Here’s The Right Way To Do Extended Warranties

Aaron Hoos

Extended warranties.

They suck, right?

I should know, I sold ’em too. (Well, I sold a type of them when I was doing leases.)

Look, we all what the deal is: extended warranties are high dollar gambles that most often sit as piles of cash in a giant vault and the Scrooge McDucks that sell extended warranties just swim around in the money.

Last time I bought a laptop, I knew exactly what I wanted before going into the store. I went in, got a clerk to get me the laptop, and then braced myself for the silliness that would follow.

It was a dance: The clerk gave all the lines and I tried not to roll my eyes while I heard things like, “My customers are always glad to have it,” and “You just never know,” and my personal favorite: “more and more computers are breaking down these days.” Then I say no. Then they ostensibly go talk to their manager and come back with a slightly lower quote because they like me. Then I say no again and they wish me well and send me to the cashier.

Same thing happens when I rent a car. And when I buy one. And when I buy any major electronic equipment or appliance.

Sure, the money is good for the companies selling them but let’s face it, extended warranties are silly:

  • They are rarely needed
  • If a circumstance arises where they are needed, they are often forgotten

… they’re basically cash. And customers know it. So you either end up with a customer who begrudgingly pays, or you end up with a customer who chooses not to pay but is still annoyed anyway because they have to put up with the BS of the extended warranty sale pitch.

Every knows it’s just a bump in the price of whatever product you’re selling.

And if ever there was an opportunity for a company to innovate on the financial side of their products, extended warranties is the opportunity.

So, when I was bought a new freezer recently, I was pleasantly surprised…

I chose the freezer and braced myself for the inevitable extended warranty pitch.

I got ready to say “no” until the salesperson added: “If you don’t use it, you get 100% of it back.

That changed everything.

… If I don’t use the extended warranty, I get 100% of it back.

It works like this: I pay now for the extended warranty coverage. The freezer is covered for 3 years from all the various things that the extended warranty covers. And at the end of 3 years, if I didn’t use it, I get the money back. (Mind you, I get them money back as a store credit.)

This is a small change but it’s huge. I think it’s smart. And I think more and more companies should adopt it as a strategy to sell their extended warranties.

  • It’s still pure cash that piles up in your Scrooge McDuck vault so you can swim in it.
  • A few people will use the warranty, most won’t.
  • Those that don’t use the warranty feel like the store owes them money and will make a purchase at that store in three years.

So, this small change in extended warranties is a simple play to increase your income now but also lock in customers who will likely come back and purchase more. Because, chances are, if they have $50 or $100 or $500 that they think is owed to them by the store, they’ll purchase far more than that amount in a future purchase.

I’ve written before about how most guarantees are weak and I wished companies would give their guarantees some teeth. And this is a powerful extended warranty strategy that more companies should adopt.


Aaron Hoos, writerAaron Hoos is a writer, strategist, and investor who builds and optimizes profitable sales funnels. He’s the author of several books, including The Sales Funnel Bible.

Passive income for financial and real estate professionals

Most financial and real estate professionals perform a service for their clients (for example: investing in stocks, selling life insurance, searching for a home to buy, or listing a home to sell). This is “active income” because it requires you to be present and spend some of your time and talent to deliver the service.

Unfortunately, you only have 24 hours in a day so there is a potential cap on the amount of money you can make by providing services to clients. And in some cases, if you have multiple service offerings (as is the case of a financial advisor who also sells insurance, for example), you can end up overloaded with so much service-offering that you don’t have time to grow your business any more.

That’s where the passive income model comes in and it can help you to grow your income and it can give you a little more freedom to reduce your face-to-face time with clients, if you want. I also like the idea of passive income for financial and real estate clients because these industries can be boom/bust industries so passive income provides another revenue stream to help smooth out the peaks and valleys.


Passive income is another type of business model. It’s a revenue stream where you don’t have to spend the time delivering a service. Instead, you sell something else that is complementary to the services you deliver (I’ll tell you some of the options later in this blog post).

For that reason, there is less of a “cap” on your income potential because whether you sell one or one hundred, you still spend the same amount of time.

The name “passive income” is a bit of a misnomer because there is still work involved. (Side note: If you look around the web at passive income possibilities, you are going to find a lot of opportunities that requires some effort even if they promise no effort at all, and you are going to find a lot of failed entrepreneurs who didn’t realize that their passive income required some effort to be successful). Some of the work involved might include marketing and advertising, emailing, accounting, and team management.

But don’t get scared off! What makes passive income so attractive is that you can put in some effort but get a much larger, ongoing result than you would by working one-on-one with clients.

You can continue working one-on-one with clients but the passive income part of your business allows you to generate additional revenue and grow your business to the point where you can dial back on some of your face-to-face time-intensive services.


For financial and real estate professionals, there are many different passive income opportunities. Here are a few that are popular:

These are some possibilities that I’m really excited about and have seen many of my clients succeed with. (Plus the following two blog posts give you some ideas to turn your existing financial or real estate business into a more passive income business: How to be a lazy serial entrepreneur part 1 and How to be a lazy entrepreneur part 2).


  • Look at your own skills and weaknesses. That can tell you a lot about what you’re likely interested in promoting. If you have a weakness in the business that you’ve overcome, an ebook on that topic might be good. If you have a weakness that you haven’t overcome, don’t focus your efforts on creating a passive income stream around that. If you have a strength in a particular area, spend your efforts on that. (Case in point: I don’t love managing other people so my passive income streams are going to be focused on things I can do. It’s not likely that I’m going to build up a huge staff of people unless I can get an Operations Manager involved very early).
  • List the problems that your clients come to you with already and find ways to solve those problems… for example, by writing something (a book or an ebook) or by promoting someone else’s services (as an affiliate).
  • Look at your systems and processes. Is there something you do well that makes you so successful? Perhaps it can be developed into a product.
  • Look around to see what other competitors are doing and add your unique twist to it. (Note: I’m not recommending that you steal the content or the idea!!! But if you see a real estate agent who is selling an ebook on how to prepare a home to be listed, and you have a better way to do it, you should write your own ebook on the topic.
  • Here’s a blog post about how to develop products that are complementary to the services you already provide.
  • Click through Amazon and see what popular books are for sale in your category. Do you have any insight that you can share on one of those topics? Even if you don’t have enough for an entire book, perhaps you have enough for an ebook.
  • Send me an email. If you’re at a total loss, I’m happy to help with some free email-based consulting to give you some ideas and get you on the right path.


It never hurts to broaden your options. Make it a goal in the next few months to create one more income stream. It doesn’t have to be big, comprehensive, or perfect. But get something together and put it out there and build from there. In the short term, you won’t retire from a flood of unexpected cash. But it will give you more credibility and more opportunity.

Just read: ‘The Best Business Model in the World’ at HBR

Business models are my drug. (Okay, that sounded pretty geeky). So when someone writes about the “Best Business Model in the World”, how can I NOT read that article?

The short story is, SAAS is the modern version of the best business model in the world: Costs are high upfront but drop overtime (and approach a theoretical zero) and you get recurring revenue.

So if you’re thinking about starting or changing your business, learn more from this venture capitalist.

The Best Business Model in the World – Anthony Tjan – Harvard Business Review.

(And I’ll send out my apologies here to the MLM folks of the world who, until just now, thought that their business model was the best one in the world).