If you own a smaller business, it can get really difficult to know how to measure success and to make sure you’re primed to grow. However, there are true-and-tried KPIs that can help you monitor the trajectory of your company and also, correct the course as and when you face new challenges. Having a small business can be intimidating and in a competitive market such as HVAC, electrical, and plumbing, all you need to know is how to keep the finger on the pulse of your operations. By reducing in on several key metrics, you can assess where your company is succeeding, where it could be doing more, and what can be done to ensure your business thrives.
According to the New York Times, the home service businesses are booming right now and will register a compound growth rate of 49% in 2021. But what does it mean for you? It means that with the coming year the number of home service businesses is going to increase even more, which will result in more competition and hence will make it hard for you to get your presence known to the world.
But you don’t need to worry about it, as long as you use and identify the right Key Performance Indicators (KPI’s) to run your business. KPI’s are the best way for any Home Service business to identify the right path which will lead to proper planning for future growth. But the question here is How to identify the right KPIs for your Business? The answer to that is not simple in fact the KPI of two businesses in the same vertical might be very different from each other. KPI largely varies from business to business, it is influenced by regional factors, industry trends, company practices, and some more parameters.
This does make your job a bit harder, but it’s not impossible at all, because all the answers you are looking for are right in front of you. You know your business the most, you know where do you earn profit from, you know where do you spend it and if anyone can make that perfect KPI for your business then that’s definitely you.
Now to talk about how will you make that perfect KPI for your business is by first identifying the different types of expenditures. You need to be able to differentiate between what will be a quarterly/yearly expense and what will be a monthly expense. There will be quarterly expenditures like when you order stock for your inventory and there will be monthly expenditures like fuel cost for your truck so you need to be very clear about what to include in determining your KPI’s depending upon the time period.
Choosing the right KPI’s is the most important part here, you have to identify what are the factors that affect your business the most. In the case of Home Service Business you should focus on the net profit margin, sales figure, expenditures. Here is a broad description of all the factors that can help you in discovering the right path for determining the KPI’s of your business.
- Sales Revenue: You need to have a very clear idea about how much you are able to earn from your primary sales strategies. Sales revenue is nothing but the amount of money that is coming in from the sale of your products and services. This will account for how much you are able to earn and then decide how much you will be spending on all of your expenses. It’s also imperative to look for trends in your sales revenue and monitor them regularly. Have you noticed any seasonal trends in your business?
- Profit Margin: The most important factor for a business to succeed is by having a significant profit margin. Now to calculate the profit margin you need to take into account how much sales you are able to make removed by all the expenses your company is making as a whole. It is crucial for you to have a very clear picture of the profit your business is making so that you can plan for what’s coming and invest accordingly. During hard times you need to be able to make decisions, and you will only survive if you would have planned for it. This is the truth, by keeping the exact profit margin into account you will be able to make the right decisions for your company at the right time.
- Financial Reporting: I think you know how it gets when it comes to reporting if you have been in the business for even a year. You know it gets really hard while managing all the reports. The mistake here is that a lot of companies do not plan, they just start. As a result, they go into the reactive phase rather than a proactive one. Identifying the right report to use is the key here, you need to choose what kind of reports should you actually be focusing on. Whatever you choose should have a direct impact on your business. When it comes to the home service business the most significant impact on the growth of any business is made by Service Charges, Scheduling and employee charges. So maybe try focusing on these!
- Employee Salary: You need to be able to determine how much you can really pay your employees depending upon the position and industry standards. The key reason is you need to decide when your company is ready to expand and when you need to cut some ties. This is how business works. If you know that your company is doing good and now it’s time for you to increase your reach then that’s great! But make sure you have thought about it clearly and have a proper plan for expanding.
- Customer Retention: Even if you have started the business recently you will have existing customers and these customers are the ones who create value for your company and they will continue if they are provided with the right service. You just need to keep these guys close. If you are able to increase your Customer Retention Rate then you will never go out of business because they will do referral marketing for you. Just keep in touch with them. Show them your care. One of the best ways to increase your customer retention rate is by asking them for feedback, this will help you build trust and improve your service.
- ROI Analysis: DeterminingReturn on Investment is going to be really important for you in deciding your KPI’s. This is something which will help you in making decisions like where to invest & when to do it. Is it working out or not? If not then what should I do? Whenever you run a marketing campaign you need to do these ROI analyses in regular intervals to choose the right path for you and not just marketing campaigns. It helps you in making decisions about when to invest and expand your business.
To summarize it all-determining KPI for your home service business is very important, you can’t run your business without them, selecting the right KPI is what will keep your business going and to do that you need to look for all the factors that affect your business directly, prioritize them and use them to create a successful business.
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