Maintenance agreement maths: pricing, renewals and capacity

Step 1: Work out what one member costs you

The answer comes before the price. Most owners set a plan price first and only later realise it barely covers the visits.

List what you promise and what each item costs to deliver. For a typical heating-and-cooling plan with two visits a year:

That $232 is your floor. A plan priced at $199 a year loses money on every member before a single repair is booked. Owners who copied a competitor's price often discover they're in exactly that position.

Step 2: Set a price with real profit in it

Now add the margin you want. A plan at $29 a month brings in $348 a year, which leaves $116 a year per member above delivery cost.

Members usually bring extra value too: repairs they call you for first, and replacements when the time comes. Estimate that value from your own history, not from assumptions. Pull last year's list of agreement customers and total the non-plan work they paid for. Divide by the number of members.

Suppose it comes to $180 a year per member at a 45% gross margin. That adds $81 a year in gross profit. Combined with the plan profit, each member is worth about $197 a year in gross profit.

Should you discount repairs for members?

A 10% member discount on repairs is common and can help renewals. But price it in. On $180 of repair work, 10% is $18 a year, which lowers each member's value to about $179. That's still healthy. A 20% discount on a plan already priced near cost is not.

Step 3: Model how the member base grows

The size of your program depends on two things: how many members you sign and how many you keep. Owners tend to focus on the first and neglect the second.

Here's a three-year model starting from 150 members, with 20 new members signed each month (240 a year):

The model is simple: each year, the members you keep plus the 240 you sign. (A fuller model would also apply losses to members signed partway through the year; the simple version is close enough for planning.)

The gap between 70% and 90% renewal after three years is 183 members. At about $197 in gross profit per member, that's roughly $36,000 a year in gross profit, from the same signing effort. That's why renewal deserves as much attention as sales.

How to raise renewal rates

• Bill monthly where you can. Customers are less likely to cancel a small monthly charge than to approve a large annual one.
• Remind early and personally. A reminder well before renewal, from the office rather than an automated system alone, keeps members who would otherwise lapse.
• Make the visit visible. A short written summary of what the tech checked reminds the customer what they're paying for.
• Follow up on failed payments the same week. Many "cancellations" are expired cards.

Step 4: Check that you can deliver the visits

Members need visits, and visits need tech hours. This step catches the most expensive mistake in agreement programs: selling more plans than you can service without crowding out paid work in peak season.

Using the example above, 662 members at two visits each means 1,324 visits a year. At 1.5 hours per visit including drive, that's about 1,986 tech hours.

Now look at your shoulder seasons. If you have four techs, each with about 15 spare hours a week across roughly 16 shoulder-season weeks (spring and fall combined), that's 960 spare hours. The program needs roughly double that.

Your options are clear:

1. Schedule some visits outside the shoulder seasons, in lighter weeks of peak season
2. Hire a dedicated maintenance tech, whose wages the program can fund
3. Slow the signing rate to match capacity

Option 2 is often the most profitable at this size, and it's covered in the hiring and owner-time session and the owner-time audit guide.

Step 5: Get techs offering the plan

The maths only works if plans are offered. In most companies, a small number of techs sign most of the members. Track the offer rate, the share of eligible calls where the tech offered the plan, as well as the sign-up rate.

A simple routine helps:

• One sentence, every time. Something like: "Most of our customers on [Plan name] get two visits a year and priority booking. Would you like me to set that up today?"
• A small, clear reward per signed plan, paid monthly so techs see it.
• A weekly count, shared with the team, of plans offered and signed.

Common mistakes

1. Pricing below the cost to deliver. Do Step 1 before setting any price.
2. Five tiers. One or two is easier to explain at the end of a call.
3. Ignoring renewals. Signing effort is wasted if members leak away.
4. Booking every visit in one month. Spread them, or they'll collide with your first cold snap.
5. No capacity check. Growth without the hours to deliver turns into unhappy members.

Putting it to work

Run the four calculations above with your own figures: cost per member, price and value, three-year growth, and capacity. If the numbers say your plan is underpriced or your capacity is short, that's a decision worth making deliberately. To work through it with Ali, see the session topics and how sessions are quoted, then call, text or email with your member count, plan price and renewal rate.