Key Performance Indicators (KPI’s) – percentages – numbers.
You can drive yourself crazy trying to track every known KPI.
What should you really be tracking to truly know, and be comfortable, that your company is headed in the right direction?
I’m going to make it simple…from my perspective.
Get these right and the other “nice to know” metrics will be right too. Get these right and you will be building profits AND wealth. You can feel comfortable that your company is headed in the right direction.
I’m going to be asking a lot of questions. It’s up to you to determine the right answers for your company and you. If you have questions call me at 770-729-0258 or subscribe to www.financiallyfit.business.
The most critical number – Net Profit per Hour
You must start with net profit per hour. This is the key to everything.
Why net profit per hour? Our companies are controlled by our labor force. We are not a manufacturing company that uses robots to produce products. People install and service, period. The more productive your field personnel are, the more profitable your company is…assuming that you have priced correctly.
So, what are you earning for every billable hour? What do you want to earn? If your net profit per hour is negative, then you are paying your customers to do their work…not a good idea.
Most of you probably don’t know the answer to this question. The best place to start is discovering what your net profit per hour is now.
Divide your net operating profit by total billable hours to get your net profit per hour. You can do this for last year, the year to date number this year or every month…even by department. Find out where you are starting.
And, if you don’t like the number, figure out what net profit per hour you want and put a plan in place to get there.
Beware! Your best technician or most senior technician can have a negative net profit per hour. I know, this really hurts when you discover this. Every technician must be profitable or you don’t need that technician. It doesn’t make sense to keep a person who is a drain on company profits.
Customers’ jobs can have a negative net profit per hour.
Always job cost. You will discover who the really profitable customers are and who the customer drains on your company are. Raise the prices on the drains or don’t do their jobs.
Crews can have a negative net profit per hour. If you have several crews, which ones are the most profitable? Which ones don’t install jobs with much profit? Why? Is it taking too long or is it the salesperson who is selling the job too low so he gets it and his commission?
Or, is it the crew that consistently complains there are not enough hours budgeted to do the work? Yet, other crews get the work done in the estimated time.
Start with the net profit per hour you want to earn and build your pricing from this number.
Next week I will write about the second critical number to track to build profit and wealth.
2025 In Person Class Schedule: Building Profit & Wealth
- January 7-8, 2025 Atlanta, GA
- February 27-28, 2025 Austin, TX
- April 2-3, 2025 Jacksonville, FL
Click Here for more information
Field Manager Survival School
- February 25-26, 2025 Austin, TX
Click Here for more information
Want a financial statement review?
Every business, large and small, can benefit from taking a closer look at its numbers. We’re happy to do a quick review – showing you what appears to be good and some areas you might want to pay attention to. (This is where Financially Fit Business can help too). Click here for more information.
And, pass along this offer to your business friends and colleagues who could benefit from this review too!
Contact Ruth by emailing ruthking@hvacchannel.tv.
