WARRANTY OWNERSHIPEvery article about warranty programs asks you to accept a premise. This one asks you to do arithmetic.
You have every number you need for this already. Nothing here requires talking to anybody, and the result is specific to your book rather than an industry average.
Step 1 — Count what you sold
How many warranties did your shop sell last year?
Not revenue. Not jobs. The count. It’s in your field software, or it’s in your invoices.
If you can’t get the number cleanly, use last quarter and multiply by four. Directionally right beats precisely unavailable.
Step 2 — Find your average price
Total warranty dollars divided by the count from step 1.
Most owners guess this wrong, and they guess wrong in both directions — some are surprised how low it is once discounts and bundles are averaged in, others have no idea how much the long-term ones pull the average up.
Do the division rather than estimating it.
Step 3 — Estimate what came back as claims
This is the honest step and it depends on which model you’re running.
- If a third party runs your program, you probably don’t know. That’s a finding in itself — it’s your customer base and your installed equipment, and the claim experience on it isn’t visible to you.
- If you handle it in-house, it’s what you spent last year on callback labour and parts you didn’t bill. Your service manager knows this number better than your books do.
Use your real figure. If you genuinely can’t get one, note that you can’t and carry on — the gap is part of the answer.
Step 4 — Do the subtraction
Count × average price = what your warranty book generated last year.
Minus claims = what was left.
That’s the number. Write it down.
That figure exists whether you own the program or not. It was generated last year by work your crew did, on customers you found. Somebody kept it.
What the number means, depending on where you are
Same figure, three completely different readings.
If a third party runs your program
That’s what left the building. It doesn’t appear as a loss anywhere in your accounts, which is precisely why almost no owner ever notices it — there’s no line item called “money that went somewhere else.”
If you handle it in-house
You kept it. You also kept all of the risk, and none of it was set aside. In a light claims year that’s a good outcome. In a heavy one, the claims came out of the same account as payroll.
If you own or take part in a program
It stayed, and it stayed somewhere with your name on it — held separately, with claims paid from what was set aside rather than from this month’s cash.
What to do with it
Compare it to something you’d notice. A truck. A tech’s salary. A quarter of your marketing spend. Warranty money is invisible precisely because it never shows up as a number — this exercise is the first time most owners see it as one.
Then decide whether it’s worth a conversation. If the figure is small enough to ignore, ignore it — that’s a legitimate result and it’s better to know. If it isn’t, you now have a real number to bring rather than a vague sense that something’s off.
Your own books will always give you a truer number than anyone’s estimate — and what that number does to your sale price is the bigger question.
Questions owners ask
How do I find out how much my warranty program makes?
Multiply the number of warranties you sold last year by your average warranty price, then subtract what you spent on claims. The remainder is what the book generated. Where that remainder ends up depends on whether a third party runs your program, you handle it informally, or you own it.
What if I don’t know my claim rate?
If a third party administers your program you may not have visibility into it, which is itself worth noting — it’s your installed base and your customers. If you handle warranties in-house, use what you spent on callback labour and unbilled parts; your service manager usually knows this better than your accounting does.
Is warranty revenue profitable for contractors?
It depends entirely on who holds the program and what claims run at. The arithmetic is the same in every case — what customers paid, minus what claims cost. What changes is whose books the remainder lands on.
Should I include maintenance agreements in this calculation?
No, keep them separate. Maintenance plans and warranties behave differently and mixing them makes the number harder to act on. Run the warranty figure on its own first.