Using KPIs to Boost Construction RevenueUsing KPIs to Boost Construction Revenue
Understand which key performance indicators to track—and how to do it—to help your company make informed decisions and set achievable goals.
September 20, 2023
Challenges facing contractors have shown little change in the last few years, with supply chain uncertainty and labor needs consistently topping the list. For Q2 of 2023, Dodge Construction Network reported total construction starts dipped in most categories, but residential single family starts rose. For those across all sectors of the construction industry, getting ahead seems ever more difficult.
Construction contractors need every tool they can get their hands on to boost sales and raise revenue, including key performance indicators—better known as KPIs.
Here’s how and why to implement these quantifiable performance measures to help your company define its goals and determine the best way to achieve them.
An anecdote: Can tracking KPIs truly impact revenue?
“The first time we put on siding, we were YouTubing how to do it the night before we showed up at the jobsite,” said Chad Enger, co-owner of Black Hills Exteriors in Rapid City, South Dakota.
It was 2014 and Enger and his partner were 23 years old. In the decade since, he said, they’ve learned from mentors, conferences and attendance at trade shows, including the International Roofing Expo. But still, Enger said, “A lot of what we were doing was gut feeling”—until an “aha moment” in 2019.
Through force of will and constant work, Black Hills grew its revenue to $5.4 million. Then Enger planned to open a second location.
“I needed to know how to keep an eye on the second location without physically being there,” Enger said. That’s when the company began tracking KPIs.
Not that Enger hadn’t heard about KPIs before, but he admits that he had “never believed in them,” that they were just “extra steps.” But once Black Hills began tracking in 2019, the company grew revenue to about $22.5 million.
Enger knows there is more to his company’s revenue growth than just tracking KPIs—implementing repeatable processes, having a strong CRM system and hiring for the right personality and talent. But routinely and accurately tracking KPIs is “when we really started to understand our business and were able to look at rapid expansion and growth, and our revenue just went up and up from there,” according to Enger.
Where should I start with using KPIs?
At their most basic, KPIs are measurable targets used to track a company’s performance over time.
“But it’s not just about gathering numbers,” said Melis Steiner, cofounder of marketing consultancy BrandPartners Collective. “It’s the insights you get from the numbers.”
The KPIs you choose to track will depend on your company’s goals. Are you having noticeable issues with turnover, revenue, management or some other aspect of the business?
“When assessing which KPIs to track, you have to understand what your goals are and what will be good indicators of success in those spaces,” Steiner said. “Also, look at the tools you have in place to figure out what you can track and manage. Prioritize tools that provide real-time KPIs, so you can respond quickly if issues arise.”
Certified Contractors Network, a business networking group with more than 400 members, put this advice into action in some of its companies 18 months ago.
“We brought in 10 sale managers from large, medium and small businesses around the country,” said Scott Siegal, president of CCN and of Maggio Roofing in the Washington, D.C., metro area. “We wanted to put together the metrics everyone should be measuring from a sales perspective. We thought it would be simple, but we got bogged down in definitions. It opened my eyes to realize that most contractors, even the best ones, don’t have a handle on it.”
Siegal warns contractors that they need to be clear on the definition of what they want to track, using the close ratio as an example.
“Everyone thinks (measuring) close ratio is easy: How many leads did you go on and how many did you close?” he said. “But then someone asked, ‘What if a lead cancels? Does it get counted in the metrics? What if we went out and were never able to give a presentation? Does that count?’ Everyone had a different reason for excluding things from the metrics.”
Getting these definitions right from the outset is important when you’re “trying to benchmark against someone else,” Siegal added.
Which KPIs should I track?
In sales, it might be the number of new customers, the amount of revenue growth or acquisition cost per customer. From a marketing standpoint, it could be data like click-through rates. With emails, perhaps it’s open rates.
Black Hills Exteriors’ Enger believes that two KPIs are especially important for roofing contractors seeking to increase revenue—cost per lead and closing rates.
“If we spend $10,000 on marketing and we get 100 leads, that’s easy math,” Enger said, coming out to $100 per lead. But tracking multiple marketing streams is where he said things get interesting.
“If we're spending $1,000 each month in the phone books and $2,500 a month on digital marketing, how many calls are we getting off each? How do I know? Which one is most effective? What’s our cost per lead for each?” Enger said. “Having answers to these questions allows us to spend our marketing dollars where it makes the most sense. KPIs give us this important information and allow us to spend less on marketing and receive the same, or more, leads.”
As for closing rates, KPIs help you track leads converted to sales, so you can see how your salespeople are performing and where improvement may be needed.
“If I give a salesman 100 leads and he sells 30, he’s got a 30% closing rate,” Enger said. “Pair that KPI information with our cost per lead at $100, and essentially out of every 10 leads, it’s costing us $1,000 to get three jobs, or $333 per signed job.”
Enger tracks closing rates per salesman, and as a company.
“When a salesman's closing rate drops, we want to understand why,” he said. “We will pair him with a top-closing salesman for a few ride alongs and try to work him back into a better closing rate together. Without KPIs being tracked, we wouldn't know how much money is just going out the door.”
What tools should I use to track KPIs?
Enger uses Monday.com, a customizable monthly subscription program, to harness data points and create dashboards so he can see the performance of Black Hills at a higher level in real time. There are also free tools contractors can use. free tools you can use.
“Even Google Analytics can give you some information, and you can use Google Studio for free to analyze data and build dashboards,” BrandPartner Collective’s Steiner said.
It’s important to check monthly and quarterly data to help “assess your current situation and set expectations and goals for the future,” Steiner said. “Not only will you be able to document internally if you’re hitting a target, but you can then turn around and use the information to promote yourself from a marketing standpoint because now you have real numbers to associate with your claims.”
Additionally, the knowledge gleaned from KPIs has become increasingly important if you’re thinking of selling your business.
“It’s like a feeding frenzy with private equity in the roofing space,” Siegal said. “If you’re a contractor who wants to have that as an exit strategy, you must have a handle on the KPIs of your business. [Investors] are looking at how much you make from your business as the owner. If you don’t have a good handle on pricing strategy—which has everything to do with job costing and understanding overhead and what it costs to be in business—you’ll never get acquired.”