Discuss Boiler service contract in the Central Heating Forum area at PlumbersForums.net

Raj

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Hi all,

I have my own business and am looking to go into selling boiler cover where I'd charge on a monthly basis. Like BG or Homeserve but on a much smaller scale.

Has anyone on here tried this?

Any advise would be appreciated

Thanks
Raj
 
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Absolute minefield, what if your 1st three customers need new pcb, or hex you will be £2000 down straight away and your getting £15 per month like BG...then there is the nightmare of your van stock
to fill a transit with regular parts used can get up to £10,000...but maybe I have missed something...you will need a big capital investement
Centralheatking
 
A

Aire

I don't think these sort of plans work on a small scale. Like Rob says, when it comes to the pcb and hex, you won't want to pay for them and if you try worming your way out of it, you could have a court case on your hands.
 

Gasmk1

Gas Engineer
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if you are intent on doing this, i thought about it and its is doable but you have to set up another bank account (called service plan easy if you have internet banking) and initially load it up with a couple of thousand, to cover parts. you need to monitor the account and only pay for parts from this account for boilers on service plan. you also need to decide how much of the monthly charge goes into the account to keep it functioning properly. your monthly charge needs to reflect the service and also call backs and fault calls. good luck if you do. its a gamble really that your income is greater than outgoings for the service plan boilers
 
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Raj

I operate a scheme on the basis of what I think you are proposing / considering.

It only applies to systems that I have installed ( and undertake routine servicing) - these are only biomass and heat pump systems. We divide the offering into long term (10 year contracts) and short term (3 year contracts).

The business is a separate legal entity to my main business and carries it’s own PI insurance. There are other insurance policies that you can take out to cover the eventualities of a large ( abnormal ) expense. Without a backbone of long term contacts, it is very difficult to secure bank finance to support the business.

From a business model perspective, the break even point is at around 100 service contracts. In reality you (we needed to achieve) need over 500 service contracts for the revenue to properly cover the indirect costs of a stand alone business.

If the business is not a separate legal entity, we found it difficult to get a decent (low!) quote for the PI insurance.

From a return perspective, after 7 years our earnings before interest and tax are now between 15 and 20%. The largest single “abnormal” expense we have had represented 20% of our annual turnover that year.

In summary, it works, but it needs to be well structured and built to a scale that is economically viable. To achieve the latter we needed bank finance to reach that level.

Hope this helps
 
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Hi all,

I have my own business and am looking to go into selling boiler cover where I'd charge on a monthly basis. Like BG or Homeserve but on a much smaller scale.

Has anyone on here tried this?

Any advise would be appreciated

Thanks
Raj
Have a listen to Wayne Bettess’s podcast
 
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I am not entirely sure here, but if you are...essentially advertising and selling a financial package or a form of insurance...you may need to be regulated
Centralheatking
 
OP
R

Raj

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Hi Guys

Thank you all for the responses. I am working on the terms and conditions and will have them checked. As I'll be advertising this as a maintenance contract, will I need to be FCA regulated? I will mention within the advertising and T&C that this is a maintenance contract and not a insurance policy.

Thanks
Raj
 
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Raj

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Absolute minefield, what if your 1st three customers need new pcb, or hex you will be £2000 down straight away and your getting £15 per month like BG...then there is the nightmare of your van stock
to fill a transit with regular parts used can get up to £10,000...but maybe I have missed something...you will need a big capital investement
Centralheatking
Thanks for your response Rob. I appreciate what you're saying and I know it is a gamble. I might have a month where I'm getting 20-30 breakdowns where parts are required, or I might get a month where only 5 breakdowns require a part. Like I said, it is a gamble
 
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Thanks for your response Rob. I appreciate what you're saying and I know it is a gamble. I might have a month where I'm getting 20-30 breakdowns where parts are required, or I might get a month where only 5 breakdowns require a part. Like I said, it is a gamble
I presume that you will service every system you take on before accepting them into your scheme and charge up front for the initial service..and list any defects before proceeding with any contractual arrangements
anyway ...thats what I would do
Rob Foster aka centralheatking
 
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Raj

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I presume that you will service every system you take on before accepting them into your scheme and charge up front for the initial service..and list any defects before proceeding with any contractual arrangements
anyway ...thats what I would do
Rob Foster aka centralheatking
Yes
A system check will be carried
 
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a
Yes
A system check will be carried
and paid up front before your scheme starts ..just like British Gas etc etc...I think you might do well if you organise things well
or just loose your house wife etc if you get it wrong ...plenty of
fellas gone down both routes...I am a lucky man after 40+ years
and 3 wives My business is solid and bouncing...but seriously
do be carefull. Rob Foster aka centralheatking
 
OP
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Raj

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a

and paid up front before your scheme starts ..just like British Gas etc etc...I think you might do well if you organise things well
or just loose your house wife etc if you get it wrong ...plenty of
fellas gone down both routes...I am a lucky man after 40+ years
and 3 wives My business is solid and bouncing...but seriously
do be carefull. Rob Foster aka centralheatking
Hi Rob

Yes payment will be taken upfront. The terms and conditions are designed so that a system check will be carried out within the cooling off period for the customer. If any improvements work is needed they will be quoted for. If the customer decides they don’t want to carry out the improvement work then the cover will be limited. If the customer decides to cancel within the 14 day cooling off period then they’ll have to pay the full amount for the service carried out.
 

Millsy 82

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If it were me I would look at setting up a separate company to your main business and contract the work out to yourself, this way if you all of a sudden get stung by a load of boiler problems then your main business would be protected.

I would also double check to see if that is legal although I cant see why not.

There does seem to be quite a few companies that offer this now on a national basis and use sunnies to carry out the work.
 
