How Contractors Track Business Performance

Doing a million dollars in revenue sounds impressive until you realize your costs were $950,000. Revenue is vanity. Profit is sanity. Track your gross profit margin (revenue minus direct costs) and net profit margin (after all expenses) on every job and overall.

Knowing your margins tells you whether you are running a business or subsidizing your customers' projects.

Your close rate - the percentage of estimates that become jobs - tells you how effective your sales process is. If you are closing 20 percent, you need five estimates for every job. At 50 percent, you only need two.

Improving your close rate is often more valuable than generating more leads because it increases revenue without increasing marketing costs.

How quickly are you responding to new leads? Track the average time between lead receipt and first contact. This metric has a direct impact on close rate and revenue.

Set a target and hold yourself accountable. Even improving from four hours to one hour can significantly increase your conversion rate.

Cash flow is not the same as profit. You can be profitable and still run out of cash if your expenses come before your income. Track cash in, cash out, and cash on hand weekly.

A simple weekly cash flow review prevents the surprise of discovering you cannot make payroll on Friday.

Set up a monthly KPI review. Look at revenue, profit margins, close rate, average job size, customer acquisition cost, and customer satisfaction scores. Compare to previous months and to your goals.

This monthly discipline turns reactive business management into proactive business growth.