Service Agreements 101: Setup, Structure, and Increased Profitability | Podcast Ep. 85

Welcome to Mastering ServiceTitan, where you get expert advice from power users. I'm your host, Josh Lew, and today I'm joined by David Helms, the operations manager at Ed Helms Air Conditioning and Electric. David, welcome to the show.

Hey, how are you, Josh? Thanks for having me.

Yeah, it's a cool full circle moment. I first met you at Pantheon, I think 2 Pantheons ago, and you're actually the first person to have come up to me and tell me like, that you actually like this show. Prior to that, I was just sending the show out there into the ether. I had no idea what people thought. And so I really appreciate, uh, you coming up to me and it's cool to have you on today.

Yeah, no pleasure to be here. I, um, listen to lots of podcasts and, uh, I do nerd out on ServiceTitan. And so Mastering ServiceTitan is a pretty nerdy show.

I love it.

So I just wanted to tell you thank you for, for being a host on the show. I really do enjoy listening to it.

Awesome. That is the best compliment ever. Um, so yeah, for people who don't know you, can you share a little bit about who you are, your— the company you're at, and what your role is there?

Sure. So Ed Helms Air Conditioning and Electric, we're part of, uh, Ed Helms Group. We're a local medium-sized family-owned company in South Florida. We do, uh, air conditioning, commercial and residential, primarily commercial, a little bit of new construction, electrical. And my department is building controls, if anyone's familiar with that. So I run the go— our, our controls division, which is Gulfstream Controls. We just have some separate branding for that. So my primary role is I manage that department, but I'm also our sort of our IT manager for the whole company and, and the admin for our ServiceTitan environments.

I have a feeling you'll be on this, uh, podcast many times, as many times as you want, because, uh, I love talking to people who are their ServiceTitan admin, the experts. And, uh, today we're gonna specifically talk about service agreements. You mentioned before we started recording that you guys have been on it early days since the beta, but for now, Maybe we can start off with telling us, um, how do you guys use service agreements today and what for?

So we mostly use it on the operational side of the workflow, not so much the sales side yet. There's still a couple things that need to be in place. We're almost there, but mostly operational. So the sales folks will still do, many of them will still do kind of their estimates and things like that outside of the platform. I personally do use the estimate side of service agreements because I do have service agreements on my, on my team. I also, you know, test the tool and kind of push to see where it's at. But operationally, we use it to coordinate all the visits. It's way stronger than memberships for commercial service. A large part of our commercial service business is our HVAC preventative maintenance inspections. And in my department, we have— we do controls inspections, which is very similar in nature, alongside some software upgrades and things like that. Memberships are great for residential, but they're very limiting for commercial. So the ability to get really detailed on the visits and equipment and materials and things like that, it's really kind of built for, for that perfectly. So we went live almost 3 years ago and we went live. I had heard that they were building a service agreement module, so I was like, we need that ASAP. So I was there really early days. So I saw the first iteration and we're still using it today.

Wow. So you've seen it evolve ever since the very beginning of service agreements. Prior to using, like prior to hopping on the beta, how were you guys managing service agreements? Before?

Uh, we were using Memberships. It worked. It was just kind of bare bones, right? I mean, the ability to kind of just pre-schedule visits or recurring service events, right? Recurring service events in Memberships is the same as visits and service agreements, right? Those are kind of the vocabulary there. Very similar, right, in nature. But service agreements just kind of blows it out where you can have proposals and profitability tracking is probably the best feature. That's the part where our, our account managers, our salespeople really appreciate service agreements and that they're able to see, you know, the profitability by visit basis, the service agreement as a whole, and most recently the pull-through work, which is the best part about the tool today.

For sure. Awesome. Yeah, I'm excited to nerd out about like all the specifics in just a bit, but, uh, one more question about the value of service agreements today. If someone's listening and they're going to go try to communicate the value to their company, like maybe they're on memberships and that's how they're managing, or maybe they're not even on service agreements at all. How would you suggest they communicate the value of service agreements that it brings to the business?

