HVAC Service Contracts Guide 2024 | How Software Optimizes the Process

HVAC service contracts provide many benefits for HVAC companies and their residential and commercial customers, such as providing reliable, recurring income and building strong customer relationships.

They can also pose challenges. Managing HVAC contracts in spreadsheets or Microsoft files is time-consuming, increases the chances of error, and frustrates office staff. 

The leading HVAC companies have simplified their contract management processes with specialized software (such as ours, ServiceTitan) that optimizes every step by helping to:

• Create customized HVAC maintenance contracts for all of your customers.

• Schedule service calls so you can fulfill your HVAC maintenance agreements.

• Automate billing and service contract renewals so customers pay you on time while you maximize selling opportunities.

• Track each HVAC service contract’s value and performance so you improve customer satisfaction and grow your HVAC business.

In this post, we'll describe what an HVAC service contract is and explain its benefits for your HVAC business and customers. 

We’ll outline the components of a good service contract and discuss how combining well-crafted service contracts with our powerful software solution, ServiceTitan, can help HVAC companies simplify contract management and increase profitability.

Table of Contents

• What is an HVAC service contract?

• Are HVAC service contracts worth it?

• HVAC Maintenance Contract Template vs. Service Agreement Software

• Common components of an HVAC service contract

• Benefits of an HVAC service contract for your business

• Benefits of an HVAC service contract for your customers

• How ServiceTitan speeds up the entire HVAC service agreement process

What Is an HVAC Service Contract?

An HVAC service contract is a legally binding agreement between a homeowner (or commercial customer) and an HVAC company or service provider to deliver regular HVAC maintenance for the property’s heating system, ventilation, and air conditioning system for a set fee (usually upfront).

• For a customer, an HVAC service contract provides peace of mind that the property’s HVAC system has been properly serviced and is less likely to fail.

• For an HVAC service provider, an HVAC service contract provides a regular stream of income and improved customer loyalty. Many customers are more likely to hire the same company for repairs if they have an existing contract in place.

Are HVAC Service Contracts Worth It?

We dive into the specific benefits of service contracts for HVAC customers later in this post, but if you’re an HVAC customer, consider the following before signing up for a service contract:

• Maintaining your HVAC equipment at least once a year will help identify issues early and will prolong its life.

• Which HVAC services does the service contract include (e.g. checkups, parts and labor, emergency services, priority treatment)? Make sure you dig into the details. 

• Do you have a warranty that also covers repairs? Some warranties require you to also have a service contract. Some don’t, and save you from doubling up on similar agreements.

• What is the annual cost of the service contract? Plans usually range from $150 to $300 annually for homeowners. Does this cost outweigh the potential cost of repairs or even replacement of your HVAC equipment over time? Repair costs range from $100 to $2,000. Do the math based on your particular situation.

• Do you live in an extreme climate or have vulnerable people in the household where a breakdown would be a serious or even dangerous situation? Or do you have a commercial business where a breakdown would damage or close down your business until it was fixed? 

We advise talking through your specific circumstances with your local HVAC company so you can work out the costs of having an HVAC service contract versus the risk of not having one. From there, you can decide what’s best for you.

For HVAC service providers, how you manage your service contracts largely depends on the size of your HVAC business.

HVAC Maintenance Contract Template vs. Service Agreement Software

It’s important to create an HVAC maintenance contract template that’s easy to understand and implement for both your HVAC technicians and customers. 

However, while using a free template may be helpful for some HVAC contractors (for example, sole traders or small HVAC shops), investing in the right service agreement software (such as ServiceTitan) can make the contract process even smoother and easier to track.

HVAC service providers that use ServiceTitan's Service Agreement Software have simplified membership management so there’s no more struggling with spreadsheets and managing data points manually.

ServiceTitan's Service Agreement Software enables HVAC service providers to quickly create, assign, and track service agreements from start to finish. Contractors can also easily manage renewals and cancellations of contracts as needed. 

First, let’s consider why HVAC service contracts are important for commercial customers as well as for homeowners.

Why Commercial HVAC Service Contracts Are Key

Being able to offer service contracts to commercial customers is important because commercial HVAC systems can be expensive to repair or replace. 

A commercial HVAC system is built to handle higher demand, which requires more maintenance.

