Metrics, Passion and Profit Sharing
How do you measure your business performance? Obviously profits are important
but I know there is more to it? - Mike G., Calgary, AB
Sure, the bottom line is the ultimate indicator of success, but knowing how to improve profitability is the real challenge. By defining the different areas of your business performance, you can identify simple, achievable tasks for your business that are
easy to monitor and act on. Typically these are called Key Performance Indicators or KPIs. I've found them an invaluable aid in bringing focus to the areas of our business where we can improve our efficiency, reduce costs and ultimately, increase profits. The more frequently you monitor your KPIs, ideally in real-time, the more easily you can improve your performance. KPIs will differ from company to company, even in our industry, depending on the scope of your particular business offering. Here are five that I feel apply to most HVAC contracting companies:
a) Call backs: These cost us money and affect our reputation. Measuring them and focusing on training and customer service strategies to reduce call backs will improve business performance.
b) Customer attrition/turnover: Frequently monitoring the loss rate of current customers helps identify trends in performance that can be turned around, especially if you take the time to speak with exiting customers.
c) Sales: Regular measurement of your sales-closing ratio and average sale will give
you very accurate knowledge of how many leads you need to generate every day. You
will be able to predict future sales and installation activity based on leads coming in.
d) Installation: One number I have tracked for years is the gross margin generated/crew/day. This is a great number as it combines the productivity of
installers along with selling the right jobs at the right price.We shoot for $1,600/crew/day.
e) Service revenue: I have seen contractors track revenue per employee or truck. Others track revenue per day, or even per time ticket hour. We also expect our techs to promote
sales of service contracts and generate leads for our sales team. These are easy to measure every day. It is not only a good focus for revenue production but also for individual
accountability.
There are plenty of other metrics, but the first step is to determine what matters most to you. One thing that you will find - and is really quite amazing - is that the things that get
measured get done. I would be very interested to learn about the KPIs of other HVAC contractors. Write to me c/o Mechanical Business or e-mail rgrochmal@atlascares.ca.
I've been doing this for close to 20 years and some days I wonder if I've lost interest. How do you keep a passion for your business? - Thomas V., Gordon, BC
Having just hit the 20-year mark as owner of my business, I fully understand what
you mean. Personally, I am most challenged when I am learning something new.
To satisfy this, I've found great satisfaction in my involvement in the industry, as a member of a committee or board, or by participating in a task force, etc. - it takes me out of the
day-to-day risk of working "in" my business rather than "on" it, and lets me learn about emerging trends and best practices among my peers.
I also recommend that contractors look at how they can change the direction of their business to address the future needs of their customer - be it building custom wood fireplace surrounds, adding a gift shop to a retail operation, or learning how to install infloor heating. Whatever you do, planning for, learning about and marketing the change is exciting.
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