Um, there's lots of benefits. The idea about having like a portfolio view of all of your agreements, your service agreements in one place, and being able to, you know, see the status of them and schedule them in their own way is kind of the first piece of keeping yourself organized. You know, a lot of communication with commercial customers, a lot of it's sent via email. So that's just a different layer there versus, you know, residential customers who are calling in most often. Like I said, the benefit is the profitability reporting. That's the best part. Sometimes those reports can be difficult to pull for memberships and trying to pull those commercial ones out specifically was challenging, would be challenging. Having the scopes of work defined in the visits and being able to kind of fluff those up and those translate to the jobs that you book and letting the technicians see that. You can define things like your service level agreements, um, things like that. And it just kind of pulls over to the jobs so the technician can see it. There are some new features in the Field Mobile app that tie directly into service agreements with tasking. We're not using it yet because we're rolling out FMA internally. We're not quite there yet, but that feature I think is a big one. It kind of really helps people stay on top of the hours of certain tasks on the service agreements. So you're talking way deeper power and tools than what memberships and visit, you know, membership recurring service events can offer.

Gotcha. Is it because, um, service agreements on the commercial side, I think you mentioned this earlier, they're just way more complex versus like a residential membership. Is that why they needed to be separated and created a separate feature for this?

It's hard to say, like the programmers could have made memberships do what we do with service agreements. It's harder to say. I remember when we were first setting up memberships while we were onboarding before service agreements existed, it was a tough thing to figure out. Memberships are complicated in their own way and how you set them up. And I mean, deferred revenue is an option in both platforms and we do utilize that in both platforms. The biggest one though, I think, is the reporting in that service agreements allows you to set the number of hours that you're expecting on that visit and you can compare that with the actual hours that it took. It's very simple, but that alone, and then, you know, labor costs and all those things and material costs and being able to see that in one clean report on the dashboard is, is great. And that was there. I think that was there at the initial rollout of service agreements. And I think what we glopped onto the most amongst other, you know, parts of the tool, which has grown over time.

Yeah. Let's dive into some of those different parts of the tool. Maybe we can approach it like a Service Agreements 101 and maybe let's say it's a new customer and they're just starting to look at both memberships and service agreements, at a high level, how would you tell them how service agreements work?

The simplest way to explain it is you lay out your visit structure. Some typical scenarios are you're going quarterly or monthly or bimonthly, something like that. You may be doing the same visit over and over again, but you could also be doing like an annual thing. Maybe you're doing inspections on all of the air handlers you know, let's say quarterly, but then once a year you're cleaning their cooling tower. So those are different scopes of work, right? You have these 4 that you're going to do, you know, throughout the year, and then this extra one that you're going to do. In Florida, we do them in, you know, December, January when it's cold outside. And I say cold, it's South Florida, doesn't get very cold. But that's, you know, the best time of year to do that. And our old system, it got complicated with deferred revenue, and I think people just dealt with it. Because you may bill the customer even amounts over time. Most customers want the whole— one of the benefits of a service agreement is they're budgeting a dollar amount over time. And so you're billing them the same amount every quarter, but yet you have 5 visits. The service agreement lets you build it such a way that you're able to keep those dollar amounts billed the same. But when you're tracking your profitability on the individual visit, it's not about what you billed them, it's about your expected cost. Memberships can maybe do that. I'm not, I don't, it would be a lot, I think, to make that work. So just that idea of, I didn't bill them directly for that annual cooling tower maintenance, but I know the value of it internally in service time. And so I say, I expect it to cost me this, and it actually came in at this cost, where are we at? You know, did I short the hours? Am I missing some material? Do I need to, you know, bump it up for next year when we renew the agreement?

