Capital is king for all companies, including those in the home services industry.
You’ve worked too hard to build your business without pin-point knowledge of cash flow, revenues and expenses. Without the use of key performance indicators (KPIs), it’s far too easy to fritter away cash on slacker technicians, inefficient operations or processes, and poor customer relations. You want to wring the most out of every dollar so that capital can be reinvested into your company or the most productive employees.
Advances in management software have made tracking KPIs easier than ever for owners of home services companies. You decide what metrics to measure, and management and tracking software does the rest. Here are seven important quantifiable KPIs every home services business should be measuring quantifiably and metrically in 2018:
- Employee performance. Good management and tracking software can track time spent on specific jobs as well as travel time. It is up to your company, however, to establish metrics for what constitutes good performance. Should your techs service three clients a day? Is there an established quota system? Are customer complaints or other feedback a performance indicator? One baseline indicator of performance is revenue divided by billable hours. A low return on billable hours suggests underwhelming performance. Once you identify the metrics you want to measure, software can track the KPIs for review.
- Customer satisfaction. As with the measurement of employee performance, your company should establish the baseline for measuring customer satisfaction. Is it tied to online reviews? Complaints? Callbacks? Sometimes unhappy customers simply grit their teeth, write a check and walk away, never to be heard from again. Repeat business is a definite indicator of satisfied customers, and can thus be measured as a KPI.
- Annual revenue per employee. This KPI can attest to the overall health and profitability of your company. Obviously, the higher the revenue per employee, the better for the company. This is a relatively easy KPI to track but can be further refined to include consultants and unbillable employees. It can also help you identify the high and low performers in your outfit.
Project overruns. Many home services companies guarantee an upfront cost before starting work on, for example, a plumbing job. This is a good way to protect customers from sticker shock, but if jobs consistently take longer than expected, you are going to eat through revenue in a hurry. It also hinders your company’s ability to take on more work. Software can help calculate this crucial KPI. - Return on investment. Marketing, public relations and advertising services are critical in this information age. But how do you know you are getting enough bang for your publicity buck? By correlating job calls, leads and conversions with ad buys or public-relations billings, you can help determine KPI at the marketing level.
- Gross margin. This is the profit gleaned from every service after all outflow has been subtracted. It is an overall KPI for your company. You want those leftover margins to be as high as possible. Tracking software can accomplish this.
- Sales revenue. This is the overall revenue coming into your shop. It’s important to track sales metrics along intervals. This will help you recognize consistent slow business periods and help you plan ahead for decreased revenue streams. Given the right metrics, management software can easily determine your highest and- lowest-grossing periods of the year. And of course, subtracting expenses from revenues gives you the magic number most important to any business owner: Net profit.
The most sophisticated and deepest-diving business analysis comes from the most sophisticated measuring sticks. Modern tracking and management software can increase the odds your home services KPIs are A-OK.
Andrew Loschert is senior director of marketing at ServiceTitan (www.servicetitan.com), a SaaS software firm based in Glendale, California. He can be reached at [email protected].