HVAC Service Contract Fundamentals: 10 Benefits for HVAC Contractors and Customers

Brittany ParisJuly 12th, 2020
Listen to this article

The HVAC maintenance contract drives more revenue for HVAC companies than any other aspect of business, according to the “HVAC Contractor Business Model” published by the U.S. Office of Energy Efficiency & Renewable Energy’s Better Buildings Neighborhood Program.

An HVAC service contract leads to revenue from annual maintenance visits, but the real value HVAC maintenance agreements provide comes from establishing repeat customers, and the repairs and replacements of HVAC units sold during those yearly or quarterly visits. 

The “HVAC Contractor Business Model” recommends using an HVAC service agreement as a way to increase the sales of home energy upgrades as well as standard HVAC equipment. From interviews with HVAC contractors working in the field and industry experts, the Better Buildings program determined an HVAC business must secure roughly 500 service contracts to be considered sustainable.

If your home service company isn’t producing these kinds of results from HVAC service contracts, or you’re thinking about launching a brand new club membership agreement for customers, we’ve got you covered. Read on to see how implementing the right HVAC service agreement benefits both your customers and your company’s bottom line, and what it takes to make your HVAC service contract worth it for everyone involved.

Here’s what you’ll learn in this fundamental guide to creating a HVAC maintenance contract program for your heating, A/C and ventilation customers:

  • 5 business benefits of an HVAC service contract

  • How to sell customers on top 5 reasons to consider an HVAC maintenance agreement

  • Create an HVAC maintenance contract template that converts customers

5 Ways an HVAC Service Contract Benefits Your Business

There’s a reason so many HVAC service companies rely on HVAC service agreements or club memberships to bolster their bottom line. In addition to making more money, you’ll see additional business benefits when you create the right HVAC service contract for your company.

1. Increased profits

The biggest benefit HVAC service contracts offer your business is an increase in profitability. HVAC maintenance agreements provide a consistent flow of repair and maintenance work for a more reliable avenue of income. They also increase company profits by converting leads and one-time service calls into repeat customers. 

A steady stream of repair jobs helps HVAC contractors maintain consistent revenues, and dedicated service contracts creates that steady stream, according to the“HVAC Contractor Business Model” report.

2. Keep HVAC techs busy during slow seasons

Given the seasonality of HVAC work in most locations, it’s helpful if you can bolster your tech’s schedule during the slow season with annual or quarterly maintenance visits so you know there’s enough work to keep everyone employed. 

Schedule out annual HVAC maintenance contract visits well in advance, during traditionally less busy heating and A/C off-seasons, to keep your HVAC techs busy when service calls slow down.

3. More customer engagement 

An HVAC service contract offers your technicians more touchpoints with customers and facilitates regular face-to-face interactions with an established customer base—always a good thing for improving sales and customer loyalty. 

Increased face-time spent with customers means more quality time to get to know the homeowner and their HVAC systems better, along with the family’s specific comfort or health needs. That intimate knowledge and time spent relationship-building with customers will likely lead to more sales opportunities.

4. Upsell opportunities

Customers already rely on your service company to improve the comfort of their homes by repairing their equipment. An HVAC service contract gives your technicians additional, optimal touchpoints to offer energy assessment services and suggest upgrades to improve the home’s comfort, health or safety. 

“Annual service and maintenance checks are the primary means by which HVAC contractors drive follow-up sales,” states the Better Buildings HVAC business model. “These routine visits to customers give HVAC contractors a key advantage…[they] can build on the existing trust of their customers to offer additional home energy upgrade services. 

“Face-to-face interactions that educate customers are therefore the most effective marketing technique for HVAC contractors.” 

HVAC maintenance agreements increase your technician’s opportunities to educate customers on home energy and air quality upgrades or HVAC equipment replacements, resulting in more year-round sales.

5. Reward successful sales

HVAC maintenance agreements can incentivize technicians to improve performance. Reward bonuses and team recognition for new or renewed service contracts, as well as financial rewards for any upgrades or replacement sales made during an annual maintenance visit.

When Chris Hunter ran his own HVAC, plumbing and electrical company, he gave technicians who sold HVAC maintenance contracts first rights to that customer and residual earnings tied to current contracts. 

“For every service agreement/club membership that a tech sells, they get the first right to go service that customer,” says Hunter, who now serves as Director of Customer Relations at ServiceTitan. “That’s helpful to the techs during slow times of the year, plus they get a residual SPIFF as the years go on.”

