7 Essential KPIs for Electrical Contractors

Introduction

Like any business, electrical contractors need to monitor and measure their success against KPIs (Key Performance Indicators). These KPIs allow them to see areas of their business that need attention and help them plan for the future and stay competitive. But where do you start? This article provides an overview of the seven most important KPIs for electricians and the best ways to track and calculate them.

The seven electrical contractor KPIs that electricians will want to consider include:

• Incoming work requests
• Customer retention rate
• Revenue per project
• Project overhead cost
• The net profit margin
• Gross margin
• Reference rate

Incoming work requests

Definition

Incoming Work Requests is a KPI used by electrical contractors to measure the number of requests they receive for new projects or services. This is a key metric for gauging the demand for their services, allowing them to adjust their prices and staff accordingly.

Benefits of Tracking

Tracking incoming work requests can benefit electrical contractors in several ways. It allows entrepreneurs to plan for the future by accurately predicting future demand and adjusting their resources accordingly. It also helps entrepreneurs identify areas of opportunity, allowing them to increase their market share and profitability.

Industry Benchmarks

The industry benchmark for incoming work requests is typically around 10 requests per month. This benchmark may vary depending on the size and scope of the contractor’s operations, as well as local market conditions.

How to calculate

Incoming work requests can be calculated by taking the number of new requests received in a given month and dividing it by the total number of requests received in the same month. This can be expressed in the following formula:

Calculation example

For example, if an electrical contractor received 200 new requests in June and 500 total requests in the same month, the KPI incoming work requests would be calculated as follows:

In this case, the electrical contractor would have an incoming work request KPI of 0.4.

Tips and tricks

• Track incoming work requests over several months to get a better idea of your overall business trends.
• Keep an eye on industry benchmarks and compare your results to get a better idea of how your business is doing.
• Use incoming work requests as a tool to adjust your pricing and staff accordingly.

Customer retention rate

Definition

Customer Retention Rate (CRR) is a metric used to measure how well an electrical contractor is able to retain existing customers. It is calculated by dividing the number of customers at the end of a given period by the number of customers at the beginning of that period.

Benefits of Tracking

CRR is a key indicator of customer satisfaction and loyalty. It helps electrical contractors identify areas for improvement and track progress of customer retention efforts over time. It is also an important metric for predicting future revenue and profitability.

Industry Benchmarks

The average CRR for the electrical contract industry is around 65-75%. This varies depending on the type of contractors and their services.

How to calculate

The formula to calculate the CRR is:

Calculation example

For example, if an electrical contractor had 100 customers at the start of the year and 95 at the end, their CRR would be calculated as follows:

Tips and tricks

• Keep track of customer feedback and use it to improve customer satisfaction and retention.
• Monitor customer churn and ensure your CRR is consistently above the industry benchmark.
• Regularly review client contracts to ensure they are up to date and that clients are getting the best value for their money.

Revenue per project

Definition

Revenue per project (RPP) is a key performance indicator (KPI) that measures the total revenue generated by a project, divided by the number of projects completed.

Benefits of Tracking

RPP tracking allows an electrical contractor to understand the profitability of each project, as well as the overall health of the business. By understanding the profitability of each project, entrepreneurs are able to adjust their pricing and marketing strategies to maximize revenue.

Industry Benchmarks

The average RPP for electrical contractors varies by region and industry. Generally speaking, the benchmark for electrical contractors is around ,000 per project.

How to calculate

To calculate the RPP, divide the total revenue generated by all projects by the number of completed projects:

Calculation example

For example, if an electrical contractor completed 10 projects and generated total revenue of ,000, their RPP would be:

Tips and tricks

• Keep track of RPP regularly to ensure your profitability is in line with industry benchmarks.
• Analyze the profitability of each project to identify areas for improvement.
• Evaluate the effectiveness of your pricing and marketing strategies to maximize your RPP.

Project overhead cost

Definition

Project overhead refers to costs associated with a project but not directly related to the activities required to complete it. These costs include items such as administrative salaries, office supplies and travel expenses. This metric is important to track because it allows a business to understand what their total project costs will be and plan accordingly.

Benefits of Tracking

• Helps understand the true cost of a project
• Provides insight into the cost of doing business
• Enables more accurate budgeting and forecasting

Industry Benchmarks

Industry benchmarks for project overhead vary depending on the type of project and the industry in which it is performed. Generally, overhead costs should not exceed 10-15% of the total project cost.

