I talk to contractors all the time who work 70, 80 and 90 hours a week trying to build their businesses. I ask them, “How do you know what’s working and what isn’t?”
The first thing to do is departmentalize. Departmentalization means allocating all revenue expenses into the proper category. Departmentalizing gives you an even playing field, so that you can make apples to apples comparisons within your company.
The KPIs we’re talking about today deal mainly with re
Make sure that you have all the revenue and expenses allocated to the right area, because in order to practice effective KPI management, you’ve got to have
What are KPIs?
Key Performance Indicators allow you to measure your performance against your strategic plan. First, you’ve got to sit down and figure out your strategic plan. When you’re seeking growth and profitability, and trying to get out of a certain part of the business and put more resources into another part of the business, you’ve got to have that discussion so you know where you want to go.
Departmentalizing, lets you measure against the industry’s success factors. It helps you gauge whether you’re being successful, what has to be improved, and more. And then, you use it as a guide to improve your decision making.
You have to reach a point in your business where you use these KPIs. You want to get the folks in your organization that are familiar with them as it relates to their function in your company. When the people on the front line understand what you’re trying to accomplish, they can make better decisions for customers rather than coming to you for constant direction.
The use of KPIs in this industry started 20 or so years ago. The graphic show’s the original 10. These original 10 came about because there were 100 contractors that were losing money. So, they said, “Well, what do we need to do to go ahead and start becoming successful?” Over the years, there have been many variations to the list of important KPIs.
Understanding the Numbers in Real Time
You’ve got to make sure you understand the numbers.
Your accountant must be putting the figures in a format that’s designed for HVAC. Because if it’s not put in a format for HVAC, you’re not going to know what’s going on. I know it doesn’t apply to anyone reading this, but if that accountant has not given you those figures within five days of the next month, that’s got to change.
So, if you’re going to do something differently, we’ve got to make sure that we have our numbers five days into the month.
Make changes based on the numbers. With proper KPI reports, you have greater control over your business’s success. You can’t do anything with information that is 10 or 30 days late.
So, if your accountant tells you that he or she cannot get those numbers to you in five days, it’s time to find a new accountant. Knowing the numbers is your key to controlling your business, NOW.
Departmentalize and take care of those KPIs one by one, to gain the control you need to run your business and reach success.
Mike Moore is the HVAC Training Director at HVAC Learning Solutions, a training division of Lennox. Find Mike at www.lennoxpros.com/hvac-training.