Having a service contract helps ensure the system will remain in good working order and minimizes failures. With a regular maintenance plan (that includes checks on components such as compressors, refrigerant, thermostats, and blower motors), costly HVAC repairs can be avoided and HVAC contractors can offer commercial customers peace of mind.

Many commercial businesses are aware of the benefits of having a solid HVAC service contract in place, so they need reliable contractors who can execute such contracts. Thus, commercial contractors who provide HVAC service agreements can increase their profitability and create more upsell opportunities. 

Common Components of an HVAC Service Contract

To get more value out of an HVAC service contract, you need to ensure it contains all the necessary components.

An HVAC service contract typically includes the following:

1. Details About Your Business

Your HVAC company’s legal name, address, contact information, and role in the transaction are required components of a valid HVAC contract.

2. Payment Terms

In this section, you need to include terms about service costs, how the payment will be made, and the type of payment (ongoing, flat fee, period charge).

3. Tasks and Schedule

Make sure to clearly list all tasks required under the contract and how often they need to be performed. A well-defined set of maintenance tasks will help your HVAC technicians stay organized and on track.

4. Any Contingency Clauses

It's important to include any contingency clauses in your HVAC service contract that detail the rights and obligations of both parties. Depending on the services you provide, some common clauses of this type may include:

• Liability protection. This clause protects against any unexpected costs resulting from damages caused by the contractor.

• Termination clause. If the HVAC service provider or the client wishes to terminate the agreement, this clause allows for a smooth transition.

• Indemnification clause. This clause outlines the allocation of liability for any damages suffered by the party that prevails.

5. Time and Material or Flat-Rate Pricing

These rates should outline the hourly and/or material fees or flat-rate pricing terms for any additional service, supplies, or parts that are needed to complete the tasks of the contract.

6. Any Additional Perks

If your HVAC company provides additional perks, they should be included in the HVAC service contract. Such add-ons could be quick response time, priority scheduling, or discounts on materials.

7. Governance / Relevant State Laws

It is important to include in your HVAC service contract any relevant state laws governing the agreement and its performance. This will help ensure that both parties understand their rights and responsibilities under the terms of the agreement. 

These seven components are just some examples of items that should be included in your HVAC service contract. There are many other elements that you might want to put in your contracts, depending on your specific business needs.

Benefits of HVAC Service Contracts for Your Business

There’s a reason so many HVAC service companies rely on HVAC service agreements or club memberships to bolster their bottom line. 

Here are the five top benefits:

Benefit #1: Increased Profits

The biggest benefit of HVAC service contracts is increased profitability. HVAC maintenance agreements provide a consistent flow of repair and tune-up work for a reliable avenue of income. They also increase company profits by converting leads and one-time service calls into repeat customers. 

Benefit #2: Keep HVAC Techs Busy During Slow Seasons

Given the seasonality of HVAC work in most locations, it’s helpful if you can bolster your techs’ schedule during the slow season with annual or quarterly maintenance visits to increase a unit's life expectancy. It also helps provide enough work to keep everyone employed year round, which reduces technician churn. 

“If you don't have a service agreement or club membership program, it's very hard to schedule and plan for work going forward,” says Chris Hunter, ServiceTitan’s Director of Customer Relations and former owner of Hunter Super Techs. "Every time we sold one club membership, that was four hours of guaranteed future work."

Benefit #3: More Customer Engagement

An HVAC service contract offers your technicians more touchpoints with customers and facilitates regular face-to-face interactions with an established customer base. In-depth knowledge and time spent relationship-building with customers will likely lead to more sales opportunities.

Benefit #4: Upsell Opportunities

An HVAC service contract gives your technicians additional opportunities to offer energy-assessment services and suggest upgrades (such as indoor air-quality solutions or more efficient air filters) to improve the property’s comfort, energy efficiency, or safety. This helps boost HVAC sales and create a long-term, loyal customer base.

Benefit #5: Reward Successful Sales

HVAC service contracts can incentivize technicians to improve performance. Consider reward bonuses and team recognition for any new or renewed service contract, as well as financial rewards for any upgrades or replacement sales made during an annual maintenance visit.