How to calculate

Project overhead can be calculated by taking the total cost of the project and subtracting the direct costs associated with the project. The formula for calculating project overhead is:

Calculation example

For example, if a project has a total cost of 0,000 and the direct costs associated with the project are ,000, the overhead for the project would be ,000.

Tips and tricks

• Keep track of indirect costs such as administrative salaries and office supplies
• Be sure to factor in travel costs
• Compare overhead to industry benchmarks

The net profit margin

Definition

Net Profit Margin, or NPM, is a financial metric used to measure a company’s profitability by calculating the percentage of revenue that remains after taking into account all expenses. It is expressed as a percentage and is used to compare the profitability of companies within the same industry.

Benefits of Tracking

By tracking net profit margin, electrical contractors can assess their financial performance and identify areas where they can improve. This metric provides a comprehensive view of the company’s financial health and can be used to set and monitor goals, create budgets, and adjust pricing.

Industry Benchmarks

The NPM for the electrical contract industry is typically between 3-5%. This benchmark can be used as a benchmark to measure the performance of a particular company against the industry average.

How to calculate

NPM is calculated by dividing net profit by total revenue. The formula is:

Calculation example

For example, if a company has total revenue of 0,000 and net income of ,000, the NPM would be calculated as follows:

Tips and tricks

Net profit margin is an important metric for any electrical contractor to track, as it provides insight into the overall financial health of the business. Here are some tips and tricks to help you get the most out of this metric:

• Track NPM over time to identify trends and potential areas for improvement.
• Compare your NPM to industry benchmarks to better understand your performance.
• Focus on increasing revenue and reducing expenses to increase your NPM.
• Analyze your NPM against other financial metrics like return on investment (ROI) and cash flow.

Gross margin

Definition

Gross profit margin is a key performance indicator (KPI) metric that measures the profitability of an electrical contractor’s operations. It is calculated by subtracting the cost of goods sold (COGS) from the total revenue and dividing the result by the total revenue.

Benefits of Tracking

Tracking gross profit margin is a great way to measure the efficiency and effectiveness of an electrical contractor’s operations. It provides a clear indicator of how the entrepreneur is doing financially and how well he is controlling his costs. Additionally, it can be used to identify areas where costs can be reduced or improved.

Industry Benchmarks

The industry standard for gross profit margin for electrical contractors is around 30%. This means that of every dollar in revenue, 30 cents goes to gross profit.

How to calculate

Gross profit margin is calculated by subtracting cost of goods sold (COG) from total revenue and dividing the result by total revenue. The formula is:

Calculation example

Let’s say an electrical contractor has total sales of 0,000 and COGs of ,000. To calculate gross profit margin, simply subtract COG from total revenue and divide the result by total revenue.

Tips and tricks

• Regularly monitor gross profit margin to identify areas for improvement and cost savings.
• Compare gross profit margin to industry benchmarks to ensure the contractor is competitive.
• Focus on increasing revenue and reducing COG to improve gross profit margin.

Reference rate

Definition

Referral rate is a KPI that measures the percentage of customers who have been referred to the company by other customers. This is an important metric for electrical contractors because it can help measure customer satisfaction, loyalty, and the effectiveness of their referral program.

Benefits of Tracking

Tracking the referral rate can be a great way to measure customer satisfaction. If customers refer others to your business, it’s a sign that they are happy with the service they received and are willing to recommend it to others. Additionally, tracking referral rate can be beneficial for understanding the effectiveness of your referral program, as well as understanding which marketing efforts are working best.

Industry Benchmarks

The average referral rate for electrical contractors is around 10-15%. However, this can vary greatly depending on the size of the business and the quality of service they provide.

How to calculate

The referral rate can be calculated by dividing the number of customers who have been referred to the business by other customers by the total number of customers. This can be expressed as a percentage.

Calculation example

For example, if a business had 100 customers and 10 of those customers were referred by other customers, the referral rate would be 10%.

Tips and tricks

• Be sure to follow all referral sources, including word of mouth and online reviews.
• Create incentives for customers to refer others to the business.
• Use reference tracking software to make tracking easier.

Conclusion

By incorporating these seven KPIs into your business strategy, electrical contractors can take their performance to the next level. Each KPI metric serves as a critical understanding of a different aspect of the business and can help electricians maintain efficiency, keep costs low, and operate profitably. When tracked and monitored frequently, these metrics can help electrical contractors make data-driven decisions and ensure long-term success.

Knowing the seven electrical contractor KPIs and the importance of tracking and calculating them can help electricians make informed decisions and focus on their long-term success.