On the journey to business success, KPI’s help you keep on track to your final destination. Check out the guide on KPI’s for service departments.

Firstly, WTF is a KPI?

KPI stands for Key Performance Indicator. It’s a measurable value used to evaluate progress towards a specific goal or the health of your business. It’s a bit like the fuel gauge on your car, you can see how much petrol you’ve got so you know when you need to take action.

Why

For every goal you need to know what your starting point is in order to know whether or not you’re getting closer, or further away, from your goal.

For example, if you want to make more money then you’ll look at what your net profit is. Each month there after you’ll measure the net profit and compare it to the original amount. If your monthly net profit is above the original amount then you’re achieving your goal of making more money, if it’s lower then you’re not.

For example, if you want to make more money then you’ll look at what your net profit is. Each month there after you’ll measure the net profit and compare it to the original amount. If your monthly net profit is above the original amount then you’re achieving your goal of making more money, if it’s lower then you’re not.

Types of KPIs

Below we outline some KPI’s for commons goals such as

  • Making more money (profit)
  • Getting your work done faster (efficiency)
  • Doing more work (productivity)

Goal – Making more money (profit)

Gross profit margin

What it tells you: The amount of gross profit you’re making on every $1 of sales.

Why it matters: This should be consistent month-to-month making it a good indicator that of changes to the business when it fluctuates. If your goal is to increase profits, then you will want to see the GPM increase over time.

How to calculate it: Gross Profit Margin = ((Sales Revenue – Cost of Sales) / Sales Revenue) X 100%.

Labour margin

What it tells you: How much profit you’re making on labour charges after tax, holidays etc,

Why it matters: Your labour costs shift, with pay rises, overtime and law changes steadily driving the wage bill upwards. If your charge out rate doesn’t change accordingly, you will make less and less profit on every job.

How to calculate it: Gross Profit Margin = Labour Revenue minus Labour Costs (P&L) as a % of Labour Revenue.

Parts margin

What it tells you: How much profit you’re making on labour charges after tax, holidays etc,

Why it matters: Your labour costs shift, with pay rises, overtime and law changes steadily driving the wage bill upwards. If your charge out rate doesn’t change accordingly, you will make less and less profit on every job.

How to calculate it: Gross Profit Margin = Labour Revenue minus Labour Costs (P&L) as a % of Labour Revenue.

Shrinkage

What it tells you: How much money you’re losing from missing stock.

Why it matters: Shrinkage happens in every workshop, from parts used but not invoiced, suppliers. To reduce the impact it has on your income, reducing the occurrence of shrinkage is key. Reduction in shrinkage equals an increase in profits for you.

How to calculate it: Parts bought – parts sold

Getting more work done (productivity and efficiency)

Efficiency

What it tells you: How fast your team are doing their work versus the time charged out.

Why it matters: Measuring your teams ability to get a job done in the required time helps you to gauge each persons performance.

How to calculate it: Charged hours / clocked hours

Available productivity

What it tells you: How much profit you’re making on labour charges after tax, holidays etc,

Why it matters: Your labour costs shift, with pay rises, overtime and law changes steadily driving the wage bill upwards. If your charge out rate doesn’t change accordingly, you will make less and less profit on every job.

How to calculate it: Gross Profit Margin = Labour Revenue minus Labour Costs (P&L) as a % of Labour Revenue.

Efficiency

What it tells you: How fast your team are doing their work versus the time charged out.

Why it matters: Measuring your teams ability to get a job done in the required time helps you to gauge each persons performance.

How to calculate it: Charged hours / clocked hours

Getting more return customers (customer experience)

Net promoter score (NPS)

What it tells you: How happy your customers are

Why it matters: NPS shows you what percentage of customers would recommend you, those that are neutral and those that would not recommend you. This helps you calculate the financial risk in the event you don’t get these customers returning.

How to calculate it: % promoters – % detractors

Are you wanting to get a better handle on your KPIs?

Speak to our team to find out how a WMS can help keep your profits on track.

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