Business Matters Taking measures: what are your KPIs?

KPI stands for Key Performance Indicators and they are exactly what they say on the tin. They are key metrics of information which indicate how your business is performing.

Fully converted

Moving forward

When the French government committed to phase out all boiler sales within 10 years, there was a surge of interest in heat pump installer training by 264% in 2019. Similar decisiveness confirming boiler phase out dates in the UK has been a missed opportunity to power action from installers and homeowners to accelerate the inevitable move to heat pumps. A decision on this will give the confidence needed to those sitting on the fence.

With new builds being heat pump ready in the run-up to the FHS, the next step is to tackle the larger more complex area – the existing housing stock. Lower flow temperatures are a foundation for creating more opportunities for heat pumps in the existing housing stock, but also result in lower running costs, less damage to the heating system, and less noise for the consumer. This change can be achieved in a short space of time through educating consumers and installers on the role of low flow temperatures.

It was good to see this recognised in the improving boiler standards and efficiency consultation, which aims to deliver low flow temperatures across the existing housing stock.

No time to waste

Despite the above being a relatively quick fix, one thing is for certain: wasted time is something we don’t have the luxury of if we are to transform the heating industry to meet net zero.

I think it is fair to say that the political turmoil of recent times has delayed progress, but I hope we can now expect a revised impetus to drive heat decarbonisation over the months ahead.

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KPIs should be used by business owners to regularly assess how their business is performing. They don’t need to be complicated; in fact – the simpler the better. The key to success when using KPIs is carefully selecting the metrics that are most relevant for a specific company’s goals. What do you want to achieve? Increased turnover? New customers? More five star reviews? Convert more quotes?

You could use information taken from your accounting data or other key metrics within your business. I would always only suggest having a handful of KPIs which you constantly measure, tweak and report on because if you have too many they won’t get done and too few doesn’t really give you a feel for how the business is going.

It’s good to start with a metric that is easily measurable: you have the data to hand and you can calculate with ease on a periodic basis.

An example of KPIs that a plumbing and heating business could measure is gross profit %. Goss profit % is calculated by:

By knowing what your current GP% is, and having a KPI to monitor and increase this periodically, this can drive your performance.

For example, what can you tweak within your business to achieve your desired GP%? You could increase prices, request discounts from merchants, and promote products and services which have higher gross profit margins. The results of these examples will all increase GP%.

Money matters

Maybe you have a target for what you want your turnover to be by the end of the year. In that case, break it down over 12 months so you can easily measure if you are on track to achieve your goal. The monthly turnover target will then be a KPI. You can then ascertain whether you are on track to your year end target or not by looking at your monthly turnover. If you are not on track, ask why not? Look into your business and establish what you can tweak to get back on track.

Another metric you could track readily within your plumbing and heating business is your quote conversion rate. What percentage of your quotes do you win? To calculate this metric is simply a case of (total quotes won / total quotes sent out) x 100 = Quote conversion rate.

You could track this over a period of time. Now lets say that you want this metric to be at 40% but it is currently at 30%, what can you do within your business to ensure you win more quotes?

This is where the KPIs come in. It is a case of having key information on your business which ultimately leads to the overall business goals. If you want to convert more quotes, establish what your quote conversion rate is, what you want it to be, and then react accordingly to make sure you win more quotes. What do you need to do to get to your desired performance?

KPIs and record keeping

If you are new to KPIs start by choosing simple metrics to measure for your business. Once you are in the habit of keeping the records up to date you could introduce KPIs for staff. For example, you could set a target to get X customers a month on a maintenance plan, reduce the number of call return visits, increase the number of same-day fixes, or receive a certain number of 5-star reviews.

Taking the long view

Whatever you choose to measure, they should compliment your long term business goals and plans.

When properly used, KPIs can offer visibility of progress towards your business goals, help create focus points, drive improvement and monitor customer satisfaction levels. They can also be invaluable in measuring overall organisational wellness and ensuring longterm sustainability.