What are Key Performance Indicators (KPIs) and which ones are the most important for your business?

Key performance indicators (KPIs) are metrics that used to assess how your business is doing. They can be financial (i.e. average revenue per project) or non-financial (new leads for the month). Each KPI can be pulled for a different time period (year-to-date, last month, last year, etc.) and graphed over time to show trends. Below are TOP TEN metrics that can give valuable insight to help drive change to improve efficiencies. Our goal is to provide a one-page 'Owner Dashboard' to give you quick insights to these 10 KPIs.

1) Cash flow from operations - how much cash is generated during a period from your business's operations. This could differ from the profit shown on your profit and loss statement because of how well you are collecting accounts receivables, managing payables, etc.  

2) New Leads - the number of leads from form submissions on your website, webchats from your website, the Home Office website, phone calls, and other sources. These will all flow into Podium, our CRM and lead generation tool.

3) Closing rate - the percentage of leads that turn into an accepted quote. This could be divided further into the closing rate per salesperson to give individual grades.

Closing Rate = Accepted Quotes / Total Leads

4) Number of Projects - the number of projects that you have invoiced customers for in a given period.

5) Average Sale - total revenue (excludes sales tax) divided by the number of invoices.

Average Sale = Total Revenue / Total Invoices

6) Gross margin % - also known as simply margin %, this is the amount of gross profit (sales minus cost of goods sold) divided by revenue. This can be subdivided into product gross margin and labor gross margin. Click here if you are curious about the difference between margin and markup. This could even be further divided by product category to see which products are your highest margins and how they change over time (i.e. shades vs shutter gross margin %).

Gross Margin % = Gross Profit / Revenue

7) Net margin % - the net profit after operating expenses divided by total revenue. Click here for an explanation of a basic profit and loss statement (also known as an income statement).

Net Margin % = Profit After Expenses / Revenue

8) Sales revenue efficiency - how much revenue is generated per salesperson labor expense. This will grade how efficient your sales team is in terms of closing. If your total revenue for a given time was $1,000,000 and you had $200,000 of salesperson labor expense over the same period, your sales margin efficiency would be 5.0x. The higher the number the better! You could also calculate per salesperson to assign individual grades.

Sales Revenue Efficiency = Revenue / Salesperson Labor Expense

9) Sales margin efficiency - how much gross margin is generated per salesperson labor expense.  This will grade how well your sales team is closing as well as quoting. If your total gross margin for a given time was $400,000 and you had $200,000 of salesperson labor expense over the same period, your sales margin efficiency would be 2.0x. The higher the number the better! You could also calculate per salesperson to assign individual grades. Two salespersons might each generate $100,000 of revenue, but one might generate $40,000 of margin while the other only $25,000. 

Sales Margin Efficiency = Gros Margin / Salesperson Labor Expense

10) Install efficiency - how much product cost is generated per installer labor cost. For example, if you sold $100,000 of product and it cost you $10,000 of installer labor, your install efficiency would be 10.0x.  This will grade how efficient your install team is.  You could also calculate per installer to assign individual grades.

Install Efficiency = Cost of Goods Sold / Installer Labor Cost