Service Contractors Can't Thrive Without PM Agreements

Nov. 1, 2006
BY JERRY HURWITZ, J J AIR CONDITIONING table width="200" border="0" align="right" cellpadding="5" cellspacing="0"div align="center"img src="/images/archive/43188ccr0100jpg_00000019468.jpg"


Sell more preventive maintenance agreements, and your vehicles will become known at facilities throughout your area.

Compressor replacements are just one of many projects that can come about as a result of preventive maintenance agreements.

With a preventive maintenance agreement, a contractor performs quarterly checkups on key air conditioning components, replaces the filters, and provides the facility manager with a report on any deficiencies found, with an estimated repair cost. The obvious extension of the PM dollar are the dollars generated by the repairs authorized by management, as well as any emergency service calls.

A commercial PM agreement generates much more of our gross sales than most of us realize. By analyzing our existing business mix, and its origins, we learn why we need to have a strong sales effort. This analysis helps us understand that we can afford to pay what it takes for quality sales personnel.

Most of us would expect income from upgrades to VFD's, evaporative condenser replacement, and possibly upgrades to the building's controls systems. What most us might not keep in mind, however, is where does our retrofit, replacement, and tenant improvement (TI) work come from?

Where did we meet, and establish a relationship with our select general contractors who use us exclusively for their design build work?

Most of us in the service work business — if we look closely at all of our retrofit and TI customer histories — will find that the original contact came from that first PM agreement.

It might be a general contractor had to first use your services because you were the service contractor on that site, and the property manager only wants one HVAC contractor working in their building. Lo and behold, the general contractor starts using you on other jobs away from this original building.

What about the tenant who needs a new server room unit and is required to use only you? Five years later, they're moving to a larger facility and they call you because they liked what did for them at their old site. You get the idea.

How Much is $1 of PM Really Worth?
Our 12% of PM business generates 48% in repairs, and 40% in tenant improvement work.

All of our repair projects are generated from PM customers, and about 80% of our retrofit work comes from our PM customers.

The ratio of work generated from PM agreements can vary; it might be 4:1, 5:1, or 6:1, and referrals coming from that PM customer is part of the total dollar volume.

Great Salespeople are Committed Hunters
To make significant strides in PM sales, it's essential that a contractor hire a dedicated PM salesperson.

Many company owners have tried to hire someone who is "just like them," and, after years of failure, have given up, and now chug along trying to find business themselves, solely on reputation or luck.

A salesperson, however, is not an account manager, estimator, or marketing manager. He or she is a person who thrives on "the hunt" for new business, and who lives for the next cold call.

What is a contract salesperson worth? Well, if the contract salesperson is making $100,000 in salary, and sells $100,000 in maintenance agreements each year, in five years this salesman can generate more than $1million in net profit after all expenses, including sales expenses. Unless you're a terrible service provider, your customer relationships will last a very long time, and I therefore contend that the payback on a superior salesperson is almost incalculable. You're never losing money by paying a top-notch service salesperson.

We found our best salesperson by using a sales consultant and a recruiter. I took their recommendations, instead of trying to hire the type of person I had failed with over the past 20 years, and hired a true salesman. What a wonderful find he has been.

Where to Find the Leads
For the best qualified leads, we use Dunn & Bradstreet, but there are other database companies that can provide the appropriate leads or SIC codes for facility managers and buildings over a certain number of square feet.

Preventive maintenance agreements are the key elements in the success and growth of a service contracting company. So, how much is $1 of a PM agreement really worth to you? How much can you really afford to pay a quality PM sales person? I believe that if you analyze your business mix that you will realize that can afford to hire the very best quality PM sales person.


Before you jump to any conclusions, consider this: one company does not "take" a customer from a competitor; the competitor loses that customer.

Everyone has lost a customer at one time or another. If a customer leaves J&J, it's because we did something wrong; and the same thing can happen to any of our competitors.

For some reason, Company A wasn't listening to the customer or meeting the customer's needs, and Company B steps in at just the right time with a PM agreement.

A situation that is beyond the control of any contractor, and causes 'lost' business could be a real estate transfer, which puts the facility under the care of a new property manager who is allied with one of your competitors. In that situation, you might have a 50/50 chance of retaining the account, because it's hard to pry a building manager away from his or her favorite service contractor.

However, if you lose a customer for any other reason, it's probably your fault.

Jerry Hurwitz is owner and president of J & J Air Conditioning, San Jose, CA, a commercial service contracting company. To reach him, e-mail [email protected]