A service-agreement base is a small subscription business inside a heating company. You can describe it with six numbers: active members, renewal rate, attach rate, other new members, visit hours and revenue per member. Put them together and you can answer the questions that matter for an annual plan: is the base growing or shrinking, what revenue does it give you before the phone rings, how many technician hours does it consume, and how many replacement jobs will it produce?
The six numbers
| Number | Definition | How to measure it |
|---|---|---|
| Active members (M) | Members whose agreement is current today | Agreement list, cleaned of lapsed and duplicate records |
| Renewal rate (R) | Share of members due to renew who did | Members renewed ÷ members due, over the last 12 months |
| Attach rate (A) | Share of new installs that included an agreement | Agreements sold at install ÷ installs |
| Other new members (N) | Members added from repair and existing customers | Agreement sales not tied to an install |
| Visit hours (H) | Technician hours per member per year, including travel | Visits per year × hours per visit |
| Revenue per member (P) | Agreement fee per member per year | Price list, net of discounts |
You will also need one planning input: installs planned for next year (I).
Is the base growing?
The year-end member count is:
Members next year = (M × R) + (I × A) + N
Worked example
A heating company has 1,200 active members. Last year, 80% of members due to renew did so. It plans 300 installs and attaches an agreement to 45% of them. It expects to sell 90 agreements to repair customers.
- Renewals: 1,200 × 0.80 = 960
- From installs: 300 × 0.45 = 135
- Other new members: 90
- Year end: 960 + 135 + 90 = 1,185
The base shrinks slightly despite 225 new members. The cause is renewals: 240 members were lost. If the renewal rate rises to 87%, renewals become 1,044 and the base ends at 1,269. Seven points of renewal are worth more than all 90 repair-customer sales. That is the most common finding in agreement maths: retention moves the base more than acquisition.
What does the base pay before the phone rings?
The revenue floor is simply members multiplied by revenue per member. If the company above charges $240 a year and averages 1,200 members across the year, the base brings in about $288,000 a year, or about $24,000 a month if renewals are spread evenly.
That last condition matters. If most agreements renew in the same two months, the cash arrives in a lump and the slow months stay thin. Spreading renewal dates by install date or by a rolling schedule turns the floor into something you can actually budget against.
How many technician hours does it need?
Visit hours are often underestimated, because the drive is forgotten.
Total visit hours = members × visits per member × hours per visit
With 1,200 members, one visit each and 1.5 hours including travel, the base needs 1,800 technician hours a year. At 30 billable hours per technician per week, that is 60 technician-weeks.
Placed in April to June and September, across 17 weeks, those 1,800 hours need just over three technicians full-time. Placed in October and November, across nine weeks, they need nearly seven, in the same weeks the no-heat calls arrive. The maths makes the scheduling decision for you. The capacity planning chapter uses exactly this calculation.
How many replacements will it produce?
Members with older equipment are the warmest replacement leads in the business. Build a watch list:
- From visit records, list members whose primary equipment is past the age at which your company typically sees replacements.
- Note any visit findings that suggest the system is near the end of its life.
- Estimate, from past years, what share of watch-list members replaced with you.
If 150 members are on the list and 20% replaced with you last year, plan on about 30 member replacements. At a gross profit of $3,000 each, that is $90,000, which belongs in the plan's install line and in the agreement's value.
Contact watch-list members before the season, during the late-summer or early-fall visit, so they can decide calmly rather than after a failure. Your technicians should report what they find honestly; the decision is the homeowner's.
A quick self-test
Before building anything, try answering these five questions from memory, then check them against your records:
- How many agreement members are active today?
- What share of members due to renew last year actually renewed?
- Of last year's installs, how many left with an agreement?
- In which months were most agreement visits completed?
- How many members replaced a system with you last year?
If any answer differs from the records by more than a little, that gap is the first thing the plan should fix. Owners are often surprised to learn that their visits cluster in the busiest months, or that their renewal rate is lower than they believed.
Putting the numbers into the annual plan
Once you have the six numbers, the agreement chapter of the plan can state:
- the member target for year end, and the renewal rate it assumes;
- the attach-rate target for installs;
- the revenue floor by month;
- the block of technician hours reserved for visits, and the months they are placed in;
- the replacement watch list and its expected yield.
Each of these gets a checkpoint. Renewal rate is checked as each renewal month closes, attach rate monthly, and the watch list at the early-fall checkpoint.
Common mistakes
- Counting signed agreements, not active ones. Lapsed members inflate the base and hide a renewal problem.
- Selling more agreements than the crew can visit. Members who never get their visit rarely renew.
- Bunching renewals. One renewal month means one month of cash and one month of scheduling chaos.
- Putting visits in the peak. It feels natural to visit when customers think about heat, but it costs the hours you need for emergencies.
- Leaving the replacement pipeline unmeasured. It is often the largest part of the agreement base's value.
Where to go next
For agreements as a source of recurring profit, hvacprofit.ca covers the profit side in more depth. To see how agreement numbers fit the rest of the year, read service-agreement base planning and the guide to writing an annual growth plan.
Frequently asked questions
What is a good renewal rate for heating service agreements?
The useful benchmark is your own last year. Measure it, then set a realistic improvement. A rate that is rising year over year matters more than any outside figure.
Should agreements be priced to make a profit on their own?
They should at least cover the visit cost. Much of their value, though, comes from the repair and replacement work members bring, which is why the guide counts the replacement pipeline separately.
How many visits per year should an agreement include?
That is a product decision for you and your service manager. The maths in this guide works for one or two visits; what matters is that the hours are planned and placed outside the peak.
What if my agreement records are a mess?
Start with a single list of active members and their renewal dates. Even an imperfect clean-up gives you a usable renewal rate within one cycle.