Yeah, and a few of the specific features within service agreements I wanted to dive into from our previous conversation. We've got linking jobs to service agreements after the fact, reporting, follow-up screen, setting pricing for individual visits, and pull-through work. So there's quite a bit to dive into. Uh, where, where should we start with some of these specifics?

Some of these aren't so much like the first one of attaching visits, right?

Is—

I wouldn't even call it so much a feature anymore. It was something that wasn't there at the beginning when, when we were in beta early access. It was a product gap, but it quickly got closed. So if anyone, I mean, I'll use memberships to compare cuz folks who are using it will understand what I'm saying. You have the ability, you know, if a, if a customer's calling, residential customer and they have a membership and they're trying to schedule their maintenance, what you're supposed to do is link that job to the visit, right? You make that link and then it will, you know, recognize the revenue and amongst other things. If you forget to do that while you're booking the job, you can easily go into the job and link it after the fact. Service agreements at the beginning didn't have that ability. If you accidentally booked the job outside of the agreement, you had no way to link it to the service agreement. Not even support could do it. But luckily, I mean, it, it's not even part of the conversation anymore. You can, you can do that. You can achieve that. You can book the job and then link it. So that was, again, kind of a requirement, not even so much a feature. We could go through WorkSum more. That's probably the, the best, the best one to talk about.

Okay.

Yeah. Yeah.

Let's dive in.

Anyone who's listening who sells service agreements knows part of the reason you're selling service agreements is that you can generate more, more revenue, more service calls. Technicians go out there, they perform their inspections, they find problems that you can then quote and, and, you know, um, increase that, that work. What pull-through work allows you to do is take that data and bring it into the service agreement. So the profitability is not just the inspections that you're doing, it's that plus the pull-through work. And what's really neat about it is if you're looking at the dashboard for pull-through work and profitability, you can choose. You can say, show me the profitability just for the inspections. Show me just the pull-through work, or show me both. And so it really gives you a good view on when you're having these conversations with your customer, you know, if you need to revisit the, the pricing, if you need to raise it. Maybe you have a, a lower margin service agreement, but you get a lot of pull-through work with that customer. That's really important information for the sales team, operations team too. But, you know, just knowing where you need to be at the pull-through work is a huge part of the conversation. Getting a little technical, you're able to link jobs to the service agreements for pull-through work. It's part of the booking process. You can also link it after the fact. It's very versatile in how you can link the jobs to the service agreements. The dashboard just, it just works great. It just become, it's part of our flow now, right? You know, if a customer calls and we know they have a service agreement and it's related, we'll link it to the, to the service agreement. And so we're reviewing those financials every year. We have all the data that we need.

Is it easy to make sure all the linking is happening that's supposed to be happening, or does that fall through the cracks sometimes?

For the most part, it works. There's some, a couple little UI quirks that I've made the team aware of. If you have multiple agreements for a customer, sometimes it can get difficult to pick the right one. We also labeled them kind of incorrectly, but we labeled them kind of like with not much detail. Because at the time it didn't matter, right? Like we labeled it, you know, like HVAC service agreement or controls service agreement. And so if a customer has multiple agreements, depending on the type of call, you know which one to pick. But there's a couple customers who can have 3 or 4 service agreements. So you don't have them labeled properly, you might pick the wrong one. So I just asked for some clarity in the UI that maybe shows, you know, whether it's an active agreement or an expired agreement, because you can link pull-through work to expired agreements technically. So just some more filtering there I'd like to see in the future where, you know, I don't want to see the inactive agreements, you know, unless I want to.

How do you guys work around that now? Do you just have to like double-click into it and each one and just make sure you're linking?

Yeah, I would say 95% of them, it's pretty, it's pretty simple. If it's an HVAC, you know, call, they're going to pick the active HVAC service agreement. It's pretty simple. If they have multiple, they may need to open the location record or the customer record and and say, okay, all right, this is the one that I need, you know. But what I've tried to do since the pull-through work feature was a thing, I've started naming the service agreements with a little bit more detail. Maybe I'll put the year of the agreement. That way at least you can identify it, you know, until these UI improvements eventually will come.