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Rob. Sorry, but can you start a conversation with me please? I don't seem to be able to do that!! David
I have no idea either just email...we are a small but happy set up
and really try to promote good ideas etc ..the next stage
is UkPHIC ...Uk plumbing and heating innovation centre which is a not for profit organisation backed by some major
players in Uk to help dev dev ideas ..we are now up and running
centralheatking
[email protected]
its a commercial email ..input gets screened , talk later
centralheatking
 
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Raj

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Any suggestions for marketing? I know you got your google ad words and all that. I was thinking direct mail marketing following up with a phone call.
 
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Any suggestions for marketing? I know you got your google ad words and all that. I was thinking direct mail marketing following up with a phone call.
Now Raj you are entering a specific area of commercial business which from my point of view conflicts with the protcols on UKPF ..Api 20o6
can help but its outside UKPF
Rob Foster aka centralheatking
 
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Raj,

A few pointers, generally gleaned from maintenance contracts:

You want five star customers, who value a heating system that is completely trouble free and dependable.

You need a business model that is robust and tested to prove it works.

You understand the technical side of the equipment you are going to maintain inside out to a high level of detail.

You don’t take risks, you price all the risk into the business model. If you want a long term sustainable maintenance business, all the risks will at some point come to fruition.

If you maintain an installation long term, any warranty issues that are not honoured by the equipment manufacturer, the customer will look to you to resolve.

From the above, to capture quality customers our strategy was to build the maintenance side from our new (or major renovations) installations business. That has worked, but has been slow to grow.

Generally a maintenance model functions around the capital cost of the equipment, it’s expected life and the cost of
expected spares ( 1 year, 3 year, 6 year, 10 year et al). With gas, that is a problem because the cost of spares is generally disproportionate to the capital cost of the equipment. A model for oil fired is much easier - because the spares are similarly priced, fir an installation of a much higher capital value.

Where we chose to go was niche, competing against the equipment manufacturers ( who don’t - or we think don’t - want the hassle) with high capital cost installations. It was very hard work to make the business work for the first two to three years.

With respect to British Gas - and I guess that I will now be ridiculed - when I compare them to my business model, their prices for a basic maintenance package are within plus or minus 10% of mine. BUT, they have the cream of the Customer market - the people who don’t want to have any risk and are willing to pay for that level of comfort / confidence.

The point of all this is : Before you even begin to advertise, you need to know the segment of the customers in the market you want to win over to your business. Do you want to poach from British Gas? Or customers who don’t already have cover? Who are the highest risk to your business?

We spent months going through these scenarios - frustrating, but on reflection time well spent.
 
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Raj

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Raj,

A few pointers, generally gleaned from maintenance contracts:

You want five star customers, who value a heating system that is completely trouble free and dependable.

You need a business model that is robust and tested to prove it works.

You understand the technical side of the equipment you are going to maintain inside out to a high level of detail.

You don’t take risks, you price all the risk into the business model. If you want a long term sustainable maintenance business, all the risks will at some point come to fruition.

If you maintain an installation long term, any warranty issues that are not honoured by the equipment manufacturer, the customer will look to you to resolve.

From the above, to capture quality customers our strategy was to build the maintenance side from our new (or major renovations) installations business. That has worked, but has been slow to grow.

Generally a maintenance model functions around the capital cost of the equipment, it’s expected life and the cost of
expected spares ( 1 year, 3 year, 6 year, 10 year et al). With gas, that is a problem because the cost of spares is generally disproportionate to the capital cost of the equipment. A model for oil fired is much easier - because the spares are similarly priced, fir an installation of a much higher capital value.

Where we chose to go was niche, competing against the equipment manufacturers ( who don’t - or we think don’t - want the hassle) with high capital cost installations. It was bery hard work to make the business work for the first two to three years.

With respect to British Gas - and I guess that I will now be ridiculed - when I compare them to my business model, their prices for a basic maintenance package are within plus or minus 10% of mine. BUT, they have the cream of the Customer market - the people who don’t want to have any risk and are willing to pay for that level of comfort / confidence.

The point of all this is : Before you even begin to advertise, you need to know the segment of the customers in the market you want to win over to your business. Do you want to poach from British Gas? Or customers who don’t already have cover? Who are the highest risk to your business?

We spent months going through these scenarios - frustrating, but on reflection time well spent.
Thanks for the advice Brambles.
 
OP
R

Raj

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Now Raj you are entering a specific area of commercial business which from my point of view conflicts with the protcols on UKPF ..Api 20o6
can help but its outside UKPF
Rob Foster aka centralheatking
Would you be able to give some advice via email or phone call?
 
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Would you be able to give some advice via email or phone call?
Api 2006 take on usually 3 projects each year , especially when one of our babies has fledged ...this makes some room...for the next...I am sorry
but for this one when I look at
the financial dynamics we would not invest ...however I know others that might be keen
...bluntly intrest rates are low and there are players whom might want to stake you..but they are ruthless if you fall down

centralheatking
 

Kwok wong

Gas Engineer
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I have had customers ask if I offer maintenance contracts for they’re boilers. There are too many pitfalls, especially as some of the guys on here have said. There could be issues from installation, parts ain’t cheap. Big gamble which can only reap good rewards if carefully executed. Also to make decent profit you would need to cover quite a lot of boilers. Which means more staff, servicing & breakdowns. Is it worth the hassle?
 
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To me this seems like a model business requiring the economies of scale.

1) you’re essentially gambling on how often people’s heating will break. You need a lot of historical data to do this. Your average firm doesn’t have access to this info.

2) Retailers get discounts based on volumes of stock turned over. Any big retailer will fall over themselves to win a contract with BG etc. Your typical firm doesn’t have access to these prices.

3) BG etc offer fairly poor rates of pay so can often under cut on labour.
 
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