It’s no easy task entering the service business, or any business for that matter. It’s an uphill battle from the start. Your competition seems to have it all: an established name, hordes of customers, perhaps a reputation for quality work, maybe a coveted spot in the Yellow Pages.
Wouldn’t it be nice if you were entering the business and you never had to be the “new guy” in town? If you could rapidly build customer loyalty, make plenty of profit and still offer discounts to your customers, you would have it made.
But you can do it. You can shed the new guy shackles that slow your success. One single technique can propel you past the typical start-up problems and accelerate the success of your business. Not only that, it’s easy to implement and the rewards are immediate.
Service agreements, now still being discovered by many service and repair businesses, can provide the vehicle for you to:
- Generate capital.
- Build customer loyalty.
- Offer customer discounts.
- Keep technicians busy in slow times.
- Increase the value of the business.
- Produce a source of business when it’s convenient for you.
How It Works: Service agreements are very simple to understand and easy to offer your customers. Once the technicians have been briefly trained, they will sell more than you can imagine.
The concept offers attractive trade-offs to your customers and your business - even the technicians gain from selling service agreements. As a service agreement customer, in exchange for a nominal fee - let’s say $50 - the customer receives a discount on all services. The lower price is shown for each service and repair job and is displayed as “service agreement customer price” in the flat rate manual. In addition, they receive a no-charge home inspection, where a technician will do a complete walk-through of the customer’s home, inspecting all systems, fixtures, water heaters, heating and cooling systems, etc.
By locating potential system breakdowns early, the customer avoids interruption of his or her heating, cooling, plumbing and other systems. The customer saves money in several ways: the cost of the service call is dropped; the price is lower for all work performed; and future problems are fixed early before the cost of repairs or replacement increases as a result of neglecting the problem.
Safety is a benefit, too. A technician can spot a leaking gas or water line or risk of such a hazard before it occurs. Detected early, a small repair bill can prevent not only a larger repair bill later, but avoid a potential catastrophe should a leak continue or get worse. The benefits of being a service agreement customer are substantial, and the cost is low. It’s an easy sell to customers.
Business Benefits: Selling service agreements to customers provides many benefits to the business, too. I mentioned that they generate capital. Compute how much additional revenue you would have in your business account if you had 100 or 200 service agreement customers - some businesses have 1,000. That’s $50,000 of cash available to the business, an amount that would certainly help with expansion.
That extra money can come in handy for a relatively new business. Why not start selling service agreements right from the start? Some established businesses are just catching on now (some haven’t figured it out yet). You’ll have a head start in your community.
Besides the extra cash generated for the business, the agreements build customer loyalty. Customer loyalty is a special benefit to a newer business because as a new business owner, you want to retain the highest percentage of repeat business possible so you can grow the business at a faster rate. A larger, more established business can afford to have a smaller amount of repeat business and sustain market fluctuations (although the best businesses tend to enjoy a large percentage of repeat business). The loyalty factor can contribute significantly to your growth; service agreement customers represent one sure way to maintain customer loyalty.
Keeping Busy: A challenge for all service businesses is dealing with ways to keep technicians busy during slower business times. At these times of the year, the phone seems to stop ringing, yet the overhead and payroll continues. Companies with a substantial number of service agreement customers have no problem in slow times because they simply schedule home inspections, part of the service agreement obligation with the customer.
Customers who receive the service without any additional charge welcome the inspection. Their concern for safety and the ability to save on any service work that may need to be performed is a good incentive.
At the home inspection, technicians ethically determine what service work needs to be performed, if any, and show the customer the reduced charges for the jobs from the flat rate manual. Add-on jobs, also shown in the flat rate manual, are offered at a reduced rate, too, since the job can be performed without an additional service call. The incentives for lower-cost repairs are a strong inducement for the customer to complete the service and repair work while the technician is on the home inspection call.
Essentially, the customer gets an inspection and reduced rates on service work while the business, obligated to perform the inspection at some time anyway, keeps technicians busy and generates more business. It’s a win-win.
The best part is having the flexibility to schedule the home inspections when you have the technicians available and not booked on other jobs. Meeting your schedule needs is a real advantage to having service agreement customers.
Long-Term Benefits: Although selling the business or building value in the business is not of paramount concern for the new business operator, it is an issue as the years go by. Someday the value of the business will be of more importance. Unfortunately, it is difficult to build that value when it comes time to be concerned about it. Building value takes time. Start early.
One of the ways to increase the value of a service company, for which future revenues are sometimes viewed as uncertain, is to show service agreement contracts - a more certain source of revenue. One of the current trends in selling service agreements is to look toward the future by selling three-year, five-year or even longer term service agreements.
By setting up automatically renewing service agreements, the benefits to both the customer and the service business continue uninterrupted. The customer’s credit card is charged annually and his or her service agreement continues in force. The arrangement could continue indefinitely. That’s true long-term thinking.
It’s never too early to build value in a business. As the consolidation trend returns, valuable businesses become even more valuable. Ones that don’t offer much value may find it difficult to compete with the professionally run consolidated businesses. Keep value on your side.
The Mechanics Of The Arrangement: This doesn’t mean technicians. I am referring to the agreement itself - who does what and for how much, that sort of thing. Where do you get these agreements that will allow you to leap ahead of the typical growth curve of a new business?
You could re-invent the wheel and spend thousands investigating what works and what doesn’t, and pay legal fees for all the learning experience. But you don’t need to get hung up on the details. Resources are out there to speed your success, and they’re available free (visit www.maiosuccess.com).
Your success with service agreements will depend on your technicians selling them, though. That means they have to understand them and believe they are a bargain for the customer. So your first wave of “customers” to explain service agreements to happens to be your technicians. Answer their questions and provide them the tools, and they will do the job.
When providing the tools, don’t forget three key elements of preparing technicians to sell service agreements. First, they need a quality flat rate manual to take much of the work out of selling. Customers ask, “How do I get the service agreement discounted price?” All the technician has to do is answer. Invoices can help, too. The regular invoice should include verbiage about the service agreement, even a check box that the technician marks to make sure he mentioned it.
Next, you need to train the technicians and let them answer practice questions in a role-play simulating customer inquiries. Send them out prepared and they will bring in the service agreement contracts.
Finally, don’t overlook an incentive. The service agreement is a “product” in your inventory of offerings to customers. When a product is sold, some compensation, incentive, commission or reward is due. Reward the efforts of the technicians. They are, of course, your sales force, and you will see service agreements pour into your business.
Selling service agreements, while not the only means, will take your business from a new business to a successful and growing business right from the start.