Annual maintenance contracts look like steady income. Many are. Some quietly lose money every year, because the customer’s equipment is older, the site is far, or the contract was priced low to win the sale. Without the numbers, those contracts are renewed at the same price, again and again.
The usual method, and its problem
Most businesses renew at last year’s price plus a fixed increase. It is simple, and it treats every contract as if it cost the same to serve. It does not.
Work out what each contract really cost
For each contract, add up:
- Preventive visits done under the contract.
- Breakdown repairs done under the contract.
- Spare parts used on those jobs.
- Technician time: the share of each technician’s actual pay that went into those visits.
Then compare the total with the contract value. That is the contract’s real margin.
Costing technician time fairly
Technician time is usually the largest cost, and the hardest to see. A simple, defensible method: take what the technician was paid that month and divide it across the visits they did. A technician paid more, or who did fewer visits, makes each visit cost more. This only works if pay and visits are in the same system.
Price the renewal from the margin
- Healthy margin: renew at the usual increase.
- Thin margin: raise the price, reduce the visits, or change what is covered.
- Loss: decide on purpose. Raise it, rescope it, or keep it for a reason you can name.
Do this a few months before renewal, so you have time to talk to the customer.
How AIMS handles it
In AIMS IQ, AMC profitability adds up every preventive visit and repair done under a contract, the spare parts used and each technician’s time, worked out from what that technician was actually paid in AIMS payroll divided by the visits they did, and shows the margin against the contract value. The renewals list shows contracts ending within three months, so you can price them in time. See where it fits in the service and AMC journey.