“Hey Dave, you ever worked for any home warranty companies? Is that a royal PITA, or was it a good and profitable experience?” Not the first time I’ve ever been asked about this concern. There are advantages and some potential pitfalls to consider, but if you keep your eyes wide shut and can keep your cool when dealing with administrators whose mission in life is protecting their bottom line - at your expense if you fail to strictly follow procedures (they’re not merely guidelines!) - there are benefits that often outweigh the aggravation.

That said, you need to know stone-cold your operating costs so you can draw the line and refuse certain conditions a home warranty company may attempt imposing.

Some advantages:

You are not the bad guy or gal. Homeowners almost always have assumed their widget is fully covered - aka: bumper-to-bumper unlimited mileage warranty. The home warranty company, on the other hand, has more ways to say, “no,” than a first date.

You agree to take the call, arrive on site, clock in as required (or no pay for you!), provide a diagnosis to find out what is or is not covered, and the home warranty company decides what is covered. In many cases, you will be told only a portion of the required repair/replacement will be covered and now the homeowner finds themselves, occasionally, out of luck and pretty ticked off - at the home warranty company, but it’s a case of don’t shoot the messenger. Either way, you now have the potential of landing a new (hopefully loyal repeat) customer without spending a single penny on advertising.

Fill in the gaps with the additional work. I always found it possible to squeeze in a diagnostic call even on days when we were slammed with an abundance of work. Home warranty companies often require you to respond within a specific timeframe, which means you will need to prioritize that diagnostic call. It’s not uncommon to have a relatively tight window for taking care of the repair/replacement. If you cannot respond as required, then be upfront and, if needed, decline the call.

Once you have established a relationship, and they know you do reliable and great work, they will always return with more opportunities. Since home warranty companies deal with numerous customers and service contracts, they can provide a steady stream of work, which helps maintain cash flow, even in slow seasons or during economic downturns.

Settle for less. Home warranty companies, by now, know how much it costs to install, for example, a 50-gallon gas water heater. They’ve got their fingers in the pie too, and will extract their pound of flesh no matter how long it takes you to perform the installation. Flat rate, but with a not-so-silent partner. Know going in that your profit margin will be lower. Consider that the cost of “buying” a new customer. There’s also the volume of work to consider, which helps minimize the sting of lower profit.

Repeat business. Home warranty companies often have customers who need multiple services over years, if not decades. Contractors who build a reputation for quality work and reliable service often become the preferred vendor requested for future calls, which can mean a steady stream of repeat business. Another benefit is when homeowners quit their home warranty contract and then keep calling you for work. Always have things like refrigerator business card magnets to leave with the customer.

Simplified billing process. Home warranty companies typically handle billing and invoicing directly with the customers, meaning you don’t have to deal with collecting payments or negotiating terms with homeowners. This reduces administrative workload and allows you to focus more on the technical side of your work.

Warranty coverage and documentation. Warranty companies often handle the administrative burden related to service documentation, coverage verification and compliance with warranty terms, ensuring that you don’t have to manage these complexities on your dime.

Credibility through warranty companies. Partnering with well-established home warranty companies can help build your credibility. Homeowners tend to trust companies that are affiliated with reputable warranty providers, which can make it easier for you to secure additional work in future.

Support for problem resolution. In the event of customer complaints or disputes, home warranty companies typically provide intervention on their and your behalf, which can help manage difficult situations more effectively and maintain a positive reputation. Here again, let the homeowner be ticked off with the home warranty company instead of you.

It ain’t all a bed of roses:

Know when to say when. Long, long ago, in a galaxy far, far away, we had a great working relationship with a national home warranty company. When it came time to renew our yearly contract, the bottom line was drastically cutting our bottom line with the straw-that-broke-this-camel’s-back being a steep cut in our labor rate. That was, for me, a red line in the sand, so I called my contact. He was very apologetic and effusive in his praise for the work we had long provided.

No dice, and I was firm that under no circumstances would we cut our hourly rate. The funny part was he kept calling for weeks because all the local mechanical contractors also told him to take a hike. Don’t ever compromise your position by listening to flattery, which doesn’t put food on the table.

Rigid inflexible service requirements. Home warranty companies typically have strict rules and processes that you will be required to follow, which can limit your ability to customize solutions for individual homeowners. Let them be the hated provider while you maintain the knight-in-shining-armor hero status. If your technician is required to clock in/out, you’d better do so if you expect to be paid. Just as they are all-too-adept at getting out of the work required (not covered per their detailed warranty coverage), they’re equally adept at finding any excuse to get out of paying you.

Follow their rules to the T and you’ll get along just fine and, normally, get paid in rapid fashion. If they do fall behind, then refuse to perform any additional work until they cough up the money owed to you. A home warranty company being late with payment was a home warranty company on my no-go blacklist.

Working with home warranty companies provides a steady flow of work, reliable payment, and opportunities for business growth. The reduced administrative workload, access to new customers and predictable nature of warranty work can be very appealing. However, you need to consider the trade-off in terms of lower profits and the potential for less flexibility in the services you provide.

Your business relationship with a home warranty company can be mutually beneficial when managed carefully. When it’s not, never hesitate to renegotiate, and be prepared to walk away at any time when the terms are not favorable. Never let any customer become so large that their loss would cripple your operation.