That's such a good tip right there. So for people who are starting out, and that's such good advice on like the classic, like, you know, you start with something, but as you scale, things get more complex. So such a great tip to set people up for success, you know, while ServiceTitan fixes some of those things, you can name it with the year. Any other naming conventions you might use to help distinguish?

Don't just put like inspections, right? Put, put what it is, you know, like I'll put like in our previous example, I'll put, you know, air handler inspections and annual cooling tower inspection. Because all of that is part of one agreement. If we're doing, we have some customers that do software upgrades with us that may be its own agreement. I'll label that as such. And I was already labeling it like that before. The thing I added recently is putting the year because some contracts are multiple years. But so now I'm putting like, you know, 2025 to 2027 in the name. At least, you know, that's the active one, for example. So every shop's going to have their own differences, but, you know, labeling things appropriately is your best bet. That doesn't just apply to service agreements. That's just in general, right? Everything. Give it a good name.

Totally. It makes such a big difference. I'm personally really bad at this. Like I do photography and I look at my folders and everything's all crazy.

This is funny. This is a really silly story. When I was a kid, uh, and I've been in IT, my degree is information technology, so that's my background. So I love computers. I remember being in elementary school and first getting my hands on, on computers and I named everything my name. So I just put David Helms on every file name. And so I was constantly overwriting things and the teacher was like, You don't do that. Like you need to give things names. And so I always forget that, you know, in my third grade computer class, don't do, don't do what I did.

Well, it's a good lesson all the way from third grade and now coming into play with service agreements. That's so funny. So now I'm thinking about a couple scenarios here for people listening. Maybe some of them are brand new, gonna implement service agreements. Maybe some people are gonna shift from some of their memberships to service agreements. How would you approach setup? Maybe let's start with the, the brand new people.

So I have to think about like, if I were to onboard now versus onboarding, you know, almost 3 years ago when we did with service agreements, it's, it's so much better now. It really is. You can make visits recurring now. You couldn't before. You could copy visits. So if I had monthly inspections, I have to make the visit and then copy it. That's fine. But what if you need to change one thing in all of them? You had to edit each one or delete them and recopy them. No more. Now you can put, this is a monthly one, right? So the onboarding is different now. You have to decide your service agreement templates, but it's really like you're defining, is this going to be a deferred revenue style service agreement where, you know, you're billing at some frequency, recognizing revenue over here? I know that's some people don't like accounting. I don't like accounting, but it's important, right? Recognizing revenue is important. So you have to decide, okay, is this going to be a deferred revenue style template or not? And so we use both because some of them are, are simple. You, you do the work and you bill on that job. So your job that you're working on, it holds the cost and the revenue. Whereas with deferred revenue, you have a non-job invoice, which only holds revenue. And then you have the job on over here, which holds all the cost and no revenue. I don't know if that concept is sinking in with people who are listening. I hope so. Accounting folks are, are, are like probably yelling at me because I didn't phrase it right, but that's an important distinction. So you have to have that set up right. And so you may need a little bit of help with setting up your price book items and things like that. It's very similar to the memberships. You have to have all your price book services set up correctly and the right general ledgers and things like that. Beyond that, you can set up your visit templates. Maybe you always do the same 10 things when you're doing an air handler inspection. You can define those, you can build, you know, the number of hours you expect that to be on a regular basis. And so what this unlocks is someone who's— maybe you have a new account manager at your company who needs to sell service agreements. Now they have an easier time building their service agreement for their customer because they're just building from a template. It already has the scope of work. And so saving them time and lessening the onboarding time for that individual, you know, new employee. So that's the other thing you can do that you couldn't do before is you can set up all these templates. You can get the, the service agreement really close to a ready state. The only thing you need to do is, you know, every building has its, you know, different types of equipment, different quantities of equipment. So you have to define those differences. But the onboarding now, man, it's probably so much better than when we did it 3 years ago because you can build all these templates now and it's evolving. It's evolving rapidly. Service agreements, one of the reasons I love it is how fast they are with improving it. You know, it is one of my favorite features of ServiceTitan just because of, of the, the love they put into it. It's a good team. Wow.

