A service agreement commits a customer to ongoing work — typically scheduled maintenance — at an agreed price and frequency.
Why they are worth more than the revenue on them
They produce recurring revenue, which is predictable, survives a quiet period, and is valued at a multiple of the same amount of one-off work when a business is sold.
They fill the off season, which is the direct answer to seasonality for trades whose demand follows weather.
They produce work beyond the agreement. A technician on site regularly finds and quotes repairs, which is why customers on agreements have a materially higher lifetime value than the agreement price alone suggests.
What the agreement has to state
What is included at each visit, how often, and what is charged separately. The same discipline as a scope of work, applied to something running for years.
Any benefits beyond the visits — priority scheduling, a discount on repairs, a waived call-out fee — and what they are worth, since these are frequently what sells the agreement.
Term, renewal and cancellation. Automatic renewal is subject to consumer protection rules in many places, and the requirements are specific.
Money received ahead of the work
An agreement paid annually in advance is deferred revenue — a liability until each visit is delivered.
Treated as income on receipt, the business looks profitable in the month it is sold and carries the unfunded obligation to perform for the following year.
Delivering them
The visits have to happen. An agreement sold and not serviced is a refund, a complaint, and a customer who does not renew — see recurring.