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What's Covered on This Page
- What Does a KPI Evaluation Include?
- Are your business KPIs not as profitable as they should be?
- How the KPI Evaluation Process Works, Step-by-Step
- Common KPI Mistakes Costing Small Businesses in Teaneck
- How many KPIs should my Teaneck contracting business actually be tracking?
- What financial data do I need to have ready before a KPI evaluation starts?
- My revenue is growing but my profits keep shrinking — can a KPI evaluation explain that?
- How long does a KPI evaluation take from start to finish?
- Will my team be able to understand the KPIs you identify for my business?
What Does a KPI Evaluation Include?
A lot of business owners we talk to in Teaneck will hear "KPI Evaluation" and think some overly complicated spreadsheet of irrelevant numbers. We get that response a lot from contractors. But a KPI evaluation is actually very straightforward.
A KPI evaluation simply looks at the numbers that show you whether your business is healthy or not. Not all the numbers are equally important. A lot of the number don't tell you anything. That's the whole purpose: identifying the ones that do.
How a KPI Evaluation Works for Contractors
Here is what the process entails:
- We pull the data from your QuickBooks Online and summarize it by job, by month, and by service.
- We figure out 5 to 8 key metrics that are appropriate for your business. There is no "one size fits all." The KPIs for a roofer in Glenpointe will be different from those for a landscaper.
- We identify benchmarks based on your business's historical data as well as what the industry standards say.
- We compare your current numbers against those benchmarks.
- Any numbers that stand out from the standards will be highlighted and then explained to you in plain English.
More often than not, the owner already has a sense that something is off with their business numbers, they just can't put their finger on what that is. That's exactly the type of insight you will get from a KPI evaluation.
Depending on the trade, we will look at different metrics, such as gross profit per job or average ticket size for a plumber. In contrast, seasonal trends and equipment expense may be more important for an HVAC contractor — and industry resources like Refrigeration System Key Performance Indicators from ASHRAE illustrate how trade-specific KPI frameworks are developed and applied. It won't be a checklist, we will be tailored to how the money flows in your business.
We don't just deliver you a report for your review by yourself. Our financial team is well versed with both corporate and small business accounting and we will go through the entire report with you. You'll know which of your business numbers is performing well. You'll know where the areas of improvement are. And you'll know what you need to do going forward to make your numbers more profitable.
Want to know more about our KPI Evaluation services for home services contractors? Let's chat.
Our KPI evaluation process is closely related to our other services, like cash flow analysis and budgeting and forecasting. It is not an afterthought to your bookkeeping; your bookkeeping is the basis of your KPI evaluation!
Are your business KPIs not as profitable as they should be?
You know the value of keeping track of your business numbers. The problem is, do you know which KPIs to track and do they really show the state of your business? You'll need to know more about our bookkeeping and financial services.
In our bookkeeping and financial services practice, we see this problem with home services contractors and subcontractors weekly. A contractor, like a plumber or an HVAC contractor will come in with a huge spreadsheet full of numbers. The numbers show revenue is increasing. It also shows that all the jobs are getting completed. The contractor says, "Everything is looking great. I just can't figure out why profits are getting smaller and smaller. Can you help me?" Typically, their Key Performance Indicators (KPIs) aren't tied to the real money makers.
These are the indicators of ineffective KPIs:
- Your team is constantly busy, yet you're often short on cash.
- You have no visibility into which projects are profitable and which ones are losing you money.
- Your reports indicate growth, but that growth hasn't made any tangible impact on your cash flow.
- You're operating on intuition, not fact-driven insights.
- None of your team members know how to read your reports.
The last item is the most important. A KPI that can only be understood by a select few is virtually meaningless. Even KPIs that are to understand are only helpful if they actually impact how you operate your business.
Take one Glenpointe contractor for example. He was reporting his "total revenue" as a monthly KPI. But when I asked him what his KPI breakdown was based on (i.e., labor, material, subcontractors, etc.), he didn't know. In reality, what he was reporting was actually an unprofitable KPI that he was growing out of, without realizing it.
