Otis Sells The Elevator To Keep The Service Deal
Hello Business Enthusiasts,
Welcome back to Business Knowledge, where every week we look at one public company that sells something forgettable and earns serious money from it. We tell the story, then dissect the habit worth stealing for your own business.
- Company in focus today: Otis Worldwide, Farmington, Connecticut (NYSE: OTIS)
- What they sell: elevators and escalators, and the maintenance visits that keep them running
- Read this twice if you sell equipment once and then watch someone else earn the repair money for years afterward
In today's issue, we look at the rope Elisha Otis had cut in front of a New York crowd in 1854 and the service contracts that now earn the company he founded about nine of every ten dollars of segment profit.
You'll learn how to price your first sale so it leads straight into the service contract, all in about four minutes.
The assistant with the ax
In 1854, inside New York's Crystal Palace, Elisha Otis rode a platform high above the crowd and told an assistant to cut the only rope holding it up.
The platform dropped a few inches and stopped. His safety brake had locked onto the guide rails. "All safe, gentlemen, all safe," Otis told the crowd, according to the company's own history.
The showman P.T. Barnum had helped arrange the exhibit, and sales had been slow before it. Otis sold 8 elevators in 1854 and 15 in 1855. In 1857 his company installed the first passenger elevator in the E.V. Haughwout store on Broadway.
What the crowd paid for
People had hoisted goods with ropes for centuries. What the crowd saw that day was proof that a car full of people would stop if the rope failed.
That proof needs upkeep. A brake protects passengers only while someone keeps checking and servicing it, year after year, for as long as the building stands. Every elevator Otis installed created a job that would outlast the sale.
The idea this issue argues fits in one line: the installation is the down payment on decades of service.
The 4.8% business and the 25.1% business
Otis reports two businesses. In 2025, New Equipment, which sells and installs new elevators, earned an operating margin of 4.8%, while Service, which maintains and upgrades them, earned 25.1%.
Service brought in $9.44 billion of Otis's $14.43 billion in sales and $2.37 billion of its $2.61 billion in segment operating profit. That works out to about 91% of the profit from about 65% of the sales.
If you are wondering what a maintenance portfolio is, it’s basically the number of elevators and escalators a company is paid, under contract, to keep running.
Otis's portfolio grew 4% in 2025 to about 2.5 million units, its fourth straight year at 4% or better. Maintenance prices rose about 3% as well, management said on the third-quarter call.
Why the conglomerate let it go
For decades Otis sat inside United Technologies, next to jet engines and air conditioners. UTC announced the split in November 2018, and Otis began trading on its own on April 3, 2020.
The pitch to its new owners put service at the center. Otis's welcome letter to future shareholders promised to accelerate service portfolio growth.
Judy Marks, who came to Otis from running Siemens USA, put the company's position plainly to BOSS Magazine: "We are in the hoistway, and we are in the spine of every building." Her plan was to give service mechanics real-time data in the field, and by the end of 2025 about 1.1 million Otis units were connected online.
The down payment can still be lost
An install wins the first contract, and the building owner can still leave. Management said on that same call that customers leaving partly offset its maintenance growth, and its filings note that Service maintains other makers' equipment as well as its own. Rivals can do the same to Otis.
New installs also rise and fall with construction. New equipment sales dropped 7% in 2025, while service sales grew 6% the same year.
That gap is the whole case for the model. Construction slows down, and the elevators already standing in finished buildings keep running and keep needing visits.
The second sale hiding inside the first
Elevators wear out long before buildings do. When an owner finally replaces the motor and controls in an old shaft, the company already servicing that shaft gets the first call.
Otis calls this modernization, and it books it inside Service. Modernization orders rose 26% in 2025, and the backlog ended the year up 30% at constant currency, according to the 2026 proxy statement.
So one install can pay off long after the sale, first through visits and later through the rebuild. When Judy Marks spoke to BOSS around 2018, Otis maintained about two million units. The 2.5 million it looks after now is the pool those future rebuilds will come from.
Turn your next sale into a contract
These four steps fit any business that sells something that needs looking after. Perhaps, you can utilize it in your business as well:
- Count your installed base. Start by listing every customer who bought equipment or a system from you in the last ten years, noting who currently services it. This exercise is a success if you discover units nobody is maintaining.
- Quote the service plan as standard. Include a one-year service plan as a default line item on your next proposal that the client must opt out of to remove. You will know it works if more than half of your buyers retain it.
- Track every contract you lose. Maintain a monthly log of unrenewed service contracts alongside the specific reasons provided by clients. Identifying a recurring reason three times highlights exactly what needs fixing.
- Service other people's equipment. Reach out to local owners using a competitor's equipment and offer a paid inspection. Spending just half a day on outreach is effective if even one owner books a service.
Elisha Otis sold 8 elevators in his first big year. The company he founded now looks after about 2.5 million, so before your next quote goes out, decide what you want to be paid in year ten.
