Business Growth

Service Agreement Template: Creating Recurring Revenue

Stop chasing one-time jobs. Here's how to build a maintenance agreement program that creates predictable monthly revenue.

Sarah Johnson

November 1, 2024

10 min read

The most valuable asset in any service business isn't equipment—it's recurring revenue. Maintenance agreements transform your business from feast-or-famine to predictable. They smooth cash flow, increase customer lifetime value, and make your business worth more if you ever sell.

This guide shows you how to create and sell service agreements that customers actually want.

Why Maintenance Agreements Matter

The math is compelling:

Customer retention: Agreement customers stay 3-5x longer
Predictable revenue: Know what's coming before the month starts
Better scheduling: Pre-scheduled maintenance fills slow seasons
Higher lifetime value: Agreement customers buy more repairs and upgrades
Business valuation: Recurring revenue multiplies what your business is worth

What to Include in Your Agreement

A good maintenance agreement has clear deliverables and boundaries:

Annual inspections: What you'll check and how often
Priority service: Agreement customers jump the queue
Discount on repairs: 10-15% off labor or parts
Extended hours: After-hours service at no extra charge
No trip charge: Or reduced diagnostic fee
Price protection: Today's rate locked for the agreement term

What NOT to Include

Avoid these common mistakes that make agreements unprofitable:

Unlimited service calls: You'll attract customers who abuse it
Parts coverage: This is insurance, not maintenance—different business model
Guarantees against breakdowns: You can't control equipment age and usage
Deep discounts: 10-15% off repairs is fair; 30% destroys margins

“My first agreement program offered too much and I lost money on every customer. Now I offer real value—priority service and locked pricing—without giving away the farm.”
— Jennifer Walsh, Walsh HVAC, Minneapolis MN

Pricing Your Agreement

Price should cover your costs plus a reasonable profit:

Calculate your cost per inspection (labor + travel)
Add the value of discounts (estimate usage rate)
Add margin (30-50% gross margin is typical)
Consider offering monthly payment to lower barrier to entry

Example calculation: If your maintenance visit costs $75 and you do two per year ($150), plus estimated discount value of $50, your cost is $200. At 40% margin, price at $280-330/year or $23-28/month.

When and How to Sell Agreements

The best time to sell an agreement is right after a successful repair:

After completing a repair: Customer just felt the pain of breakdown
During annual tune-up: Natural transition to ongoing relationship
At equipment installation: Bundle it in the new system price
Seasonal marketing: Email/mail campaign before peak seasons

The pitch: 'This repair was $X today. For $Y/month, you'd have priority service, a 15% discount on this repair, and two annual tune-ups that catch problems before they become emergencies. Want me to add that on?'

Agreement Management in Your CRM

You need systems to track agreement customers:

Tag customers as agreement members in your CRM
Auto-schedule maintenance visits when due
Apply discounts automatically at invoicing
Track renewal dates and automate renewal reminders
Flag expired agreements so staff knows status

Manage Your Agreement Program

Local Business Pro tracks maintenance agreements, schedules visits, and applies member discounts automatically.

Learn More

Sample Agreement Language

Key sections to include in your written agreement:

Term and renewal: 'This agreement covers 12 months and auto-renews unless canceled'
Included services: List exactly what's covered with number of visits
Exclusions: Clearly state what's NOT covered
Member benefits: Discounts, priority, extended hours
Payment terms: When payment is due, what happens if payment fails
Cancellation: How and when they can cancel, any refund policy

Tracking Agreement Performance

Key metrics to monitor monthly:

Total agreements: Growing or shrinking?
Renewal rate: Target 80%+ annual renewal
Attach rate: What % of customers have agreements?
Revenue per agreement: Are your agreements profitable?
Upgrade rate: How many agreement customers buy additional services?

The Bottom Line

Maintenance agreements transform a service business. They create predictability, deepen customer relationships, and increase what your business is worth. Start simple—one agreement tier with clear deliverables—and grow from there.

The goal: 30-40% of your customer base on maintenance agreements within 2-3 years.

maintenance-agreementsrecurring-revenuegrowthcustomer-retentionpricing