Turning Home Service Into A Long-Term Revenue Stream

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By Roy Diez, Associate Publisher & Director of Editorial

Publication Date:

Wed, 2000-04-26 19:00

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It’s the current Holy Grail sought by volume home builders -- find products or services that can create an on-going revenue stream from the new homes and communities that you have built and sold.

Pat Hamill, for one, has taken up the quest. President of Denver-based Oakwood Homes, Hamill is seeking to earn long-term residual income from customer service and home maintenance by developing a service model that he thinks will work.

The key to the success of Home Service Plus+, says company president Battishill, is its team of nine full-time professionals.

Hamill has disbanded his in-house service department, forming in its place a wholly-owned subsidiary called Home Service Plus+. The new subsidiary will not only handle Oakwood’s normal warranty work but will market extended warranty service, pre-scheduled home maintenance programs and home repair service to the Oakwood homeowner base -- hopefully turning service from a cost center to a profit center.

Selling approximately 850 homes a year, each with a standard one-year warranty, Oakwood has approximately 1500 homes in warranty at any one time. The firm, says Hamill, had been spending $1 million a year on warranty work ($600,000 during the home’s first year, $300,000 the second year, and long-term payables extending all the way to the seventh year).

"Instead of a revenue stream," says Hamill, "we had a negative annuity trail as long as seven years."

Initially HSP+ will perform the following services:

Standard warranty service for all Oakwood homes based on a one-year contract between Oakwood and HSP+.

Offer extended warranty plans (3-year, 5-year, and 10-year structural) to Oakwood homeowners for a fee. A deductible is built into the extended warranty to prevent nuisance calls.

Offer homeowners pre-scheduled maintenance inspection service based on a 35 item inspection checklist. Inspections can take place on a quarterly, semi-annual or annual basis. Fee ranges from $119.99 to $159.99 depending on inspection schedule and home size. Repairs based on the check list can then be performed by HSP+ at the owner’s discretion for a fee of $50 per hour.

Provide home repair on an as-needed basis, either on an hourly basis ($50/hour) or on a project bid basis.

Handle collateral damage on a fee basis. HSP+ will do the work and back charge the vendor.

Provide homeowners with 24-hour emergency service ($100/hour).Once the HSP+ brand name has been established, future services could include:

Home remodeling (with plus business generated for the Oakwood Design Center).

Model home maintenance.

Warranty service for smaller area home builders.

"Our goal," says Arlene Battishill, President of the new firm, "is to turn the single transaction of building and selling a home into multiple revenue generating transactions."

Scheduled for full implementation in June, HSP+ was being field tested in early April. The operation currently has nine full time employees (each a jack-of-all-trades former remodeler). "With that staff," Battishill claims, "we can handle 300 to 400 warranty calls a month."

HSP+ will also have a password-protected Internet site for Oakwood homeowners. Battishill envisions selling advertising space on this site to strategic building supply allies.

Warranty or handyman service concepts have been tried in other markets. The problem with those concepts, according to Hamill, is that the handyman technicians are independent contractors and not employees. "You have to be able to control the quality of service delivered," says Hamill, "so you have to own the company." Projected first year revenue from the new firm is $1 million. "And that," says Battishill, "is conservative."

Roy Diez is Associate Publisher and Director of Editorial for Professional Builder Magazine. Please e-mail him [1] with any comment or questions concerning his column.

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