or b) They’re hard to manage, or, c) Who cares about upselling stupid little tune-ups? please realize that I used to answer “All of the above.”

Yes, I’m a recovering Leadaholic, who now realizes, after years of direct response abuse, that there is a big difference between creating income and producing wealth.

Maintenance Agreements Work Seven Ways

Seven factors contribute to your profit picture’s success or failure. If you agree with even one of these, there’s good news ahead.

1. Customer migration. A full 71% of your customers who leave you do so for the same reason: you weren’t in their face but the competition was. You paid to get them but let ‘em leave for free. Not good.

Last month we looked at newsletters as a great way to stay in touch. Maintenance agreements are the natural succession of this with a twist: Now your customers pay you to remain a customer. This means you get a…

2. Recurring profit stream. Contractors who live off “originals” — which are the direct result of hard work — are trading dollars for hours. Those with maintenance agreement programs allow you to turn one sale into many, on cue. This effectively eliminates…

3. Seasonal swings. Are you following the HVACers “Rule of 72”? This means the greater temperature variance from 72, the busier, happier, and more profitable your season. Sorry to tell you, but this weather slave mentality isn’t making you very fun to be around. Maintenance agreements automatically fill in the off-peak season, making you a profitable partner with the weather. A much nicer position, I promise. Related to this is…

4. Employee loss. Your best techs will leave you in the off-season if they don’t get enough hours and are sick of cleaning out their trucks. Maintenance agreements give them meaningful work to perform on schedule. And it’s not just tune-ups. As my friend Ron Smith says, “maintenance agreements are a replacement waiting to happen.”

As usual, he’s right, especially when it comes to…

5. Bidding. Want out of the bidding game? Maintenance agreement customers close on replacements almost three times more often than the cold lead national average (84% versus 30%), and nearly 10 full points more than your current customers. This alone is worth the effort.

Want to increase this even more? Give them bonus bucks toward a replacement for each year they renew. This is explained in the free report offered at the end.

6. Automatic referrals. Most of you hope your good work will generate referrals. The bad news is, your referral rate drops off a cliff the longer you’re out of contact with even the formerly giddy customer.

Maintenance agreements keep you in front of the customer, plus they allow you to ask for referrals. Relationships bring more referrals than hoping ever will. All your relationships bring you…

7. Bankable value. Too many contractors work too hard for too long, only to find the company’s value is mostly perceived. Last year’s sales are just that. Used inventory and an ill-defined customer list don’t add up to much.

A Maintenance agreement program generates value already on the books. Your value goes from “Who knows?” to having a verifiable wealth accumulation plan.

Your Education is Showing

If you’re not watching “The Apprentice” you’re missing a free, professionally crafted seminar every week. Winners and losers are determined by dollars generated per project in a team competition.

Most sane viewers feel it’s about personal initiative and leadership. Yet the outcome on 85% of the shows is based on something else entirely. The loser does one thing poorly. The winner does one thing much better: marketing.

Think ‘em through yourself. Incoming leads convert to sales, which convert to dollars, which convert to winners. Period.

The better marketer kicks bootie. The losing team pursues hard individualized effort instead of the multiplied outcome from marketing.

The Apprentice candidate has zero need for long term recurring revenue. The Contractor can’t live without it.

The Calendar Keeps Moving

“I don’t have time. I can do that later.” We all say that. Then we notice our kids have grown up. Another season has passed. Friends we meant to contact weren’t called. The program we meant to implement wasn’t pushed forward. The resolutions we made resolved nothing, excepting the heightened futility with which we make them.

Shall we shed a tear at the altar of good intentions? Or rejoice that we recognize the problem at all?

I’m all over Option B.

Here is a sample of the worst phone conversation we get all year. Realizing that we’re in semi-regular contact with maybe 7,000 contractors, it’s hard to pick a winner, but this is it for sure:

Caller: “We’ve been in business <10,20,30> years.”

Optimistic me: “Great! How many trucks and how big is your database?”

Caller: “We’ve got 3 trucks, and I don’t really keep up with our customers. I guess 1,000 or so. But I’m looking to grow it.”

I can virtually assure you that the caller has spent years “thinking about” growth, had a zillion ideas, truckloads of advice, and a dozen living examples to copy… all followed by massive “busy” effort… none of which was directed at growth. Just another example of the business running the man, instead of the other way around.

“I don’t have time. I can do that later,” he says. Just like tens of thousands of contractors in similar situations, where the “tyranny of the urgent” strangles the “potential of the important.”

His bucket is filling at a glacial pace, and it has a large hole in it. Fixing the leak and turning the trickle to a very manageable gush is the objective.

Adams Hudson is president of Hudson, Ink, a creative marketing firm for contractors. Readers can get a free marketing newsletter by faxing their letterhead with the request to 334/262-1115. You can also call Hudson, Ink at 800/489-9099 for help or visit for other free marketing articles and reports.