How Do You Figure A 12 Month Warranty?

I have a simple question: how do you compute the cost of a warranty on a large system (say $1M) ? Lets say the warranty is for emergency service during normal business hours for products you sold and installed. Do you use a percentage of the total job? If so, how much?


10% of project total.

10% is a pretty fair estimate. We talk about this in our Service / Maintenance Contracts Guide. 8-12% is average.

However, keep in mind that in year one, most products are under warranty, so material replacement costs should be low. You will still need labor to replace failed equipment, though the manufacturer will be replacing it under warranty. Because of this, knocking a couple % off of the first year isn't unusual.

Thanks Ethan. Suppose we make the warranty a bit different:

Where would you put this percentage under the following circumstances:

  1. The service is now 24/7 with a 4 hour mandatory response time, but only for certain issues such as server down, loss of communications with the building, etc, or when the Security Director feels that a threat risk presents a clear and present danger to his constituancy.
  2. Or where a detailed preventative maintenance check is required at least yearly?