Key Performance Indicators (KPIs) are numbers you can use to make smarter business decisions. With KPIs, you can flag areas of growth potential, fix issues before they become problems, and generally gain a greater level of insight into your business.
KPIs are important with or without ServiceMonster. While the ServiceMonster dashboards give you instant, real-time results, complete all of your calculations and comparisons for you, and offer an elegant carousel view, you don’t need ServiceMonster to measure and understand your KPIs. You can get these numbers from a stack of invoices, a calculator, and a few days to kill. But make no mistake, they are that important.
Let’s break down each of the nine KPIs we have identified as the most critical to any service company. Although ServiceMonster gives you much more data than what we’ll explain here, these KPIs should be numbers you know off the top of your head. These nine are the most important.
Most of these figures are focused on residential floor cleaning and related services, with some commercial data thrown in. Many of these figures are simply universal truths. The target rates are the results of 15 years of data analysis within our industry. In 2015, ServiceMonster processed over $345,000,000 in cleaning and restoration invoices in the United States alone. That gives us the largest analytical data engine in the industry. By a lot.
Numbers and Comparisons
Understanding and monitoring a KPI is the first step towards real change. Simply watching a KPI will improve it! Being able to understand the differences in the last 30 days, the last month, the last quarter, and the last years’ worth of data for a given KPI can uncover trends that you never knew were there.
In addition to the KPI itself, you can also look at changes to your KPI over time. Comparing last month with the same month last year can show you if you’re up or down, and by what percentage. We say that business moves fast, and while that’s certainly true, it’s not real-time. It can take 18 months to see the cause and effect from changes you’ve made to your business. Running comparative KPIs can give you true clarity on the direct effect of everything you do!
1) Repeat Rate
What is repeat rate?
Your repeat rate is the percent of clients who have used your services more than once in a given period. Repeat rate is the most important KPI you have, and it will take a few other KPIs to calculate it correctly. Believe it or not, a fair number of service businesses calculate their repeat rate incorrectly. With this in mind, part of our training process includes an in-depth look at your marketing efforts, and one of the items we focus on is repeat rate.
The incorrect calculation
Most of our clients will calculate their repeat rate like this: Take the number of customers you serviced this month (c). Then find how many of them used you more than once (r).
(r/c) x 100 = repeat rate %
The correct calculation
Take the number of residential clients you have serviced in the last two years (C), then find how many of them used you more than once (R).
(R/C) x 100 = Repeat Rate %
The main problem with the incorrect calculation is the length of time sampled. The rate can vary widely depending on how successful or unsuccessful your prospecting efforts are. The two-year timeline in the formula represents your true number of active clients. ServiceMonster research shows that getting a client to return after two years has roughly the same cost as obtaining a new client.
Why should you track repeat rate?
Your repeat rate is often an indication of the experience you give your client, combined with your proficiency at maintaining a consistent client retention program. Your repeat rate is the most important KPI you have. If you track nothing else, track your repeat rate. You work hard to attract new business! In fact, our data shows that it costs around $82 per prospect to get in their home. Compare that to an average of $15 per client, and you can see – the difference is all profit. Your margins on repeat business are much higher.
In addition, your total marketable base will grow much faster with a compounding client base. Take this example: Company A and Company B are cleaning companies. They both pull in 20 new customers a month and have an average invoice of $250. Company A has a repeat rate of 25% and Company B has a repeat rate of 60%. The only difference is that Company B has a strong client retention program. In just three years, Company A has a customer base of 640 clients, earning a total of $80,000 per year in revenue. Company B, however, (the one you want to be), has accumulated 1,200 clients, and brings in $150,000 per year.
In addition to the increase in base revenue, you will also reduce your expenses. Keeping your name in front of your existing client is far less expensive than trying to get a new customer. Not to mention, your cross-sale potential radically increases if your current clients are aware of ALL the products and services you offer.
Repeat rate targets
Your repeat rate should be above 50%, otherwise attrition will limit both your business growth and the horsepower you need to build your empire.
