Service Agreements, Part 1: Should Your Company Offer Irrigation Service Agreements?

First in a Three Part Series

A residential service agreement. It sure sounds impressive, but what exactly is it and should you have one?

First off, rest assured that the average homeowner is probably already familiar with the idea of service agreements. After all, many of them already have enlisted other companies to perform a variety of work at their house.

Common examples of such business relationships are the services provided by pest control companies. Many homeowners maintain service agreements that are often paid quarterly and renewed annually, covering both scheduled (quarterly) spraying and "emergency" service on an as-needed basis as special problems arise.

Another familiar service agreement is for furnace maintenance, which typically includes cleaning the filters and turning on and off the pilot light at the start and the end of the chilly months of the year. And, of course, there’s the seasonal agreement for snow plowing, where the customer pays one price up front that covers snow removal for the entire winter season.

Regardless of the merchandise being sold, a service agreement means that you are selling the customer more than just products, you are selling them service which stretches your business relationship with them into a period of years, instead of just days. That is why, as an irrigation professional, you should work to ensure that a business relationship with each customer extends beyond the time you place the sprinklers in the ground and the controller on the wall.

Easier Scheduling

By having service agreements for service that is paid for up front (or with seasonal or annual payments), your customers will have a reason to respond promptly to your inquiries about scheduling their system start-ups and winterizations since the work is pre-paid. And because you know in advance who all of your service customers are, it will be easier to schedule your jobs during the busy spring and fall seasons. You’ll also have some leverage to choose the specific times to service particular customers and geographic areas.

Having a service agreement in place guarantees you get the customers’ business, reducing a potential loss of customers, to competitors or to their own "do-it-yourself" attempts. Because they are under agreement to you, they won’t shop around to other contractors to see if they can get quicker service.

And what better way than a service agreement to ensure steady work for your staff? With a ready-made list of potential service calls on hand, you can easily fill the gaps during slow times by scheduling checkups or periodic routine maintenance.

Money Matters Made Easier

All the basic service needs a customer may have are handled with one check. By paying for the service agreement up front, they are fully covered. So, calling you out to take care of a system problem becomes a matter of "when" and not "if."

Monetary matters are easy for you, as well: by collecting funds in advance, your business’ cash flow is improved.

By giving your service representatives a product (the service agreement) that they can "sell" to your existing accounts, you’ll provide your staff with potential incentive commissions. And these agreements also represent a steady, profitable source of income even during economic downturns when installation business slows.

A Professional Advantage

The availability of a service agreement can be a professional advantage that helps your company stand out from "fly-by-night" operators. It effectively demonstrates that your business is here for the long term to stand behind and take care of the products you sold and installed. You can also use agreements as an incentive to close a bid for new work; for example, including one free for the first year.

From a personal standpoint, consider the fact that service agreements can help increase the value of your business. After all, if someone is looking to buy a business, they want two essential things: an established customer base and proven, profitable cash flow. Maintaining service agreements on your books help you achieve both, making your business all the more attractive.