PRIME: Key metrics to manage your business
Our PRIME advisory panel includes some of the remodeling industry’s top professionals. This month we asked, “If you had only three metrics to manage your company, what would they be and why?”
Profit, sales, and leads
The first to pay the most attention to would be net profit; there is not a more important metric to track. A healthy net profit benefits the stakeholders of the business and our clients. Net profit should be tracked as a percentage, but it also critical to know the dollar amount. It is the key that drives every decision the company makes. The second key metric to track is sales. Without sales there would be no profit of any kind to track. The last is leads; to state the obvious, without leads there would be no sales.
Bill Simone, President
Custom Design & Construction, El Segundo, CA
Margin, average sale, and dollars per lead
First is gross margin. By managing the gross margin of the various product lines, I am able to assure we will have enough margin to pay expenses and make the bottom-line profit budgeted by the company. Second is average sale. We are constantly managing the net average sale of each product. By managing the average sale, we are able to add $200,000 to $300,000 of net sales dollars each month. Last is net dollars per lead issued. This metric helps us manage the effectiveness of our combined sales effort.
Nick Cogliani, Owner/President
NEWPRO, Woburn, MA
Leads, sales, and P&L
The numbers that I pay most attention to are lead counts, sales (new contracts), and our monthly P&L. Leads are the lifeblood of the company and, based on the type and source, we can make a reliable prediction of future sales. Sales is the engine that drives everything. The P&L statement tells us how we are doing on our job costs and overhead.
Tom Kelly, President
Neil Kelly Design/Build Remodeling, Portland, OR
Leads, close ratio, and sales efficiency
The three metrics that I would use to manage my business are total number of leads and average cost per lead; average close ratio; and sales efficiency. These three metrics give me the key information I need to understand where we are at any given point. If I know these three things, I can pretty much tell you how my business is performing on the top and bottom lines.
Chris C. Edelen, President and CEO
LeafGuard, Bath Planet, and Beldon Home Solutions, San Antonio, TX