Improving repeat rate
Working to improve your repeat rate should be your number one goal at all times. What good is driving new business if you’re losing them on the backside? Focusing on the lower margin sale is a good way to grind your exciting business into just another job. There are many ways to help ensure you have a good chance at new work from an old client: Show up on time. Be well groomed. Be professional. Listen to your client. Set proper expectations. Work hard. Do a good job. Give the client an unforgettable experience. You might be surprised at how much room for improvement there is in these areas! Fix those first.
After you’re sure you have the basics covered, create a client retention program. You can use the do-it-yourself marketing features in ServiceMonster to create direct mail, call, and email campaigns. Build a few years’ worth of content at once, then build a drip campaign which will generate your materials and lists, or send the emails at timed intervals. Optionally, you could also use our FillMySchedule (FMS) system, where we do high-quality direct mail for you, automatically (content and all!). FMS is a proven tool with a national average of 800% return on investment (ROI), and is a great way to get your client retention program up and running quickly.
2) Total Market Potential
What is total market potential?
Your total market potential is not strictly a KPI, but it’s a number you should know and understand. It represents the total number of potential clients in your area (but it’s not population). It’s also called your core demographic. If you’re focused on the value client in California, for example, you would target 25- to 55-year-old home-owning females with kids and/or pets, with home values above $350,000. You can use the free tools from InfoUSA to target your area and service distance. That will give you a nice target number. Tattoo that number to your forehead: the maximum size of your business depends on it.
3) Total Marketable Base
What is total marketable base?
Your total marketable base is the number of active clients in your database that have used your services in the last two years. You can increase that to four years if your services are strictly maintenance-based, like tile cleaning or air duct cleaning. A company that deals solely with restoration has no “marketable base,” because you can’t convince people to have another flood just so you can come clean it up for them. You will use your total marketable base when calculating your repeat rate.
Why should you track total marketable base?
Assuming that you know your total market potential, understanding how much of that market is yours gives you incredible insight. What’s your potential market share? What’s your maximum earning potential? How will you scale? You also need to track marketable base because you won’t know your repeat rate without it.
Marketable base targets
We have seen some interesting trends with marketable base and residential clients. Let’s assume your market potential is around 100,000 people. When your total marketable base hits 1% (1,000 clients), your referral rates start to climb… especially if you’re asking for them. When you hit 10% (10,000 clients), your referrals are so strong that you may forgo prospecting altogether. Not that we’re advising that.
Improving your total marketable base
To improve your total marketable base, you will need to implement strategies for improving both your repeat rate and your sales pipeline.
4) Average Invoice
What is average invoice?
Your average invoice is a calculation of the sum invoice subtotals over a period of time. You want to break it up by order type (carpet cleaning vs. restoration work), but other than that, it’s pretty straight-forward.
Why should you track average invoice?
There are two important reasons to track average invoice. The first has to do with your repeat rate. Understanding your average invoice gives you the power to influence it over time. See if you can change the numbers by targeting higher-end clients, or by adding new products or services. Raising prices will quickly increase your average, but will that affect your total marketable base? Will your new leads slow down? Knowing these comparisons in real-time gives you the ability to make quick course corrections and stay ahead of trouble.
The second reason to track your average invoice is because it can greatly affect your repeat rate.
Average invoice targets
Residential carpet cleaning invoice averages are around $245 nationwide. That also happens to be the sweet spot for getting a great repeat rate. Invoice averages under $200 typically attract price shoppers who have little loyalty when it comes to service providers. Invoice averages of over $350 are in real danger of creating sticker shock, drastically reducing your repeat potential. Managing expectations is tough for even the best cleaners.
Improving your average invoice
Improve your average invoice by focusing on incremental price increases, offering additional products and services, and working to boost your upsell numbers. Use ServiceMonster service items to increase the likelihood of an upsell to an existing client by over 30%! Use the income by service report to find out which of your services are selling, which ones need more attention in your marketing message, and what new services are working in your area. Track your upsells with the order upsell and commission features.
5) Income by Service
What is income by service?
This KPI is a very common accounting report. It breaks down your income by the services you provide, and it’s hard to put together without accounts receivable features like ServiceMonster’s invoices, line items, and service list.
Why should you track income by service?