When Chris Hunter ran his own HVAC, plumbing, and electrical company, he gave technicians who sold HVAC maintenance contracts first rights to that customer and residual earnings tied to current contracts. 

“For every service agreement/club membership that a tech sells, they get the first right to go service that customer,” says Hunter. “That’s helpful to the techs during slow times of the year, plus they get a residual SPIFF as the years go on.”

By incentivizing your techs to sell more HVAC service contracts, you’ll increase the company’s overall profit as well as improve your techs’ job satisfaction and income potential.

Benefits of an HVAC Service Contract for Your Customers

Customers are naturally skeptical of signing an annual contract of any kind, especially if they’re new to your company.

That’s why it's critical you give your technicians the tools (such as service contract software) to quickly and easily sell the benefits of an HVAC maintenance contract and show them why HVAC checkups are worth it. 

Benefit #1: Club Memberships 

HVAC maintenance contracts make repeat customers feel special and give them access to exclusive discounts or deals, in addition to helping them save on energy costs. 

One way to do that is by calling the arrangement a “club membership” instead of an HVAC maintenance agreement or service contract. 

Hunter says he prefers to call them club memberships because they’re something that benefits the company, customers, and the techs. Hunter helps train contractors and service business owners as co-founder of Go Time Success Group. 

Benefit #2: Build Customer Relationships

Having a service contract establishes a bond between your technicians and their customers. 

“When the time comes and a customer needs a big replacement, there’s no longer a bidding situation,” Hunter says. “They’re dealing with a trusted friend.”

For every month that the homeowner remains under contract, the tech should get a percentage of each membership they’ve sold. Over the years, that monthly income adds up to enough of an incentive to keep techs on staff for much longer. 

Benefit #3: Offer Customers Incentives

Give customers incentives for signing an HVAC service contract, such as offering a discount on scheduled preventative maintenance for their heating and cooling system, deals on equipment upgrades, or promising priority service, including emergency service during times of peak demand. 

Some companies allow customers to make monthly payments on the HVAC maintenance contract to make the offer more attractive or affordable, and they provide discounts if the customer hires them for unexpected repairs outside of the scope of the annual maintenance agreement. 

Use the club or contract to build trust in your HVAC company brand with repeated, upstanding maintenance service at a discounted rate, as scheduled and promised.

Assure customers they can rely on the same company and same technician showing up every time they need service, which puts many customers at ease if there’s already a good relationship developed during the initial pitch.

Benefit #4: Routine Maintenance Saves Money and Energy

By signing an HVAC maintenance contract, homeowners or commercial customers can rest assured their HVAC units and ventilation systems remain well-maintained and less likely to fail early. 

Regular preventive maintenance saves energy and keeps the HVAC equipment working optimally so it lasts longer. Lack of HVAC maintenance can cost homeowners by reducing efficiency by 5% or more, resulting in higher energy bills. Be sure to explain these risk-reward benefits when selling an HVAC service contract to customers.

Benefit #5: Save Money in the Long Run & Avoid Dangerous Problems

Routine equipment inspections included in an HVAC service agreement allow your technicians the opportunity to spot a minor problem before it becomes a major, costly issue. 

Annual or quarterly inspections give customers the option to budget and prepare for any recommended replacements versus shelling out thousands of dollars unexpectedly when their air conditioner or heat pump suddenly dies. 

If the customer has an aging A/C unit or furnace, it’s best to inspect it at least twice a year to check for dangerous issues like a cracked heat exchanger and look for signs of impending failure. 

For customers with newer equipment still under warranty, be sure to explain that many equipment manufacturer warranties remain valid only if they keep up on annual maintenance inspections with a trained HVAC professional.

ServiceTitan’s service agreement software has helped thousands of companies tailor memberships based on each customer's needs with a solution that automates the whole process of managing service contracts. 

Here’s how it works.

How ServiceTitan Speeds Up the Entire HVAC Service Agreement Process

For HVAC companies that want a solution that’s far more efficient and scalable than a template, ServiceTitan’s service agreement software helps:

• Create customized HVAC maintenance contracts for all of your customers.

• Schedule service calls so you can fulfill your HVAC maintenance agreements.

• Automate billing and service contract renewals so customers pay you on time and you maximize selling opportunities.

• Track each HVAC service contract’s value and performance so you improve customer satisfaction and grow your HVAC business.

