How Maintenance & Service Maintains Profitability
Maintenance and service (M&S) business is a vital element in building security dealer or integrator company value and profitability. Learn out how to promote and structure M&S in most if not all contracts.
Revenue from M&S, which reached $14.5 billion in 2015, is expected to rise to $18.8 billion in 2020, according to research firm IHS Markit.
What Should You Charge?
So how can a dealer/integrator gauge how much time they may need to spend on M&S calls and how do they typically arrive at a price point for these contracts? Schricker offers these insights: “We use a multiplier based on the amount of equipment installed at the location. We cover all repairs due to normal wear and tear on the equipment. If a piece of equipment is maliciously damaged or caused by a lightning strike, water damage etc., it would not be covered. In most cases, something like this would be covered under the subscriber’s insurance policy.”
He adds that SMG also has a weekly operations meeting to review all service techs’ productivity, the amount of time actually spent onsite at a protected location, as well as the amount of time spent on T&M calls and maintenance calls. All repeat service calls are also reviewed during this meeting.
Cassara points out that the cost of an M&S contract is often a small price for a customer to pay, as opposed to gambling on repair costs without one. What people should understand, he stresses, is that the cameras that are installed are expensive.
“If a customer doesn’t have a maintenance contract and a camera breaks, they call us, we have to go there, replace the camera and charge for time and material. It can end up costing them more this way. Some of these installs can be huge. Picture if more than one camera needs to be replaced without the benefit of a contract,” he says. “With our M&S contract, we charge a percentage of the hardware. It’s our job to make sure the system doesn’t go down, especially where it’s mission critical. We have cameras in our trucks and are familiar with our customers, what they have and what they need.”
Cassara views the M&S agreement as such a valuable part of the overall sale and customer relationship that he requires any customers who don’t opt for one to sign a form stating that they don’t want the contract. It makes them think twice about the importance of it, and serves as proof that they were, in fact, offered one at the onset.
Bringing M&S Contracts Into Mix
For many security companies that have historically offered M&S contracts, they know the benefits and have been reaping the RMR for a long time. But for companies that have offered service and maintenance for little or no extra cost, transitioning to a formal M&S contract can come with its challenges.
Andrea and Barry Reiner, co-owners of connected home specialist Innerspace Electronics in Port Chester, N.Y., are introducing a recurring program this fall. The biggest challenge they foresee is trying to effectively communicate to customers that they’re now going to charge for services they used to offer for free under their initial service warranty. They’re often asked, for example, to logon to a client’s system remotely on a weekend to assist with a system connectivity issue.
“When we began to offer remote login services, there weren’t a great deal of systems out there and it wasn’t too much of a disruption,” Andrea says. “Now, there might be a call every day requiring remote login services. So when these systems are out of warranty, they are billed for these services.”
To date, Innerspace mostly offered service contracts exclusively for the very largest systems, especially when the residences are rarely used. In most situations, “after warranty” services are billable at the firm’s hourly rate. However, the company is now rolling out service contract options for smaller systems to realize the recurring revenue and make sure the business is capitalizing on the easiest cash flow.
To arrive at a price point, Andrea Reiner believes it’s important to decide on and implement service contract pricing on multiple levels, as well as provide non-service agreement clients with hourly pricing for onsite service calls and another rate for remote access services. M&S agreements, she says, represent a stable future income that is easy to forecast. “This is just another example of where our knowledge and consultation should be compensated. As we become more involved with service contracts, we trust it will represent a profitable portion of our business in years to come. And, the more often we have the opportunity to get in front of our clients, the better our long-term relationship with them will remain. Maintenance and service contracts are just another avenue for this.”
After being in business for 28 years, there are always daily service requests, she adds. “Service requests take up more time than maintenance. It’s important to be very honest with your clients, and expect that you should be compensated properly for your services.”
Cassara can’t overemphasize the fact that the health of a company can be gauged on the satisfaction of the customer and the happiest customers, he says, are the ones who have M&S contracts. “People take the sale so seriously and the service and maintenance not so seriously. The contracts should be equally important, or even more so.”
ERIN HARRINGTON has 20+ years of editorial, marketing and PR experience within the security industry. Contact her at [email protected]
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