More on Pricing the Service Contract
April 22, 2013
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Comment
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Ken,
Service policy we came up with eliminates most of the guesses. We charge a trip charge of $50 every time we go to the customer’s premises – we do provide a 3-month trip warranty on the same problem. New problem we then charge for it.
We charge a smaller monthly fee of around $8 to $16 per month for the labor,
depending upon the size of the system – day time service only, after hours or 24-hours is more
We discount the parts by 25% - no need to try and figure out what may go bad in the future. We discount the batteries by 40% - batteries are a consumable and will need to be replaced. This has worked very well for our resy and small business clients and we have found that we do make money on these policies
Robert
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Question
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Hey Ken,
I am a new owner, and I have no experience with pricing service contracts, what is covered therein, nor how they might vary from customer to customer. What resource can you recommend to me for learning more, in addition to your wonderful newsletter.
Graciously,
David
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Response
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I suppose there's nothing like experience, and when you don't have it you can buy it. The Alarm Exchange has a number of consultants who offer their experience, and many share their experience here in this forum.
You can design your Service Contract to suit your business model and ideas. The Standard Form Contracts that cover service includes an option for "per call" [pay as you go] or an RMR charge that includes all labor and material provided the repair entails ordinary wear and tear. Traditionally the RMR option adds equity to your alarm business, and should, as you accummulate more and more accounts, generate a positive cash flow of reliable RMR. Sure there is risk building the account base.
How to price the RMR for service should be based on your estimate for number of service call and cost of replacement equipment.
TO SUBMIT QUESTIONS OR COMMENTS, REPLY TO THIS EMAIL, OR EMAIL Ken@Kirschenbaumesq.com. Most comments and questions get circulated.