Guys like Bob Bair feel your pain. Faced with the ever-growing problems of trying to succeed, Bair has aggressively marketed plumbing service agreements. He sees it as a way to expand his profitability, and make his company more money.
“Not many guys are doing plumbing service agreements,” says Bair, owner of Downers Grove, Ill.-based Robert Bair Plumbing Inc. “There are a lot of HVAC service and maintenance agreements out there, but there’s not that many plumbing.”
Bair is leading the plumbing service agreement movement in northern Illinois with more than 500 in the last two years. PM columnist Maurice Maio has thousands of plumbing service agreements in southern California, and became Bair’s inspiration.
Bair, who concentrates on residential service, went to flat rate in 1995, and moved away from new construction jobs.
“I went to three Frank Blau seminars. He convinced me to go flat rate, and get out of construction.” Bair says. “We went flat rate in June 1995, and have gone from about three service trucks in those days to 11.
“He made me take a look at my business, and I saw I wasn’t making any money. I didn’t want that lifestyle.”
Bair moved toward service agreements about the same time, after attending a Maio seminar. “I can really see that people save some money on a good size job. It’s that they’re investing their trust in us. I think it’s powerful.”
Partly because of service agreements, Bair says he has been able to cut his Yellow Pages advertising by more than half. “Our business is just as strong, and our flat rate is pretty low compared to some flat raters around here. The service agreements enable us to have about a 70 percent repeat and referral rate. And that percentage is the number of service calls; if you went in dollars it would probably be even more.”
Bair started working as a draftsman, became an apprentice and worked for 10 years, before opening up Robert Bair Plumbing in 1974. He started out in his garage, and has since outgrown two locations.
Bair views service agreements as a way to compete in his marketplace.
“The service agreements allow us to look at everything in someone’s house. We qualify the people we work for because of the service charge to go out,” says Bair, whose business employs 18 people. “We don’t get many deadbeats when we make them pay $47.50 for us to come out. Generally with these people when there’s something wrong, they want it fixed. A lot of times we’ll get add-ons from the service agreement inspection.”
Once Bair’s company starts looking at a customer’s house, he grabs competitive advantage over any other shop. Bair says his company documents brand names, model numbers, serial numbers and capacity in case they need to go back and replace any equipment. All the information his workers gather, Bair keeps on file in the company office.
Takes Time: The service agreement Bair uses took more than two years to develop. He purchased his original list from Frank Blau, and then had monthly meetings to make additions. Bair’s workers use a checklist — which covers everything from sump pumps to refrigerator ice maker piping — to provide a visual inspection of 30 items. The visual inspection takes an average of 30 minutes to complete.
“All they get with the service agreement is a visual inspection,” says Bair, who is a member of Contractors 2000 and the Illinois PHCC. “There are no repairs included with the service agreements. They get the inspection and their right to get a value rate for any calls we do for them for up to a year. For the customer it’s a substantial savings.”
Bair uses service agreements in tandem with his flat rate book. “As we do our proposal, we show them the flat rate price both ways. For example, the book can say the job is $120 without being a preferred customer as opposed to $100 if you are. More than half go ahead and do it. They trust us, and they trust the plumber. They want to have the relationship. The customer also gets preferred scheduling.”
But Bair warns if the service agreement is not presented properly, people become upset. He says some people think they are purchasing an extended warranty or something other than a visual inspection.
Bair must be doing something right, with the growing number of service agreements over the last couple of years.
“In about 10 percent of the inspections, we find something where we’re able to eliminate a dangerous condition,” Bair shares. “About 40 percent of the time we’re finding something where we save them a flood or an emergency call in the middle of the night. And again we make a proposal on the invoice. They agree to the price and then for us to do the work. We don’t do anything unless we have a signature.”
Bair says most of the time people are getting items he finds fixed. It just depends on what is broken.
“If it is fixing an emergency shut off we sometimes don’t fix it. If they have a big snowball on the pipe that looks like it is going to break at any minute then they are going ahead and saying fix it,” he says. “They’re into getting it fixed. I think it has to do with the service charge getting us out there. It really qualifies them. People who just want to patch things together don’t want to pay the $47.50 for us to come out.”
Service agreements are not all roses. According to Bair, a majority of his customers do not renew after the first year.
“The renewal rate is low. We send out letters at the end of the year when their time is up, and we get back very little from it,” Bair says. “In other words, we say ‘Would you pay for my guy to come out there and do an inspection?’ We have a tremendous repeat customer base, though. As soon as they call us back they are getting a new service agreement. They are not really renewing the service agreement unless we go out there and fix something else.”
Ninety–five percent are one-year service agreements. Bair says his company is not giving his customers a big break to sign up more than one year.
“We would almost be willing to give the service agreements away when we’re slow,” adds Bair. “We are doing service agreements because business is so strong, but we would consider something like that if we get slow.”
Most of the work the company generates is seasonal, Bair says, but he is confident his business is growing. “I know the philosophy I have is working really well. I’m really comfortable where the company is right now.”
Bair says the service agreements are removing a lot of the emergency calls his company would otherwise be receiving.
“We don’t do that much emergency work. I don’t really push for emergency service,” Bair explains. “I like my guys to work eight hours, and maybe a little overtime. But if they are going out in the night then they are no good the next day. If a preferred customer calls we will certainly go out there and take care of it.”
One last thing the service agreement does, Bair says, is add professionalism to his company. “Any little thing we can do to convey that we are professional helps. We need to respect our customers, service techs — and everyone. It helps us all get jobs.”