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Tracking a $20M Install: Service Contracts Are a Win-Win
Mark Sipe explains the benefits of service contracts and why they're needed on this project.
CE Pro is documenting the ups and downs of this ambitious $20 million, 28,000-square-foot home installation.
Mark Sipe of Abacus Prime LLC, who has been tasked with designing and managing the installation of the electronics, is looking for a CE pro to excel on the project. If you're interested, email Mark at .(JavaScript must be enabled to view this email address). Here Sipe's next running commentary on the project. Good luck Mark!
Service contracts are a win-win for any size project, but they are less common with residential contractors.
I have seen a few threads on the forums asking about service contracts and how to structure them. Some have talked about a commercial approach using a percentage of the contract with a higher percentage each year, others have different levels and some create custom service agreements for each project.
For a service contract to be a value, it should address the needs of the client and be profitable for the contractor.
Service contracts are like clothes: they have to fit or they'll ride up and be uncomfortable. I will be asking every sub I work with on this project to offer a five-year service contract for any system they install.
One of the most common ideas is to try and fit everything into a contract to cover your backside. I prefer the approach of regular maintenance. And if something goes bad, hopefully you'll find it before the client does.
I've found certain things require a routine amount of attention: system firmware updates, channel line ups, smoke detectors, remote programming, lighting programming, wire trim, (just in case the client decided he could do something simple himself) etc. Building in the cost of replacement parts such as batteries, smoke detector guts, IR emitters (almost gone but not quite) and other little parts keeps the system working on the mechanical side.
A set number of hours to make minor changes in programming and upgrades makes the customer feel like the service is almost "free" because he pays yearly for the contract and doesn't have to write a check every time you come out (3-4 times a year).
Once in a while we would find something that was on the edge or had just crashed and burned and had to be replaced. So for the term of the service contract, we would discount the hardware 10 percent but charge our hourly service rate for the install if it was small and required minimal time. On larger replacements or upgrades (more on this later), we would submit a proposal since we would have to design it into the system. Clients wouldn't replace a VCR, but they would buy a DVD burner. They wouldn't replace a CRT, but they would upgrade to a flat-panel display.
It was important to be specific about what was covered in the service contract to both minimize confusion by the client and eliminate non-billable hours and materials. Anything outside the service contract was first discussed and presented as a separate invoice.
Mark Sipe of Abacus Prime LLC, who has been tasked with designing and managing the installation of the electronics, is looking for a CE pro to excel on the project. If you're interested, email Mark at .(JavaScript must be enabled to view this email address). Here Sipe's next running commentary on the project. Good luck Mark!
Service contracts are a win-win for any size project, but they are less common with residential contractors.
I have seen a few threads on the forums asking about service contracts and how to structure them. Some have talked about a commercial approach using a percentage of the contract with a higher percentage each year, others have different levels and some create custom service agreements for each project.
For a service contract to be a value, it should address the needs of the client and be profitable for the contractor.
Service contracts are like clothes: they have to fit or they'll ride up and be uncomfortable. I will be asking every sub I work with on this project to offer a five-year service contract for any system they install.
Routine Maintenance
One of the most common ideas is to try and fit everything into a contract to cover your backside. I prefer the approach of regular maintenance. And if something goes bad, hopefully you'll find it before the client does.
I've found certain things require a routine amount of attention: system firmware updates, channel line ups, smoke detectors, remote programming, lighting programming, wire trim, (just in case the client decided he could do something simple himself) etc. Building in the cost of replacement parts such as batteries, smoke detector guts, IR emitters (almost gone but not quite) and other little parts keeps the system working on the mechanical side.
A set number of hours to make minor changes in programming and upgrades makes the customer feel like the service is almost "free" because he pays yearly for the contract and doesn't have to write a check every time you come out (3-4 times a year).
Once in a while we would find something that was on the edge or had just crashed and burned and had to be replaced. So for the term of the service contract, we would discount the hardware 10 percent but charge our hourly service rate for the install if it was small and required minimal time. On larger replacements or upgrades (more on this later), we would submit a proposal since we would have to design it into the system. Clients wouldn't replace a VCR, but they would buy a DVD burner. They wouldn't replace a CRT, but they would upgrade to a flat-panel display.
Be Specific About Coverage
It was important to be specific about what was covered in the service contract to both minimize confusion by the client and eliminate non-billable hours and materials. Anything outside the service contract was first discussed and presented as a separate invoice.
Tracking a $20M Project
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About the Author
Mark Sipe, System Designer
Mark has been both a commercial and residential integrator and systems engineer for over 25 years. He works with Builders, Homeowners and Architects to design and support all types of projects around the world. He is also a software developer (SalezToolz) and mad scientist/inventor (Xspot Products) all developed around what he saw as a need for the businesses he works with and supports. He has been a CEA Mark of Excellence judge the last 6 years and CE Pro Best awards Judge.
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