What retention rate should I use?

Your own, from your own renewals — plan count at the start of the year against how many of those renewed. If you have never measured it, that is the single most valuable number to start tracking this month, because every decision about plan pricing depends on it.

Should the plan include a discount on repairs?

It is common and it is a real cost that belongs in this calculation. Model it as a reduction on the pull-through revenue rather than ignoring it — a 15% member discount on repair work is 15% off the part of the plan that was actually paying.

Is a plan worth selling at a loss to get the customer?

Sometimes, if the pull-through genuinely covers it and you can prove that from your own numbers rather than assuming it. The version that goes wrong is selling plans at a loss on the belief that volume fixes it, which it does not — it multiplies it.

Free tool

Maintenance agreement calculator

A maintenance plan is not a discount you give away to be nice. It is recurring revenue with a cost attached, and whether it pays depends almost entirely on how long people stay.

Method reviewed by Darren Lim, US CPALicence CPA.74253602

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What one plan is worth over its life

$1,172

At 78% retention a plan lasts about 4.5 years. Most of it comes from the repair and replacement work it pulls through, not from the plan fee.

Cost per visit1.25h at $46.00 + parts + truck$100

Cost to deliver per year2 visits$199

Plan price$240

Plan margin per year17.1% of the fee$41

Pull-through margin per year$640 of work at 38%$243

Total per year$284

Expected lifeat 78% annual retention4.5 yrs

Lifetime value, plan onlyAfter acquisition cost$66

Lifetime value, all in$1,172

Acquisition paid back in5 months

If retention were 15 points worseLife falls to 2.7 years. Retention moves this more than price does.$648

The visits are a real cost and they are usually understated

Every included visit costs a loaded technician hour plus the drive plus the truck plus whatever consumables go on the job. Two visits a year is not "an hour of labour" — it is two calls, with everything a call consumes, and it recurs.

The mistake that makes plans lose money is pricing them against the parts and forgetting the visits, or pricing the visit at a wage rather than a loaded rate. On a plan sold cheap to win the customer, that gap is the whole margin.

Retention is the number that decides everything

A plan that renews for six years is a completely different asset from one that renews for two, and the difference is not linear — acquisition cost is paid once and spread across every year they stay.

This is why churn is worth measuring properly rather than estimating. A plan base with 60% annual retention and one with 85% look similar in a monthly report and are worth vastly different amounts over five years.

The part the plan is actually for

The direct margin on the plan is rarely the reason to sell it. The reasons are that it smooths revenue through the shoulder months, it gives you a reason to be in the building twice a year, and plan holders buy repairs and replacements from you rather than from whoever answers first.

That pull-through is real and it is the largest part of the value — but only if you measure it. Track repair and replacement revenue from plan holders separately from everyone else, otherwise the plan is being justified by a belief rather than a number.

The calculator shows the plan on its own first, then with pull-through, so you can see how much of the case rests on it.

Common questions

What retention rate should I use?: Your own, from your own renewals — plan count at the start of the year against how many of those renewed. If you have never measured it, that is the single most valuable number to start tracking this month, because every decision about plan pricing depends on it.
Should the plan include a discount on repairs?: It is common and it is a real cost that belongs in this calculation. Model it as a reduction on the pull-through revenue rather than ignoring it — a 15% member discount on repair work is 15% off the part of the plan that was actually paying.
Is a plan worth selling at a loss to get the customer?: Sometimes, if the pull-through genuinely covers it and you can prove that from your own numbers rather than assuming it. The version that goes wrong is selling plans at a loss on the belief that volume fixes it, which it does not — it multiplies it.

What we do about it

Plan revenue reported separately from repair and replacement, with plan-holder work tagged, so pull-through is a figure you can see rather than a claim the plan is defended with.