By incentivizing your techs to sell more HVAC service contracts, you’ll increase the company’s overall profit as well improve your techs’ job satisfaction and income potential.

Top 5 Selling Points of HVAC Maintenance Agreements

Customers are naturally skeptical of signing an annual contract of any kind, especially if they’re new to your company, so it’s critical you give your technicians the tools to quickly and easily sell the benefits of an HVAC maintenance contract and show them why your HVAC service contract is worth it.

1. Club memberships 

HVAC maintenance contracts provide an opportunity to make repeat customers feel special and give them access to exclusive discounts or deals. One way to do that is by calling them a club membership instead of an HVAC maintenance agreement or service contract. 

Hunter says he prefers to call them club memberships because they’re something that benefits the company, customers and the techs. Hunter helps train contractors and service business owners as co-founder of Go Time Success Group.

2. Build customer relationships

For every month that customer remains under contract, the tech should get a percentage of each membership they’ve sold. Over the years, that monthly income adds up to enough of an incentive to keep techs on staff for much longer. It also establishes a bond between your technicians and their customers. 

“When the time comes and a customer needs a big replacement, there’s no longer a bidding situation,” Hunter says. “They’re dealing with a trusted friend.”

3. Offer customers incentives

Give customers incentives for signing an HVAC service contract, such as offering a discount on scheduled maintenance services, deals on equipment upgrades, or promising priority emergency service during times of peak demand. 

Some companies allow customers to make monthly payments on the HVAC maintenance contract to make the offer more attractive or affordable, and provide discounts if the customer hires them for unexpected repairs outside of the scope of the annual maintenance agreement. 

Use the club or contract to build trust in your HVAC company brand with repeated, upstanding maintenance service at a discounted rate, as scheduled and promised. Assure customers they can rely on the same company and same technician showing up every time they need service, which puts many homeowners at ease if there’s already a good relationship developed during the initial pitch.

4. Routine maintenance saves money, energy

By signing an HVAC maintenance contract, homeowners or commercial HVAC service contract customers can rest assured their HVAC units and ventilation systems remain well-maintained and less likely to fail early. 

As any good HVAC professional knows, regular preventive maintenance saves energy and keeps the HVAC equipment working optimally so it lasts longer. Lack of HVAC maintenance can cost homeowners by reducing efficiency by 5% or more, resulting in higher energy bills. Be sure to explain these risk-reward benefits when selling an HVAC service contract to customers. 

5. Save money in the long run: Avoid dangerous problems, and keep warranties valid

Routine equipment inspections included in an HVAC service agreement allow your technicians the opportunity to spot a minor problem before it becomes a major, costly issue. Annual or quarterly inspections give customers the option to budget and prepare in advance for any recommended replacements versus shelling out thousands of dollars unexpectedly when their furnace suddenly dies. 

If the customer has an aging A/C unit or furnace, it’s best to inspect it at least twice a year to check for dangerous issues like a cracked heat exchanger and look for signs of impending failure. For customers with newer equipment still under warranty, be sure to explain most equipment manufacturer warranties only remain valid if they keep up on annual maintenance inspections with a trained HVAC professional.

Create an HVAC Maintenance Contract Template to Convert Customers

It’s important to create an HVAC maintenance contract template that’s easy to understand—for both your technicians and customers—and easy to actuate. Investing in the right service agreement software can make the contract process smoother and fool-proof to track.

However, not all software facilitates HVAC service agreements with the ease and intuitiveness required for successful implementation. A recent survey of 200 contractors revealed the field management software HVAC companies choose could actually prevent them from profitably delivering aftermarket services to customers.

Software survey says...

While 85% of study respondents say they offer HVAC maintenance contracts with customer-specific terms and pricing, only 14% say their company’s software facilitated these contracts “very well.” 

Many contractors report the service agreement software didn’t enable field technicians to improve the customer experience or drive new revenue, with just 38% saying technicians could access information on the terms of the contract like customer-specific requirements. 

Only 15% of respondents say they have the right technology to empower field technicians to upsell or sell new service contracts, and only 25% can issue new estimates from the software, while 23% can get customer approval for an estimate through the field software. 

Ditch the Manual Maintenance Agreement Approach

An automated, integrated software system that handles every aspect of a job—from scheduling and technician tracking to invoicing and bookkeeping—simplifies the process for implementing HVAC service contracts. Plus, service agreement software makes the contracts clear, trackable, and less prone to mistakes than manually entered information.