Knowing what your clients are buying, and when, can be very insightful when trying to offer additional products and services. We once had a client who was, shall we say, “manly.” In our first conversation, he mentioned that he wouldn’t clean upholstery. When asked why, he said, “Oh I sell it. But that’s women’s work, so my wife does it.” Months later, we noticed that upholstery services represented over 25% of his income. We told him that his wife needed a big raise! His reply, “After I found out how much upholstery work there is, I’ve been doing upholstery too.” His market was perfect for upholstery cleaning, but he never realized it until he saw the KPI.
Income by service targets
Target making the largest slice of the chart under 50%. Stable companies usually have three or four main services, and a small market in additional work. Ideally, you would have three services at 30%, and the remaining 10% in “other” services.
Improving your income by service
Adding additional services is as easy as visiting your local distributor and shelling out some cash, but deciding what new services to offer varies based on your area. Getting that tile and grout wand won’t do much good in a community with little tile. Listen to your clients! What services are they asking you for? Let your market help you decided what to add.
Secondly, sell them! Service providers are inherently bad at two things. (1) Maintaining a consistent client retention strategy, and (2) Letting clients know about ALL of the products and services they offer. Customers can’t buy it if they aren’t aware of it! Update your marketing materials, your website, and your business cards. Before each job, talk with the client about what you have to offer. Part of the reason you want to expand into other services is to keep your client, YOUR client. There are other service providers out there that Mrs. Jones can use to get ALL of her cleaning done, but we don’t want her to use other service providers. We want her to stick with you!
6) Clients by Lead Source
What is clients by lead source?
Clients by lead source helps you to identify which of your marketing campaigns are winning you business. ServiceMonster allows you to identify, using lead sources, which specific marketing campaign or client (referral) brought he new account to your company. We track lead sources for both the account and the order. This is a very important difference, because it identifies two important data points: (1) Which campaigns are working to gain you new clients, and (2) Which campaigns are working to bring existing clients back to you. We see too many data imports where the current account lead source is set to “Repeat.” Not only does that hide the actual result of what brought them back, but it REMOVES THE ORIGINAL lead source value, destroying your ability to see which campaigns are working over time!
Why should you track clients by lead source?
Knowing your response rates, close rates, and ROI for a given campaign will help to maximize your marketing dollar. Ideally, 30% of your gross income should be going back into marketing (we’re not there yet either). Imagine if you were averaging 400%+ ROI on your campaigns over a 90-day period. You would essentially turn your company into a cash machine, only reaching a peak due to your total market potential. That’s a very compelling reason to track your lead sources.
Clients by lead source targets
By breaking up your campaigns into prospecting and client retention, you’re able to set your targets with more accuracy. As a rule, your client retention responses and ROI will be much higher than general prospecting campaigns. If your client retention is very strong and your repeat rate is well above 50%, your prospecting ROI could even be negative and your business would still grow. Ideally, your total average prospecting ROI will be above 100%, and your total average client retention ROI will be above 400%.
How to improve your clients by lead source
Every guru has a magic pill. A silver bullet. But in reality, there is no such thing. Positive prospect marketing ROI comes from hard work, trial and error, and understanding your core demographics.
You can improve your results by running A/B campaigns. Break your list into two equal, but random, parts. Use a separate message and imagery on each one. Track the one that has the best responses, and use that as the A campaign next time. Then create a new B to battle against. By using an A/B campaign, you will slowly increase your response rate by leveraging content and language that speaks to your clients.
Try not to limit your prospecting to one single campaign. Sure, it may have the best “numbers,” but a single source will only produce a high volume of leads for a short time. Diversify. Keep marketing on several channels at once: direct mail, email, Facebook… you get the idea.
For client retention programs, you can influence your response rates by a few percentage points, but the biggest way to improve these numbers is by simply running consistent campaigns.
7) Average Job Time by Order Group
What is average job time by order group?
The average job time by order group takes the total man-hours for each job, for each type of work you do (cleaning, restoration, etc.) and averages the total for the time period. It can be broken down by employees as well, so you can compare each employee to the company average. We only focus on the job type, work (not estimates), drop-offs, pick-ups, or reworks.
Why should you track average job time by order group?
Tracking your job times can help identify your margins. We’ve had clients that feel they are profitable, but the data tells them another story. Understanding your average job time can also help you plan your workload better.