That's awesome to hear. In that setup, um, what about for those switching from memberships? Is that like pretty complicated? I know that's what you guys did and when it was early access, so maybe it's a bit better now, but what's that look like today?

Yeah, I feel like if you know how to set up a membership, you'll have no problem setting up a subschool. Memberships are complicated to set up. Definitely have an administrator. Help with the setup because of the making sure you link the right general ledger accounts with the price book items. That's, you know, price book is at the core of so many things of ServiceTitan. So that's probably the hardest part. You don't have to have templates when you start. You can build the backbone with, you know, whether it's deferred revenue or not, and you start from, you know, from scratch. And then as you go into it and you say, okay, you know what, we do this type of agreement over and over again. Let's put that as a, as a visit template. Instead of having to rebuild it every time. It doesn't break anything with memberships, right? The only thing you need to consider is if you have a customer who's using a membership and you want to move it to a service agreement instead, just, you know, don't double bill them, deactivate it over here, you know? So definitely anything new, I definitely recommend playing with it in, in practice or in Next first so you can get comfortable with it. But the UI just flows so well. Everything just, it's like its own little module with everything kind of just explained well. It's just, It's very well built.

Do you know if service agreements is included in everyone's package? Is it like a CSM needs to turn on thing? Can, can they turn in, can customers turn on themselves?

I'm not sure on that. I don't know what package is included within what needs to be turned on or not. I'm not sure.

Gotcha. I believe it's a, it's a core feature. I'm just not sure that in terms of permissions or like the, yeah, how to turn it on.

I'll include some of the articles in here and we'll figure it out. Anything where you're going to embark on a new feature, always involve your CSM. You know, we meet with our CSM weekly and when we go over all that stuff with him and, you know, shout out to Kyle Rogers, he's great. You want to review that because they have insight into, you know, what it's connected to, just to, you know, here's what we're going to do. Here are the risks if there are any risks, or they can just say it's low risk. We're going to turn around. No problem. Right. Always check with your CSM. It's not a pro product. It is core. So that's good. To me, it's a no-brainer. You know, there were some limitations at the beginning. Most of them have been eliminated now. Some customers may want you to bill a certain amount on that visit. You can do that now and you couldn't do that a couple years ago. So that's a, that's a big one for anyone. Cause that, I knew, I know that was holding a lot of people back on the, on the feature.

Oh, interesting. Um, why is that?

We're always at the mercy of what our customers want, right? Some customers, their contract, the contracting department wants things a certain way. And unless you're able to give them exactly how they want it, right, they may not pay you or they may not even want to do the work with you. So you are always at their mercy of how they want things built. And the tool has gotten better in how you can structure things. You can bill it, like I said, time of service, which is the job and the invoice, the cost and the revenue is all on one job invoice versus, you know, doing it deferred revenue. You can bill it, um, at any cadence really that you want. You can do it all up front. You can do it monthly. Quarterly, there's a bunch of options in there of how to invoice the customer. It's important because like I said, customers just, customers can be crazy on how they want things.

Top of the episode, you mentioned you guys mainly use it on the operation side and are starting to look at the sales side. I know this is a whole nother probably episode topic. Maybe you can, maybe you can just shed a little light on what that looks like.

