KPI’s: What’s the big deal?

Many of you may have heard the term “KPI’s”, but how many of you know what they are or even more important, use them on a consistent basis to run your business. I am continually amazed at the number of people that don’t know anything about KPI’s (Key Performance Indicators). These are numbers, percentages, averages or rankings that tell you how your business is performing overall or in specific areas. But in order to use these numbers effectively, you must know what these KPI’s are,what they should be and whether they need to be trending up or down and whether these numbers are industry averages or KPI’s that you have specifically set up as goals or targets for your company.

Most Appliance Service Company owners probably went into business because they were really good at repairing appliances but didn’t have a clue about operating a successful business. Does this sound like you? Well Congratulations, you are not alone. Like many others, you probably just printed some business cards and started running service calls and collecting checks. You were now in business! You had no clue as to whether you were making money or not. You just deposited checks and watched the checking account as your major means of tracking what was going on in your business. If money was in the account, then great. If not, then you started to maybe panic a little bit. Sound familiar? Most of the time, and I will venture to say maybe up to 90% of appliance service business owners, had no experience or no idea how to run a successful business, they where just good at repairing them.

As long as you work out of your home and you can keep your customers happy & continue to get more service calls along the way, everything is ok. But as soon as your business begins to grow and you need to hire someone else, whether it be someone to answer the phone or run the office or maybe a new technician, things really begin to change. Payroll increases, more insurance is needed, maybe a telephone system is now needed instead of cell phones, and other overhead expenses increase. Oh, and don’t forget about the home office, the wife doesn’t want the business in the house any longer so you have to start looking at moving the office. Any business, if successful, just isn’t that easy to run. It takes a lot of work and a lot of business knowledge to make any business really successful.

The fact that you thought you could make a better living working for yourself rather than working for someone else is probably true. However as you grow, so does the knowledge you need to run a successful business. it’s no longer just yourself & a truck, you have employees now and you have to be willing to learn about business growth and management and implement some basic business principles along the way. You must be willing to educate yourself and know what to look for to keep the business on track. Everything was probably ok in the beginning but as the business grew and you incurred more overhead, more employees, and more stuff, you began getting in “Over your Head”.

This is where KPI’s come in.

Small business owners continually face a variety of challenges, tough choices, and financial decisions that can have a significant impact on revenue as well as the future of their business. The challenges can include additional employees, more inventory, more vehicles and additional money for funding to support business growth. Small business owners must be strategic, creative, customer centric, and take a proactive stance toward fiscal planning.

KPI’s are not a one and done format. They will vary from business to business as well as different industries, However there are some standards and averages that will apply to all similar business. As a business owner, you must learn what these standard or averages KPI’s are, and how to apply them to your business. You should understand if they need to be tracking up or down and what needs to be done when they aren’t. Some KPI’s need to be looked at daily, while others can tracked weekly, monthly or even quarterly. You should be tracking no more than 5 KPI’s at any given time. Sometimes it can be as few as 3. If you start tracking too many KPI’s, it can become overwhelming and possibly confusing and you can get bogged down. The fewer KPI’s you can track and still know your business is running efficiently and profitably, the better off you are. So determine what KPI’s you need to start tracking in your business and get started today. If a KPI is not telling you anything about your business, maybe it’s the wrong KPI to track at the present so switch it out for another KPI and track it for a while. You’ll find the KPI’s that are of most value for your business.

In the rest of this article we’ll be specifically talking about KPI’S relative to the Appliance Service Industry. Some of these KPI’s are standardized such your P&L Statement, Balance Sheet and Cash Flow statement. But when do you get them and even more important, do you understand them or even analyze them. The problem with these reports (KPI’s) is that most business owners only look at the P&L once a year or maybe once a quarter. Very rarely are they looked at monthly. And when they do get them, they don’t analyze them to see what they are telling them. They just go to the bottom line showing the profit or loss for the period and never analyze all the numbers in between. Most business owners manage their business from the checkbook. Yes that is a type of KPI but it’s not telling you anything about how well or efficient your business is running. It’s just telling you if you money or not. I’m not saying that you shouldn’t look at your bank balances, you absolutely should. But what I am saying is that you shouldn’t manage the current condition or future growth of your business from the checkbook. There are way more KPI’s to consider in running or managing your business.

The following are a list of some of the KPI’s and typical periods/intervals you can use to track the success of your Appliance Service Industry?

• P&L Statement (monthly)
• Balance Sheet (monthly)
• Cash Statement (monthly)
• Cost of getting a new customer (Yearly)
• Cost Of Doing Business (quarterly)
• Billed Revenue (daily)
• Revenue per technician (weekly/monthly)
• Call Back Percentage (monthly/quarterly)
• Completed calls per day (weekly/monthly)
• Average Sale per Customer
• Marketing cost with ROI (monthly/quarterly)
• Lifetime value of a customer (yearly)
• Average Parts usage per call per technician (monthly/quarterly)
• Average revenue per call for parts & labor (weekly)
• First time completes (monthly/quarterly)
• Percentage of calls requiring 3 or more visits (monthly/quarterly)

As you can see, you don’t need to track all KPI’s daily, weekly or monthly. Some are once a year or once a quarter. Take for instance, your “Cost Of Doing Business” KPI. This only needs to be done once a year or anytime a major purchase happens or an employee is added. Once you done it, you have the number (KPI) to track your labor rate per hour or completed call rate against. These quarterly or yearly KPI’s should not be counted as part of your 3 to 5 KPI’s I talked about above. The 3 to 5 KPI’s should be the ones you track daily, weekly or monthly. Do not try to track all of these KPI’s right out of the gate. Pick 3-5 KPI’s above to track and start tracking them on a daily or weekly basis and see how it goes. I think you will be surprised at what you will learn from these KPI’s. It will either put you at ease knowing your business is running well or it will start your engines turning to correct some issues.

Good Luck as you “Travel The Road To Success”

“DependableDon” Harris

Founder, Appliance Service Secrets

If you are interested in learning more about KPI’s, just click here to download your “FREE” KPI Cheat Sheet.