HVAC
HVAC Agreement Renewal Rate Calculator
See what a change in renewal rate is worth across the book, and what drives the rate up.
Result
Retention improvements are not free and this does not model what they cost. Earlier reminders, a person making the call, and actually delivering every included visit all take time. The point of the calculation is to size the prize so you can judge what that effort is worth. It also assumes a retained member behaves like an average one, which understates the value of long-standing customers and overstates the value of new ones.
Open the agreements demoWhat moves the number
- Visits actually delivered, which is the largest single factor.
- Contact before expiry rather than at it.
- Whether the customer can see what they received for the fee.
Where this one goes wrong
Measuring renewal against the whole book rather than against the agreements actually due in the period. Measuring against the total flatters the figure and hides the problem.
Questions
About this calculator
What is a point of renewal rate worth?
More than it appears, because the revenue repeats and the acquisition cost is already spent. Worth calculating on your own book rather than assuming.
When should renewal contact begin?
Early enough to fix anything outstanding, which usually means months rather than weeks. A check around ninety days out leaves time to deliver a missed visit.
Why do plans lapse without being declined?
Because nobody owned the renewal and nothing surfaced the expiry. Most lapses are administrative rather than decisions.
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How to use this calculator
- Active agreements. Enter your own figure; the page starts at 180.
- Average annual agreement value ($). Enter your own figure; the page starts at $299.
- Current renewal rate (%). Enter your own figure; the page starts at 62%.
- Target renewal rate (%). Enter your own figure; the page starts at 80%.
- Average repair revenue per member per year ($). Enter your own figure; the page starts at $180.
- Gross margin on agreement and repair work (%). Enter your own figure; the page starts at 45%.
The result updates as you type, so you can try a figure, see what it does to additional annual recurring revenue, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Active agreements | 180 |
| Average annual agreement value | $299 |
| Current renewal rate | 62% |
| Target renewal rate | 80% |
| Average repair revenue per member per year | $180 |
| Gross margin on agreement and repair work | 45% |
| Cost to win a replacement customer | $310 |
What comes out
| Result | Value |
|---|---|
| Additional annual recurring revenue main result | $15,520 |
| Agreements retained | 32 |
| Additional gross profit | $6,984 |
| Value lapsing at the current rate | $32,764 |
At a 62% renewal rate you lose about 68 agreements a year, worth $32,764 once the $479 each member is worth in plan and repair revenue is counted. Lifting the rate to 80% retains 32 of them, $15,520 of recurring revenue and $6,984 of gross profit. It also avoids roughly $10,044 of acquisition cost replacing them.
How sensitive the answer is
Holding everything else steady and changing only average annual agreement value, this is what happens to additional annual recurring revenue. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Average annual agreement value ($) | Additional annual recurring revenue |
|---|---|
| $150 | $10,692 |
| $224 | $13,090 |
| $299 example above | $15,520 |
| $449 | $20,380 |
| $598 | $25,207 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Active agreements
- A number, between 0 and 20000, starting at 180.
- Average annual agreement value ($)
- A money amount, starting at $299.
- Current renewal rate (%)
- A percentage, between 0 and 100, starting at 62%.
- Target renewal rate (%)
- A percentage, between 0 and 100, starting at 80%.
- Average repair revenue per member per year ($)
- A money amount, starting at $180.
- Gross margin on agreement and repair work (%)
- A percentage, between 0 and 95, starting at 45%.
- Cost to win a replacement customer ($)
- A money amount, starting at $310.
What the results tell you
| Result | What it is |
|---|---|
| Additional annual recurring revenue | The headline result. A money figure. |
| Agreements retained | A number. |
| Additional gross profit | A money figure. |
| Value lapsing at the current rate | A money figure. |
Before you rely on this number
Sizing, capacity and load figures here are planning estimates. A real installation depends on the manufacturer's data for the specific equipment, the duct system it is going into, and a proper load calculation for the building. Use this to sanity-check a number or price a job, not to select equipment.
Keep going
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Open calculatorWork a renewal list, not a reminder
The demo shows agreements at 30, 60 and 90 days out with the visits-used column beside each one: the number that predicts whether they renew.