Average job time by order group targets
Looking at employee job averages can give you insight as to which of your employees are excelling and which ones are a drain on the company (and you!). Longer job times aren’t necessarily a bad thing if the employee is upselling well. Taking order totals into account will give you an average revenue for each employee.
Average job time by order group targets
Use ServiceMonster Mobile for automated employee check-in and check-out. One way to get more out of each employee is to limit their downtime. Wait list, job work logs, and commissions can all be used to effectively establish company policies. Create a commission program where your techs get more for upsells. Educate them on giving value to the client as opposed to taking a sales approach.
Get the employees involved. ServiceMonster leader boards can be a powerful tool you can use to offer rewards to high earners. Quick and efficient employees, with low rework scores, will have good averages even if they aren’t upselling. More deliberate techs with better people skills can push good numbers by offering all of your services, and landing add-ons. Techs with poor performance can be retrained, repurposed, or replaced before they poison the well.
8) Sales Pipeline
What is sales pipeline?
Your sales pipeline shows you how many new leads, opportunities, and invoices you have received and converted in a given period. If you work sales opportunities over multiple touches and through different stages, then your sales pipeline will show you what percentage of leads convert to opportunities and how many of those opportunities convert into sales.
Why should you track your sales pipeline?
Getting the information sooner rather than later that your leads are depressed gives you time to adjust. Knowing that your conversion rates are high might tell you that new message and language you’re using is working. Tracking your sales pipeline can provide clarity on how you and your staff are dealing with the influx from the marketing you’ve been doing. If your leads are up and your conversions are down, perhaps you’re targeting the wrong base, or your message is establishing improper expectations. Either way, data gives you the power to make changes and see how those changes affect your bottom line.
Sales pipeline targets
10%+ of your leads will be spam from bots and price shoppers who provide junk data. From your qualified leads, you should be closing well over 50%, no matter what services you provide. As a service provider, just answering the phone and showing up will land you more jobs and earn great clients! Most of your competitors have a hard time with those two simple things. Past that, your challenge is to beat your own numbers.
How to improve your sales pipeline
Implement some sales commissions. Train and retrain. Then monitor sales activities (especially your own!). Record phone conversations here and there, and listen to them. Talk about the recorded conversations. Then train again.
Do what you say you’re going to do. If you say you’re going to send an email or call a client back, don’t drop the ball. Track sales efforts and tasks with opportunities and activities. Create drip campaigns to automate basic communications and offers. Send potentially large clients a thank you card. Above all, set yourself up to stay on top of your leads and reach out to them as soon as possible.
What is churn?
Churn is not typically found as a KPI in service companies, but we think that all businesses in this industry should at least understand it. ServiceMonster is a SaaS (Software as a Service) company. Repeat business is a critical part of our business model. You pay monthly to use ServiceMonster, but you can cancel at any time. The clients that we lose from cancellations, or simply because they couldn’t pay, go into a calculation called churn. It measures the percent of clients lost over time.
Why should you track churn?
There are two client programs that make churn relevant in a service business: (1) Recurring commercial work, and (2) A SaaS-style residential program, like ServiceMonster account subscriptions, where you charge the client monthly for regular automated services. Tracking churn against these cohorts makes a lot of sense. As you onboard new clients, you will notice a shift in your receivables (if you can pull it off). Your income will stabilize throughout the year, and your repeat rates will climb. Churn is almost the opposite of repeat rate: a SaaS-style approach assumes that you will keep the client, while the standard service approach is trying desperately to bring them back.
As this represents a very small (but growing) income for the industry, we don’t have good a churn rate to give you. As a SaaS company, we try to stay below 12% annually. That means our repeat rate, month after month, is 99%. Chew on that for a minute.
How to improve churnWe know how we improve churn at ServiceMonster. We use education and contact strategies for customers’ first 90 days. In your business, let’s just get a SaaS-style service to market, shall we?
ServiceMonster is full of KPIs. The ones mentioned above are the heavy hitters, but there are still many more that serve to enlighten your business decisions and help keep you on track. Keep your finger on the pulse of your business 24/7, with the help of ServiceMonster!