Create Customized HVAC Maintenance Contracts

With ServiceTitan, you can create and customize membership agreements from scratch or you can adapt and improve on an existing agreement if you’re already using one that works. 

Instead of completing each service contract manually, HVAC companies can select agreements from our generous library of templates and set up and store as many as needed to suit different membership types. 

Each template is fully customizable with a menu of recurring services including the number of visits to be undertaken for specific services on each call. 

Since everything within ServiceTitan is centralized, HVAC service contracts can be viewed by office staff and also by HVAC technicians in the field via our mobile app. This means that techs have all the pertinent information they need on a service call and can update customer details (such as service type or equipment needed) on the spot so everybody is kept in the loop and there’s no need to search through different filing systems.

Having a central solution also means that you can integrate your HVAC service agreements with other business operations such as scheduling, estimating and billing. For example, service techs can access job histories, maintenance checklists, and warranty details, as these are seamlessly linked with the customers information.

Being able to organize and manage everything from one place reduces errors and saves a significant amount of time. 

Organize Schedules to Fulfill Service Calls

When you set up a recurring membership service within ServiceTitan, it’s automatically added to the schedule based on the frequency you defined. So, office staff don’t need to add jobs manually and no jobs are missed.

Office staff can view the dispatch board by date range, book jobs with customers, and assign techs who can see the job details on their schedule. You can also include extra information via notes, such as preferred technician, materials, or if a customer isn’t ready to book a job.

Having all the information on hand via the ServiceTitan mobile app also provides technicians with upselling opportunities. They can follow up on estimates or upgrade customers to a higher level of service agreement to bring in more revenue and increase profits.

Automate Billing & Membership Renewals

Automating billing and membership renewals are also quick and easy with ServiceTitan. Customer records can be organized by membership expiration date so you can stay on top of who’s due to renew or upgrade.

With ServiceTitan, you can automate billing rules by defining the billing frequency in the membership setup so that invoices are automatically sent within the specified time frame (e.g. monthly, quarterly, etc.). 

You can select an invoice template and specify preferences for pricing, discounts, and customer-specific pricing (for commercial businesses). 

This is a huge timesaver compared to compiling invoices manually, as payments will run automatically and all you’ll need to follow up on is a failed payment or customers who prefer to pay by mail/check. 

HVAC business owners can view a master list showing the status of every membership account — including the payment status — and it’s a useful guide for how much revenue they’re bringing in. Plus, you can utilize ServiceTitan’s integration with QuickBooks, which allows contractors to run a revenue recognition model. 

Note: ServiceTitan’s membership renewal protection tool saves more time by automatically checking and updating credit card details. This prevents companies from having to contact customers for their information (and also avoids a potential cancellation opportunity).

Track Membership Performance

ServiceTitan also provides deep reporting insights into how your HVAC service contracts are performing. Users can review two key areas — customer memberships and recurring services — and filter using dozens of KPIs to see what’s working and what needs improving. 

Drilling down into data sets like response times and number of memberships renewed or canceled allows HVAC businesses to analyze data at a granular level to see how memberships are helping drive revenue. 

Plus, with ServiceTitan’s Marketing Pro feature, you can use this information to inform your marketing activities by determining the best way to communicate with target audiences (e.g. via email). You can even prioritize customers who are most likely to invest in a big-ticket order.

Ian Goldberg, the president of Frank Gay Services, talks about the power of using ServiceTitan in creating and managing memberships.

"We love focusing more on memberships because that's consistent revenue. Also, with memberships comes the service revenue on top of that. ServiceTitan is a great reminder and tracker of all the memberships we have; you'd probably be shocked as to how many businesses have memberships but don't track them all. Now, we've got them all in one place. We've got reports that spit those out, and it's really encouraging."

Further reading:

• Maintenance Agreements | The Ultimate Guide to Profit

• HVAC Marketing Strategies That Make Companies Stand Out

Ready to Try ServiceTitan’s Service Contract Software?

While sole traders or small HVAC shops could use ServiceTitan’s fully customizable service contract template to produce service contracts, best-in-class HVAC companies add value to their service contract management with specialized software like ServiceTitan that speeds up the entire service contract process and integrates it with dispatching, customer service, and more.