I did this for a number of years when I first started, and that business model did not work for me. The problem I had was there just was not enough electrical work to justify the amount of money needed to make it work. I ended up doing refrigeration, plumbing and anything else I could to try to make more out of it but then ended up a glorified maintenance man. I have seen guys make it work with infrared testing, and the documentation that some companies like, but at the time that kind of equipment was well over $20K (now you can get it for about $5k). For me the better move was to go into straight new construction contract work, and throwing my pager away felt great.
When I got more established I tried this again it did not work out so well either; a few big plants around town love to do contract maintenance for controls work, and I took one of these contracts about 5 years ago. Basically how that works is a big plant wants a good union control guy, but they don’t want to actually employ him, so they get a local contractor to do a maintenance contract and hire the guy they want. You as the contractor become a go between the plant and the union. The deal is negotiated on percentage, and you get a fixed percentage of what you pay your electrician.
The problem with these type of contracts is that big plants are run by bean counters, and sooner or later they will figure out a way to work the deal so you cant make any money. First they start off with documentation on their forms, that would choke a CPA with detailed break downs of all the fringes and which ones they will pay for and wont.
On paper it looked like I was making a little bit of money for a lot of headache, but when you look at how much money is spent on headache and paper work it started to look like it was not such a good deal. Making 2%-3% on labor contract you negotiated at 12%, does not look so good when you can make 15%-30% on a new construction contract.
This went on for a number years because I was making a little money and it kept a good electrician working. Then the plant bean counters started to question why the electrician needed a truck, even though he did work with his tools on a very large plant with lots of different buildings. They wanted to provide a golf cart for his use, and to remove the truck from the contract. When I told my electrician that he was losing the truck, he got upset and wanted me to suck it up because after all, I was making all that money off his labor.
(There is a unwritten rule in our business, if you give a man a truck, he will quit if you take it away. It does not always happen but 95% of time it does work out like that.)
He quit, I lost the contract. Later he went to work for a competitor doing the same labor contract for the same plant, and I sincerely hope they other guy figures out how to make it work.
Sorry for the long story but I don’t see service contracts as a real lucrative deal; yes there are guys that do them and there have been a few outfits that have come to town and tried to get me to partner with them on them but it never seems to work out for me.
