The Financial Journey Continues

Departmentalization is the first step to making KPIs work.

KPI’s are all about doing the work, changing the game and overcoming obstacles. I constantly meet contractors giving it their all, but are missing something when it comes to translating efforts into profits. I laid the groundwork to overcome this in a past article titled, “10 KPIs for Successful Ownership”. Congratulations if you have instituted these KPIs, or “Key Performance Indicators” in your business. If not, read that article in addition to this one and get started today.

Departmentalization is the first step to making KPIs work. Have your Accountant get you all your numbers to you within 5 days of month’s end. They need to be specific to your industry and broken down into departments.

Compare your existing performance in each department with industry success factors and your strategic plan to determine which areas need the most attention. KPI planning tools in the Lennox Learning Management System are available to help you with this step.

Set goals once you see patterns emerge in your data. 

Continue to measure performance and make necessary adjustments.  

That being said, the second tier of company imperatives for success are:

1. 8.33%-10% of Demand service and maintenance calls should convert to replacement opportunities. The Technicians have to understand this is in the best interest of the customer.

2. All replacement sales completed in one day. Even if it is a 10-hour day. 55% of these sales should be generated by your Technicians. These leads have a higher closing rate of 50-86%; compared to 30% from a marketed lead. 

3. Service gross margin average should be at least 55-60%. Gross margin is equal to the revenue minus cost of sales.

4. Operating profit should be 10% to 15% of sales. It is crucial to also convert and quantify this percentage into a specific dollar amount. An absolute, dollar amount goal will help you know how much you have to sell to be profitable and will help you calculate your break-even dollar amount per crew day. When you have these numbers, you control the situation. When you don’t have these numbers, the situation can control you.

5. Company growth rate of 10% or higher. You have to know where you are going, and your people have to buy in. If your Comfort Advisors are having difficulty reaching new goals, they may need additional sales training.  

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