Ineffective KPIs give you a false sense of security. They tell you that your numbers are great right up until they're not. Effective KPI evaluations will get rid of meaningless KPIs and replace them with effective ones, the type you can use for decision-making regarding where to cut back, where to invest, and which KPIs you actually need to be tracking.
If you're nodding in agreement with any of the above, you're in good company. Not sure which metrics are the most important for your business? Take a look at our bookkeeping and accounting services to see how we've helped contractors get their numbers under control quickly and effectively.
How the KPI Evaluation Process Works, Step-by-Step
The KPI evaluation process is often misunderstood. Many business owners think that KPI evaluations involve simply looking at a few data points. Not at all. KPI evaluations are actually quite involved and complex, and we follow the same steps every time we perform a KPI analysis for a Teaneck contractor.
We perform these steps:
- Review of current financial statements. Profit and Loss statements, balance sheets, and Job Cost reports are pulled from your QuickBooks Online (QB) account.
- Determination of applicable KPIs for your trade. KPIs for a roofer near the Glenpointe area will be different than KPIs for a commercial landscaper. We identify the 5-8 KPIs that are relevant and actionable for your business.
- Benchmarking. Your KPIs will not be analyzed within a vacuum. We measure these against industry standards and other key contractors' results.
- Comparison of current KPIs with prior KPIs. Here is where the magic happens. We pinpoint the gaps between where your business is actually performing and where it should be. Is your gross margin on jobs down three points from the previous quarter? Has your overhead ratio started to rise without you even realizing it?
- We develop an action plan. Not a 50-page report, but specific action items that you can start implementing immediately.
Most clients are surprised at what comes to light in step four. They had a hunch that something wasn't quite right, but they couldn't quite put their finger on it.
The entire process typically spans a few days to complete. We do all of this work remotely, so there's no need for you to leave the office or spend your afternoon in a meeting room. Plus, since you're already paying us to do your monthly bookkeeping, your data is already compiled and ready to go.
Want to know what your data is actually telling you? Give us a call.
One thing that many people don't realize, though, is that KPI analysis isn't a one-time service. The full benefit of KPI analysis in Teaneck only becomes apparent if you run your evaluation process on an ongoing basis. You tie cash flow analysis into it. You tie budgeting and forecasting into it. As you run more evaluations, the next round builds upon the last to help trends jump out at you. That is how you stop guessing and start making data-driven decisions.
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Common KPI Mistakes Costing Small Businesses in Teaneck
We see this every week. A business owner here in Teaneck is looking at a pile of numbers, a dashboard of nothing but green arrows, and they have no clue why they have no cash. The issue is not in the data, it is in what they are tracking.
Picking the wrong KPIs is an expensive mistake. Not in the distant future, today!
Here are the most damaging errors to make:
- Only tracking top-line revenue instead of bottom-line margins. You might look like you are doing great on the top, but material costs and employee pay have already swallowed up most of that revenue. Tracking revenue in isolation tells you absolutely nothing about your business.
- Applying a single set of KPIs to all job types and services. Jobs with a roofing crew and jobs with a landscaping crew cost money in completely different ways. One size doesn't fit all when it comes to KPIs.
- Reviewing metrics just once every three months. It may seem logical to run a KPI evaluation once every quarter, but if you miss out on the problem for another quarter, you've probably already lost out on thousands of dollars by then. Consistency and frequency are the keys to running any evaluation.
- Tracking activity levels as opposed to outcomes. Tracking how many estimates are generated may seem impressive and productive, but what you really want to track is how high your close rate is, say 12 percent.
The last one that is especially common for contractors in the Glenpointe area and around Teaneck. We find they are tracking revenue per job but never deducting out the actual labor cost including drive time to the job site, time to make a callback, and wasted materials so a $15,000 job that actually made only $800 looks like a great project.
That's not the way it happens. In reality, business owners often pick their KPIs based on what feels comfortable to track rather than what would expose real issues. Based on our extensive experience working with small businesses, we've found that the most important metrics are almost always the ones people are least to monitor. The burn rate of cash flow. The true profitability of any specific job. The age of any outstanding accounts receivable. These are the key figures that point directly to areas where money is getting lost. If you're not tracking your KPIs in this way, that's OK because it's a common mistake. The majority of the business owners we work with began by tracking the KPIs that were defaulted to by their accounting software without considering whether they were actually measuring what the KPIs were intended to do for their business. What's important isn't to track more KPIs but rather to ask better questions.
