Using KPIs to Set Goals for Your Electrical Service BusinessBy My Service Depot on Thursday, November 11, 2021
Every industry, such as electrical service and field service, is full of acronyms and buzzwords. Note that a few of these acronyms even manage a whole-hearted crossover. This is because they are relevant regardless of the industry. One example of these acronyms is KPI.
If you run an electrical service business, you probably have a vision and ambitions for your small business. However, keep in mind that turning this vision into a reality requires carefully laying out your path to success. So, if you would like to see your small business skyrocket, it is important to set goals. There is no doubt that a results-driven business leader needs and understands what results they want to achieve.
When a year ends, and another year starts, it is the right time to think about overall success metrics and ratios related to your electrical service business. And these metrics are also known as key performance indicators (KPIs). Keep in mind that KPIs are critical to helping small business owners and managers measure and evaluate their own success.
Key performance indicators reveal quite a lot about the health and financial success of a business. Managing a small business can be overwhelming and daunting, and in a competitive market, such as electrical service, you have to know how to keep your finger on the pulse of your operation.
What are KPIs?
Did you know that many people tend to associate KPIs as solely numerical? However, they can also be qualitative. KPIs provide the most important and crucial performance information, such as profitability, which enables business organizations to understand and gauge whether or not they are on track toward their stated objectives and goals.
We can say that KPIs helps businesses turn high-level and strategic goals into various actionable tasks with measurable results.
You should zero in on several KPIs and key metrics so that you can easily assess and evaluate where your business is doing well and where it can improve. However, keep in mind that choosing the right and specific KPIs in order to track performance is essential.
Because a KPI is a measurement, people naturally assume that KPIs should always be a number. However, never forget that evaluation, particularly of service or customer experience, usually go beyond a number.
KPI and Business Reports You need to Track
Are you meeting all your sales goals and objectives? Sales revenue represents how much money comes in from the sale of your various electrical services (or any products that you offer). Keep in mind that this is a core metric essential for any business in this industry to stay in business. You should always look for trends in your sales revenue. For example, you can compare your revenue with past periods.
Without this, it is challenging to interpret various trends in profit. Also, it is almost impossible to know if you are on track with your current business goals in terms of saving, spending, and earning.
You may experience spikes or slow periods during specific seasons. Do you have an idea when customers usually call for air conditioning repair or appliance repair?
Surely, distinguishing and anticipating these significant trends will help you keep competitive pricing as well as make long-term and strategic financial decisions in order to ensure profitability.
Specific Expenses and Service Costs
It is vital to make sure that your total service costs are part of the KPIs you track. For example, look at how much you really use your service technicians and how much of their time you may directly bill to your customers.
Note that your expense report will complement your revenue report. Although you should track the money coming into your small business, it is important to know how much money you are incurring on expenses.
As you need to keep your costs low, it can be one of the most important numbers. And expenses can include anything from paying employees and buying purchasing materials to purchasing cleaning supplies.
One of the most difficult concepts for many small business owners to grasp is cash flow. Cash flow refers to the actual amount of cash that comes into and leaves your business over a specific time period. Also, it is worth noting that your cash flow statement shows the amount of cash that is available at the end of that period.
You should know that even if your P&L statement shows a consistent profit, you may still run into cash flow problems. Perhaps, you invoiced for a major project; however, the payment term is 60 days.
This means that you will not have cash in hand for a while. On the other hand, your expenses, such as rent, may be reasonably based on the income you are earning making. However, if a huge investment in equipment is needed while you wait for that cash to come in, you will end up without sufficient money to pay for the equipment.
It is simple to calculate your gross margin by using the formula: total sales revenue minus the cost of rendering services, divided by sales revenue. Keep in mind that gross profit margin, expressed in terms of a percentage, will help you track the growth and success of your electrical service business.
The percentage represents or depicts the amount of every dollar from your revenue that you retain as profit. This means that a high percentage translates to excellent efficiency. On the other hand, a low percentage means a need for increased productivity.
Payroll or Workforce Management Reports
You must create a robust system for payroll reports. This is because knowing how much you spend on your employees is vital for optimizing your business. Remember that as a small business owner, it is vital to know when you need more employees and when you can manage with a small team.
Also, it is worth noting that creating payroll reports helps ensure you are on track with everything ranging from accurate work hours to tax preparation. And these reports may include employee details, total pay, payroll contributions, and time activities for all individual employees.
The quicker your technicians respond to problems and issues, the more work they will be able to perform in a day. Also, the earlier the customer’s problem is solved, the happier and more content the customer will be.
Monthly or Quarterly Profit/Loss
In order to determine your monthly or quarterly profit (or loss), you have to subtract fixed and variable operational costs from your gross profit. Keep in mind that fixed costs, such as rent, are recurring costs that you pay each month. On the other hand, variable costs, such as fuel costs, are unexpected costs that can fluctuate month-to-month.
You can track technician utilization and efficiency by dividing the amount of time the technician is working on aspects that are part of the job description vs. time spent completing timesheets, attending various meetings, and other activities not related to productive work.
There is no doubt that customer retention is a crucial KPI. This is because it costs money as well as time to attract new customers. For example, you may need to create engaging social media posts and offer discounts in order to get somebody to call for an estimate.
And if you find that your small business depends on several one-time, low-scoring customers, you should look at your customer service practices and implement retention campaigns (like discounts) in order to bring customers back.
Website Traffic Report
You should never ignore your website traffic, as it is an integral part of running your electrical service business. Note that even if you do not have a firm grasp of modern digital marketing, it is vital to do your best in order to take your business digital.
For example, referral reports can provide you with a wealth of information regarding how your online strategy is driving traffic to your website. It is no secret that local businesses need a strong internet presence these days. Also, BrightLocal reports that about 97 percent of consumers look online for local businesses.
Offering your electrical services for credit is an excellent way to get an edge over your competition, right? However, it is essential to take a bird’s eye view and then consider how credit financing affects your cash flow.
If you often find yourself with alarming P&L numbers, you should look at your A/R. This is because late or unpaid invoices are usually the culprit for the financial distress of small business owners.
Budget vs. Actual
As its name suggests, this report compares actual results, mainly from the Income Statement, against your budgeted amounts that you projected at the start of the period. And this report allows you to assess how closely your business spending and revenue generation can meet the financial forecasting projections in your budget.
Setting SMART Goals
When determining which metrics and KPIs to track, you should be setting SMART goals.
This means that a goal is specific and unambiguous in what is to be achieved. So, everyone knows the what, who, where, and when of the goal.
It’s clear how to measure and track the goal and the outcome you are hoping for. Preferably, you should be able to assign one or multiple maintenance metrics to every maintenance goal you have defined.
This means that reaching the goal is reasonable and realistic.
The goal ties to your overall business values and objectives.
You should have a clearly defined and realistic timeline to create a sense of urgency.
Tracking key performance indicators and metrics for your electrical service business will help you offer the kind of excellent services that your customers expect and demand. And identifying the metrics and KPIs that have the greatest negative effect on service performance is the first and most crucial step toward implementing business and technical changes.