Maintenance contracts: Friend or foe?

Written by LetsBuild

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We have all been there, you complete a project and then you are not really sure how to best implement a maintenance contract. What you should charge, what you should include, what should you exclude, how often should you make routine upkeep visits, etc. etc.
This can be a very tricky thing to get right and an even trickier thing to consistently implement.
To my mind I think it’s better to look at the bigger picture of what providing maintenance contracts can add to your business rather than how difficult or complex they are to implement. Here are some of the benefits:

Regular income

The best way to charge for maintenance is on a monthly basis so make this the most attractive and cost-effective way for your customers to pay.
Reducing the headache of call-outs for things that routine preventative maintenance can minimise. The answer of how often to make routine calls can easily be answered by looking at historical data and past experience of how often particular equipment falls over. For example, if you fitted a wired Lutron lighting system, the chances are with one yearly visit this will never give any trouble. If on the other hand, you fitted a Sky based video distribution system you will need to be sure an intelligent PDU was or is fitted ASAP, preferably with some kind of network monitoring so you can catch problems from off-site without the need for visits. Even then quarterly or biannual maintenance calls would be highly recommended.

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Knowing what is included and what is excluded from regular maintenance is key. While most customers are looking for a one-stop shop, increasingly we are seeing a trend for clients to supply some of the equipment themselves. More or less Sky boxes have always been done this way due to the way Sky runs its contracts but we are seeing more and more projects where clients are supplying their own TV’s. It makes sense on items where you simply can’t make much or any margin to allow the client to supply their own equipment. Things like Apple TV’s, Amazon Fire and Google ChromeCast can all be supplied by the client and then excluded from any maintenance contract. This means if something the client has supplied has an issue any related call out or replacement would be fully chargeable making this another good source of income.

Peace of mind

If a customer was getting quotes for a new intruder alarm system they would expect to see fees for maintenance on the quote as this is standard practice in this industry sector. Unfortunately (or fortunately depending on your viewpoint) in the world of AV it isn’t. If your quote talks about maintenance and even shows pricing options and service levels from day 1 this gives the client another reason to choose your quote over another that doesn’t include this. Generally, clients will always prefer a safer option that gives them peace of mind that they are buying from a company who will come back time after time if there are ever any issues with their system in the future.

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A chance to sell to an existing client: For me, this is probably the biggest reason to provide maintenance and something that a lot of integrators miss. In my experience, an existing client is worth 10 to 15 times more than a potential customer. An existing client is pre-qualified as someone who bought from you before and they did this for a good reason. As we all know it’s hard to win over a new client and it takes a lot of time and effort. As long as you keep on good terms with your existing clients and don’t treat them like money mines, there is no reason why they would shop anywhere else, right? Maintenance provides you with the opportunity to keep a client’s system up to date with the latest greatest tech, simply by making suggestions. Just ask yourself many clients have you upgraded from SD to HD or HD to UHD (4K)? And how much was this worth? The AV industry moves at a fast pace, why not use this to generate revenue.
Linked to the above is a concept that I still carry from my days as a manager of a 2 channel Hi-Fi outlet. As anyone who worked in one of these establishments would know, they were all about selling a dream and getting the client to that dream through a well-established upgrade path. I believe the AV industry could learn from this model. If you design your systems carefully most of them can have a built-in upgrade path. Believe it or not, this can help you win more new projects too as you won’t be pushing from day 1 to sell the most expensive system the client can just about afford. Instead, you are seen as someone who understands how expensive it is to refurbish a building. Your aim should be to put in future resistant infrastructure that will last for as long as the client might inhabit the building for. You are there to build a long term relationship with the client through maintenance and to provide any upgrades they might desire in the future, and probably a few they didn’t even know they needed!

Where does design come into this?

Well, design can have a considerable effect on quite a few areas:
Firstly picking up on the last point, you need to design a future resistant infrastructure that should be capable of dealing with faster and faster internet and networking speeds and the future requirements of video as we move beyond even 8K
Secondly with the last point again you need to design an upgrade path where equipment is easily interchangeable, this takes quite a lot more thought and design than you might at first think.
Thirdly once a project is complete the documentation should always be updated to reflect exactly how the system has been installed, with accurate as-built or record drawings. These act as a crucial reference point for anyone coming along later to maintain the system, especially if it’s someone who wasn’t involved in the original installation. If you have ever been faced with a system that has been installed that you don’t have design documentation for you will know just how daunting and difficult dealing with this scenario can be.

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How to price maintenance; as I said before the best way to get clients to pay for maintenance is on a monthly basis as this will be a great way of bolstering your cash flow but how much? Well, the most reliable way to work this out is on a fee per system x size basis, this means different systems and differently sized projects can have a maintenance fee that reflects their complexity. For example, let’s say we have a smaller project with 4 zones of audio and video plus a small wired lighting system, the fees for this could be something like 0.5 x day rate + 1 x day rate + 0.5 x day rate allowing for 2 days of preventative maintenance per year. On the other hand if we have a larger project with say 8 zones of audio and video plus a large wired lighting system and an 8 camera CCTV system, the fees for this could be something like 1 x day rate + 2 x day rate + 1 x day rate + 1 x day rate allowing for 5 days of preventative maintenance per year.
To put some numbers to this let’s say your day rate is £500 the smaller system would cost £1,000 per annum to maintain and the larger one £2,500 per annum. The trick is to make this look really attractive if the client pays monthly if we divide the annual fees by 12 months the smaller one would cost £83.33 a month and the larger one would be £208.33 per month. To give the client an incentive give 10% or more discount for them paying monthly by direct debit. Let’s say we give a 15% discount the smaller one is now £70.83 a month and the larger one £177.08 if we take an average of these two projects we get £123.95 per project. To help you see how this can bolster your cash flow simply multiply this number (£123.95) by the number of projects you have completed over the whole time your business has been providing AV systems. It’s a lot, isn’t it? Now imagine if you had that figure coming in from maintenance every month. Also, remember this does not include the additional sales opportunities you will have as you repeatedly return to your existing projects simply talking about the latest greatest tech and thus creating needs and desires amongst your existing clients as you go!

If you don’t offer maintenance contracts at the moment, to begin with, don’t worry about different levels of support. To start with write down what you can comfortably manage now, bearing in mind that it’s important to be realistic with this. This might look something like “unlimited telephone and remote support during office hours, callouts to major issues within 24 hours, callouts to minor issues within 48 hours, 1 routine preventative maintenance visit per year”. Apart from the last one you probably are already providing the rest so you might as well be getting paid for it. As the maintenance arm of the business grows you can learn from your customers what they require and then develop different levels of cover with different price points as you go. Most importantly talk about maintenance from day one when you meet a potential client and even price it up and include it in their quote and give them the first year for free, you will be surprised how much of an effect this will have on your conversion rate.
There you have my conclusion: Maintenance contracts are our friends, they make far too much business sense to be ignored.
About the Author: Keith Jones studied Product Design at Central St. Martins where he graduated in 1996. He has had a successful career working in numerous high-end audio outlets, culminating in owning his own successful AV installation company from 2001-2008. After a career break, he started Jones designs in August 2009 which morphed into limited company designflow, in 2015. Designflow aims to increase awareness of design in AV and help installers win more jobs and create proper documentation for them. You can find out more about designflow and the design services they provide to the AV and smart building sectors here