|Brian Nolan, managing partner and business coach with Nolan Consulting Group, advises Mission: Vacation winner Dustin Zupancic, owner of Dreamscape Painting, on KPIs. Are you tracking your business performance?|
How do you gauge the success of your painting business?
Do you just have a sense that money is flowing in because you’re working 70-hour weeks? Or are you tracking key performance indicators (KPIs) that indicate where your business stands financially on a monthly, weekly and even daily basis?
The only real way to gauge your success if by establishing benchmarks—or KPIs—against which to gauge your performance and progress.
Brian Nolan, managing partner and business coach with Nolan Consulting Group, advises looking at it this way: “Pretend you're a pilot in a plane. You have all your gauges in front of you. Your gauges tell you the altitude, how much gas is left, etc. Developing KPIs is about the same thing: developing a dashboard.”
The first KPI that comes to mind for most contractors is the job cost. “They think if the job came in okay, then they’re solid. Or if there's money in the bank, they’re solid,” Nolan says. If you’re guilty of taking this surface view, consider it a positive: it means you’re already tracking a KPI. It’s just now time to dig a little deeper.
“When you start to understand how to read your numbers and what changes you have to make before you grow so that when you grow, you're not just growing to be busier,” Nolan explains. “We grow so that you can support the bottom line.”
Nolan lays out a few baseline KPIs that all painting contractors should be tracking consistently:
Nolan highlights the gross profit percentage as particularly important. “The gross profit percentage is really an important number to know because it's what percentage is left over to apply to overhead and profit at the end of the job. Quite simply, you can't grow your business unless your GP is high enough because otherwise you can't afford office staff, facilities, vehicles.”
Contractors looking to grow should also be tracking KPIs that their lending institution is going to want to see, and this means turning to the balance sheet. However, Nolan cautions, “I think a lot of contractors don't spend a lot of time understanding the balance sheet. And a lot of balance sheets are wrong because accountants haven't made adjustments to entries that were put on it years ago.” In most instances bookkeepers are just that, the keeper of books, not financial managers. They may be ignoring data that you’ll later find to be important. So a deep dive into financial KPIs will likely require the aid of, and regular audits with, a trusted accountant who is well versed in tracking KPIs.
For this deep dive, you’ll want to track data including:
Armed with data, you can begin to look at your business like a pilot looks at the gauges—and know you’re riding high and headed upward.
The insight provided by KPIs is particularly valuable when you know you need to make a change. Examining all of the relevant information can lead to precise place where business can be changed.
“For instance, there have been times in the past where we've operated in our line of credit,” shares Dustin Zupancic, owner of Dreamscape Painting in Vancouver, British Columbia, and the 2019 APC Mission: Vacation winner. “It's not ideal. How do you track where you're at in paying it back when the number is fluctuating up and down so much?”
As part of Mission: Vacation Zupancic and Nolan have discussed different ways of entering that information into profit and loss sheets to better track debt. “That's been really encouraging,” Zupancic says. “It’s not just looking at the numbers, but understanding how those numbers give you the capability to make changes.”
Zupancic points out that examining the numbers at first may feel difficult. Digging into the data for the first time can reveal how vulnerable a company really is. But it also makes a company far more powerful.
“Not all the numbers are always amazing, but understanding them is amazing,” Zupancic says. “It's been really encouraging to start tracking them, as it gives me a more positive outlook for the future.”
Want more insight? Learn more about tracking KPIs by tuning into Paint Radio.