Measuring your tradie business’s key performance indicators (KPIs) is essential for success. It allows you to truly understand how well your business performs over time, identify improvement areas, and make strategic decisions.
However, many tradie businesses struggle with establishing the right KPIs to track or fail to analyse the data properly. This blog post will discuss the most important KPIs and metrics for tradies to measure. This includes factors like sales revenue, profit margins, jobs completed, customer satisfaction and staff retention.
We’ll provide practical guidance on how to track each metric and turn your numbers into actionable insights. You’ll learn about the types of data to collect, how often to assess your KPIs and tactics for using the results to boost business performance. By implementing the right measurement systems, tradies can optimise operations and growth.
Why Measuring Performance Matters for Your Tradie Business
Measuring key performance indicators is crucial to running a successful tradie business. Tracking the right metrics over time allows you to understand how profitable and productive your business is truly.
It will reveal if you are trending up or down in important areas like revenue, costs and customer satisfaction. Having data-driven insights into the operational performance of your business enables you to identify weak areas that need improvement.
You’ll also be able to see the impact of any changes or investments you make. Regular analysis of KPIs helps ensure you maximise efficiency while informing smarter strategic planning and goal setting for future growth.
Top KPIs for Tradie Businesses
Focus first on tracking the key metrics most vital to your business. Analysing trends in these key performance areas each period will give valuable insights into how effectively your business operates and where improvements may be needed.
Tracking your total monthly or yearly sales revenue will reveal your growth trends over time. Analyse revenue by job type to see which services are most profitable. Compare actuals to targets and budgets regularly. By tracking your inflows and outflows, you can monitor your overall cash flow and ensure you have enough money to cover your expenses and commitments.
Calculating gross, operating and net profit margins shows how much of each dollar of revenue is contributing to profits. Monitor margins to optimise pricing and costs.
Working capital is sometimes referred to as net working capital (NWC) refers to the difference between the company’s current assets (such as cash, accounts receivable (customers’ unpaid bills) and inventory of raw materials and finished products) and current liabilities (such as accounts payable).
In simpler terms, this is the value of the required funds the company must retain to repay debts and other business-related expenses.
Jobs or projects completed.
Tracking the number and types of jobs finished each month shows productivity levels. Make sure job completion is on track with healthy business plans.
Average job size
Understanding average invoice sizes helps determine marketing and pricing strategies. Aim to increase the average over time.
Collecting feedback through surveys or reviews maintains high service levels. Address any issues and use feedback for continuous improvement.
The rate of voluntary resignations impacts productivity and costs. Monitor closely and implement retention initiatives if turnover increases.
How to Measure Business Performance for Tradies
Tradies should regularly track key metrics to measure their business’s financial performance and overall health. One of the most important is monthly revenue. A tradie business owner should closely monitor the monthly income earned from completed jobs.
Tracking revenue in any trade business over time will help tradies identify trends, such as when revenue may be higher or lower than previous months or years. This can provide valuable insights into busy and slow periods.
Another important metric is the gross profit margin. To calculate this, tradies need to subtract their total materials costs from the total revenue earned from jobs in a given month.
This will show tradies their gross profit in dollars and as a percentage of revenue. Aiming for a gross profit margin of at least 30-50% each month is a good target for most trade businesses to be profitable.
Monitoring monthly revenue and gross profit margins systematically is essential for tradies to gauge how well their business is performing financially and identify areas where performance needs improvement.
Using KPIs to Improve Your Tradie Business
Properly measuring key performance indicators is essential to managing a successful tradie business. Regularly analysing metrics like revenue, profits, productivity, and customer satisfaction provides valuable insights that few tradies leverage. Tracking the right KPIs consistently allows you to monitor progress, optimise operations and make good strategic choices over time.
If you need help establishing an effective performance measurement system for your tradie company, TradesFormation can assist. As tradie business advisors, we have helped numerous trades business owners improve results by implementing customised KPI tracking and providing advice to improve your business health and reporting processes. Contact the team at TradesFormation to discuss how we can support you with measuring and growing your business performance.