So we are, we are lucky enough to also be a part of the CRM early access, and the CRM plugs directly into service agreements. And so now we're bringing our sales pipeline, our commercial sales pipeline into ServiceTitan. Where the feature is not quite there yet is in permissions. It's quite simple. ServiceTitan is built where all of your salespeople are technicians. Now we're moving into the world where your office employees are your salespeople, right? All of our commercial account managers have Office logins for ServiceTitan, but we also have duplicate accounts as technicians because that's how things are reported on, amongst other things. And so now, you know, you're not in the app building a service agreement, you're on the desktop browser building it that way. So ServiceTitan is having to rethink how user permissions are set up. And as of this moment, I believe if you have an Office employee account, you know, you can see more than you would need to see. Whereas if you're a salesperson, we still use other CRM software. The salesperson should be able to see their stuff, but not another salesperson's stuff. Only a manager should be able to see everything, right? That's kind of the key unlock. And CRM does support that. So I think we're really close to, to, to that threshold. I think once the sales— because this, it's a salesperson comfort thing, right? I want to be able to build what I want to build and not everybody can see it. Only the manager can see it and things like that. Once we're there. I think we're going to get our sales folks more, okay, all right, now that we're there, we're going to start estimating in there because I personally use it. I think it works great. It's definitely a time saver being able to load things in. We can have a whole episode, Josh, on change management, man. There's a comfort thing. People like the way they like it. Um, so they're afraid to, to learn the new way, but it is very well done. And the fact that it builds you the proposal, you know, that, that document that the customer sees. Is really nice. I don't know if you've done an episode on Document Template Engine. It's really nerdy, but that's a good one. Document Template Engine, you could do so much with it nowadays.

I haven't even heard of that. So, okay. I, yes, I, I have a feeling I will be hitting you up again.

Oh man, I'm, I'm okay at it. You know, it's, we'll talk more.

I'm sure you're probably just being humble. And then the CRM, that's another big topic. A lot of people are really interested in this early access and what it looks like for the future. That's a big one, right?

Yeah, but we're— I'm really— I personally excited. So I, I wear many hats, but I was in the field on my computer doing startups and commissionings and things like that. I've done project management. I've— I still do sales, and now I run the team. So I feel like I'm the voice of many folks here. And like, part of what— why I have no time is because I'm trying to improve all of our processes. And, you know, and sales is a big part of it, right? I want to get your— the sales pipeline being a Service Titan is a really helpful and important endeavor. I'm glad we're getting there. You know, adding consistency to any of your processes is really important for growth, tracking and things like that. So I'm glad to see that ServiceTitan's investing there.

It's so cool to see how much you love service agreements. And then now to get to see you implement it on the sales side as well. That's, it's going to be like the COVID so much. So I'm excited to see your progress within ServiceTitan. Any closing thoughts or last pieces of advice for folks listening?

Be involved, you know, and that's hard to do because everything takes time. I'm at the mercy of my own decisions. You know, I, I'm involved in so many things. I try to give feedback to ServiceTitan folks as much as I can. A lot of it's selfishly, right? I want to improve the product so that we can have a better product. And the only way you get that is by, you know, giving feedback, constructive feedback. Sometimes I go a little overboard and I'm involved in too many early accesses. I have to kind of dial it back. At the end of the day, I want a product that's going to work for our company. I don't think any company that I've ever dealt with takes the feedback the way ServiceTitan does. Be involved. Join Spark, join Torch, all the things you need to do to be involved. Get certified, all those things. It does take time, but it makes, it just makes for a better experience. You know, people call me the ServiceTitan guy at work, and that's okay. I don't mind. I wear it loud and proud. It's a very powerful tool. It's not without its faults. I'm very vocal about the things that it, that it doesn't do right. And, you know, the product team, you know, I'm sure I annoy them sometimes, but the product isn't going to get better without that. And so I try to do my part for, for us and for everybody.

And we appreciate that so much. We would way rather know about those frustrations than to not know at all. Right. So yeah, we appreciate people like you getting so involved. Thank you so much for coming on the episode today and taking more of your time to share, share your wisdom. Thank you all for listening. We will catch you on the next episode.

Thanks, Josh.