Don’t manage your HVAC membership agreements manually when software can help monitor, automate, execute, and store critical steps in the service agreement process. Utilize a field service management tool with the following advantages:

  • Integrated scheduling, reporting, and invoicing. Utilize HVAC service agreement software so scheduling and reporting related to recurring jobs updates automatically and accurately in real time. Track projected profit for maintenance contracts, which technicians sell the most, and to which customers. Automate customer billing to send on a recurring basis, and connect to a bookkeeping program so technicians get paid appropriately. 

  • Tracking customer history. It’s important to track and manage contracts while viewing a customer’s entire service history with the company. You can adjust contracts and personalize service by knowing a customer’s specific pain points and vital details about their HVAC equipment, such as age of an A/C unit or likelihood of needing a replacement.

  • Market memberships to target customers. Use marketing technology available in the field management software to target existing customers who meet the right criteria for club membership through email or other marketing promotions, and to say thank you to those customers who renew or sign a new HVAC membership agreement. Send automated reminders for follow-up appointments or expiring memberships through the service software.

  • Automate HVAC service contracts. Build in HVAC maintenance agreements to automatically show up on jobs where the homeowner and their HVAC equipment meet your company criteria, so techs know to offer it as an option on a job estimate and can easily present the contract benefits on a digital device.

  • Customize customer contracts. Invest in HVAC service agreement software that offers customizable HVAC service contract templates, allowing you to determine your company’s specific terms and conditions, and make personalized adjustments for each new service contract issued.

  • Mobile presentation tools. Give your techs the tools and information to make a convincing, short presentation on the value of your club memberships or HVAC service agreement. Make it easy for technicians to sell the agreements, show how the HVAC service contract pricing easily covers the cost of unexpected repairs or replacements without regular maintenance, and a simple way for customers to sign up on the spot using a mobile device like a tablet.

  • Offer a valuable renewal strategy. With the right software, HVAC contractors can run reports to show customers the true value of an existing HVAC service contract and encourage them to renew the agreement. Provide a performance summary of the agreement to show revenue, costs, number of planned and unplanned visits, and overall savings or bonuses they accumulated over the past year.

  • Prioritize high-need customers. Software should offer a way to sort HVAC maintenance contract customers by age of equipment and possible replacements so your team can prioritize those customers most likely in need of imminent maintenance attention. You can view open estimates, see service histories, and leave notes to discover new sales opportunities to pursue.

ServiceTitan Mobile 2.0 Service Agreement Software

ServiceTitan Service Agreement Software offers all of the above and more, giving HVAC companies the power to improve profitability while greatly reducing the manpower required to maintain service contracts.

ServiceTitan’s Mobile membership wizard allows contractors to generate new maintenance memberships and equipment-based contracts with three quick steps on a mobile device or tablet. There’s no paperwork to follow up on when the technician returns to the office, and customers can take immediate action instead of thinking it over and forgetting or reconsidering the commitment. 

Once customers sign an HVAC service agreement form on the mobile device, technicians can easily apply discounts, schedule regular maintenance appointments, collect payment or submit invoicing, and leave important notes for future reference. The office side of your business can utilize the service agreement software to produce recurring service reports to track profits produced, monitor scheduling, and allocate pay to technicians for related sales. 

With the right technology and approach, an HVAC maintenance contract can successfully convert one-time customers and new leads into repeat customers, improving both customer acquisition and retention. Building that base of loyal customers sets a steady foundation for your company for years to come, while also creating a steady flow of repair and maintenance jobs that ultimately provide a more consistent income stream with more total profit.

ServiceTitan is a comprehensive HVAC business software solution built specifically to help service companies streamline their operations, boost revenue, and achieve growth. Our award-winning, cloud-based platform is trusted by more than 100,000+ contractors across the country.

Learn More
Product IllustrationProduct Illustration

Related post

Pantheon 2020: Live Coverage

Live coverage of Pantheon 2020, ServiceTitan's annual conference for contractors — including recaps, links and resources for contractors and business owners from the trades. Pantheon 2020 is virtual and includes dozens of sessions with leading industry experts.

Pantheon 2020: Pro Tips for Closing Out Your Monthly Books in ServiceTitan

Svamal De Fonseka, Revenue Accounting Manager at Michael and Son Services in Alexandria, Va., provided tips and tricks for more effectively validating a service company’s financials in a virtual session during Pantheon 2020, ServiceTitan’s annual conference for the trades.

Pantheon 2020: How Women In the Trades Are Building Community

The women in the trades networking session for ServiceTitan’s Pantheon 2020 annual conference focused on the issues that women in the trades face today.