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focus on your annuity base, come on man..


Stick with what you know and repeat often. When I think about maintenance, regardless of type of contract, I think about consistency, consistency, consistency. The motivation behind writing this post is to encourage you to either build or bolster your existing maintenance base, here are some things to consider:

  • most maintenance contracts should yield between 5% and 7% additional revenue above and beyond the contract value.  Building trust between you and your clients organization will result in additional service activity.
  • Full risk contracts, or those where you were charging one flat amount and taking all of the financial risk, can be profitable.  Watch out for the age of the equipment, service call track record, and customer disposition
    • pull-through opportunities can be constrained with full risk contracts unless the scope of work is very specific. This can be a bit of a slippery slope. The perception of a customer signing up for a full risk contract is not going to want to argue with you about what is in and out of scope.
  • maintenance contracts on buildings with brand-new equipment are generally not as profitable regarding pull-through opportunity as the equipment will likely run trouble-free for many years.
  • equipment in the center third of its life are really perfect for full risk and negotiated rate maintenance contracts
  • those assets in the last third of life expectancy should be approached very carefully when pricing maintenance contracts and setting expectations with your customers
  • as mentioned in previous posts, crew mix is CRITICAL.  Make sure you are applying the appropriate amount of labor (and cost) to maintenance tasks.  DO NOT be afraid to consider outsourcing low value elements of your contracts to subs.



The simple fact is you need an annuity-based model in order to continue growing your company. It is time, right now, as you are thinking about your next year's business plans, to commit to an increase in effort towards building or adding to your existing maintenance portfolio. This is not easy work, but it will yield peace of mind and a solid financial backbone for your organization and your employees.



What are your thoughts?



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Next post:  is the "big picture" important?

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