On any given day, HVAC and plumbing business owners and managers are wrangling a lot of moving parts. Scheduling, staffing, sending your crew out on service calls, keeping a handle on inventory, fielding customer inquiries, responding to emergencies, putting out fires, and more. It doesn’t leave much time for focusing on the numbers that matter in making the business profitable.

You’re probably already tracking revenue, but digging a little deeper into those numbers is the key to finding out how efficient your operations are, and where you might improve. Not taking that extra step might be a missed opportunity to increase profits without added work.

Here are six key metrics, or key performance indicators (KPIs) every HVAC and plumbing contractor should track.

Average Ticket Size

You’re surely already tracking this. But have you put any thought into bumping it up a little without charging more for the same work? It’s about training and empowering your people in the art of upselling. Customers don’t respond well to pressure. But a knowledgeable heads-up from a pro? That’s welcomed advice.

Some areas where you could increase that ticket size:

• Maintenance agreements
• Recommending preventative service
• Talking about equipment upgrades when appropriate
  

Even a small bump of $50 per service call can have a huge impact over the course of the year.

Gross Profit Margin

Gross Profit Margin (GPM) is revenue minus the direct cost of doing the work, including parts and labor. How are your margins? Many small business owners are seeing those numbers shrink. Likely culprits:

Rising material costs, which the whole industry is experiencing.

• Underpricing. Have you benchmarked your rates lately? You could be short-changing yourself.
• Excessive labor hours. How well trained are your service techs? Are they completing jobs on schedule?
• Unorganized dispatching. Great dispatching is an art form. It’s scheduling by proximity so your techs aren’t having excess “windshield time” driving across town from one job to the other.

 Revenue Per Technician

This is an often-overlooked, much-misunderstood metric. It’s not about fostering competition among team members, rewarding the tech with the greatest revenue. That can breed resentment. Instead, tracking revenue per technician helps you better understand your whole team’s productivity. If you have someone consistently generating more revenue than the others, it’s a golden opportunity to level up the whole team. Think about:

 What is the top performer doing differently?

• Could you promote them to coach or trainer?
• Can the top performer mentor others?
• Are newer employees receiving enough support?
• Does everyone need more training?
• Are certain service areas or specialties more profitable than others?

Customer Acquisition Cost (CAC)

Every business wants new customers, that’s a given. But how much are you spending to attract them? And are you getting the most bang for your buck? Your CAC is the total marketing and advertising cost — online and print advertising, direct mail, social media, and more — divided by the number of new customers it brings in. Say you spend $1000 per month on advertising and gain 25 new customers. That means your CAC is $40 per customer. You want that number to be as low as possible.

 Ways to reduce your CAC:

• Try Google Ads or other low-cost online advertising
• Partner with other companies for co-marketing
• Ramp up referrals from satisfied customers

Close Rate

Are you tracking how often estimates convert to paying jobs? Is your close rate high or low? If it’s low, why? Here are a few things to watch:

 Pricing. Are you on par with your competition?

• Follow-up. When people call for an estimate, they want to talk to someone now or get a quick call back. You don’t want to lose that customer to someone who calls back first.
• Lack of knowledge or training. Who is answering your calls? That person is your company’s first impression with new customers. Make sure they are friendly and knowledgeable.

Call-back rate

Also called first-time-fix rate, it’s the percentage of service calls that get the job done right the first time, without a need for a callback or a second visit. Ideally, that percentage should be right around zero. But in the real world, things happen that may necessitate a return visit. When tracking this number, note which techs are generating the most callbacks. It could be a training issue.

These numbers are your key performance indicators. When you’ve been tracking them for a few months, a quarter, or even a year, what should you do with all of that data? We’ll tackle that in Part 2 of this series.