Howard Partridge is an internationally recognized business coach, best-selling author, and experienced business owner. He discusses Key Performance Indicators (KPIs) and their crucial role in building a successful home services business. 

Howard likens KPIs to a scoreboard for your business. It helps you understand how you are performing in the game of business, when you are winning and losing, and where you can improve. 

Key Performance Indicators (KPIs)

Howard says that there are several important data points and numbers to track, but the priority should be: “The Critical Number.”

He learned about “The Critical Number through the Great Game of Business” program by Jack Stack. This is the number that is most important for you to focus on during the specific chapter of growth your business is in. 

He shares the example of when his business was bringing in an income of 2 million dollars but had a very small profit. Ellen Rohr, business makeover expert, helped him build on his understanding of “The Critical Number” by identifying his Known Financial Position (KFP). Identifying your KFP requires going through line by line of your income statement and balance sheet and knowing exactly what each number means and where it goes. 

Establish Your Known Financial Position (KFP)

Howard recommends tracking on a weekly basis so that you can pivot and take action based on real numbers. Questions to consider to improve your business success:

1. What are your weekly and monthly profits and losses? What is your profit margin? Set up a 12-month budget to guide you.
2. Look at your labor cost and what percentage of it is of your income. How can you improve in this area?
3. Are you pricing profitably?
4. What are your daily sales?
5. Look at your marketing: How much does it cost to acquire a client? Market to your past and existing clients and work on generating referrals.

Howard recommends Ellen’s book “Where Did the Money Go” for a more in-depth understanding of how to implement these strategies.

Track Your Return on Investment (ROI)

Howard makes sure he includes his team is in the game by tracking their company sales and updating them on the numbers each day. This keeps everyone invested and working toward hitting their monthly sales goal. If they hit it, rewards like bonus checks are passed out. 

The important numbers Howard recommends focusing on in order to track your ROIs begin with a financial forecast or annual projection for your year. 

1. Consider the busy and slower seasons to identify trends during the 12 months that you should be prepared for.
2. How much profit do you want to make?
3. Create a budget and stick to it.
4. Decide in advance what you want to invest in marketing.
5. Track how your marketing is performing in key areas:
   • Repeat business.
   • Referral business
   • Direct advertising

This helps you understand your client acquisition cost. 

“I know how hard you work. One of these days, it’s all going to be over. And my question to you is: ‘Do you want to do all of this work and not have anything to show for it? Do you know what the score is?’ I mean some people are working seven days a week, 24 hours a day to lose money! If you’re like me and you hate the numbers, do yourself a favor, get some help, get somebody to help you understand those numbers. Because the way to win the game is through profit. And if you don’t know your numbers, you don’t know whether you’re profitable or not.”