What You Get Once Your Evaluation Is Complete
The only benefit in tracking your KPIs comes after you have evaluated the results. That's the part of the KPI tracking process that business owners often get wrong. Once we've completed your evaluation, we go over every finding and discuss exactly what they're telling your business about your cash flow situation. We don't get into complicated explanations; instead, we explain it to you during a phone call, showing you what your cash flow numbers mean for your business at this specific moment in time. We've discussed this analysis with contractors from across Teaneck and the whole country, and the discussion usually starts the same way for all of them. "I see it. But what am I supposed to do about it?"
Your KPI Action Plan
This is what we recommend you do next: First, we point out which two or three of your KPIs are most urgent to review in this moment so that your attention isn't scattered across the whole range of KPIs you are already measuring. Next, we show you what all of those KPIs are telling you about your cash flow status based on your existing month-to-month bookkeeping data. Third, we identify the steps you can take this month that will make a positive change in your cash flow situation and your business., we set a date to check back on your cash flow KPI status 30 days from now.
You will probably start your plan by making only a very minimal change or two because you want to avoid overwhelming yourself. This can be something as as changing your profit margin calculation on certain types of projects to account for the true value of your time, or reducing a certain operating expense that is taking up too much of your margin. These small steps add up quickly once you've started tracking the right KPIs.
The good news is that this process doesn't just stop once we've finished your KPI evaluation session. We integrate the KPIs you're tracking into your existing bookkeeping service so you know where you stand every month. Business owners in the Glenpointe, Route 4 and elsewhere throughout Bergen County with a crew that is working all over the state tell us the exact same thing when they understand this process. They say that as soon as they understand what their cash flow numbers are telling them, they're better able to make the decisions that result in a stronger business overall. Once again, this is not an exercise where you with a spreadsheet of cash flow data and leave you to do the rest. Instead, our follow-up process means that your cash flow and the KPIs associated with them will be tracked on a monthly basis as part of your and forecast going forward. It's a part of your business planning in Teaneck or anywhere in New Jersey. Have your questions answered? Get a call back.
Frequently Asked Questions
Common questions about kpi evaluation services in Teaneck
How many KPIs should my Teaneck contracting business actually be tracking?
Most contractors in Teaneck do best with 5 to 8 KPIs — not more. Tracking too many numbers creates noise, not clarity. We narrow it down to the metrics that actually reflect how money moves in your specific trade. A plumber's key numbers look different from a landscaper's. The goal is a short list you can act on every month, not a spreadsheet that sits in a drawer.
What financial data do I need to have ready before a KPI evaluation starts?
You'll need access to your QuickBooks Online account — that's the main source we pull from. We look at your Profit and Loss statements, balance sheets, and job cost reports. If your books are behind or disorganized, that's okay. We've seen it before with contractors across Teaneck. Getting your bookkeeping current first makes the KPI evaluation much more useful and accurate.
My revenue is growing but my profits keep shrinking — can a KPI evaluation explain that?
Yes, and this is one of the most common situations we see with Teaneck contractors. Growing revenue with shrinking profit usually means the wrong KPIs are being tracked. One contractor near Glenpointe was reporting total revenue monthly but had no breakdown by labor, materials, or subcontractors. He was growing an unprofitable mix of work without knowing it. A KPI evaluation finds exactly where the leak is.
How long does a KPI evaluation take from start to finish?
The evaluation itself typically takes one to two weeks once we have access to your QuickBooks data. After we run the analysis, we schedule a review session with you to walk through every finding in plain English. You won't get a report dropped in your inbox with no explanation. We go through it together so you leave knowing what to do next — not just what the numbers say.
Will my team be able to understand the KPIs you identify for my business?
That's a big part of what we focus on for Teaneck business owners. A KPI that only one person understands is almost useless. We build your final KPI set around metrics that are simple enough for your team to read and act on. If a number can't drive a decision, it doesn't make the list. Clarity for your whole team — not just you — is part of what makes this work.
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Book A Free Consultation. Call 973-453-5052 today.