Cleaning Contractors Maximize Business Potential with Metrics
A frustration I often hear from building service contractors (BSC) is their inability to reach the growth and profit goals they desire. Don’t get me wrong, these companies aren’t failing. Rather, they are just having trouble moving the needle toward significant progress. While many factors contribute to this condition, one problem is their hyper-focus on lag measures to the neglect of lead measures. Let me explain.
Lag measures are those metrics that allow you to look back over a period of time and see how the company has performed. A classic example is the profit and loss (P&L) statement. A monthly P&L looks back on the previous month and gives you a financial snapshot of how you did.
While lag measures are good and vital, they arrive after it’s too late to fix the problem. They tell you how you performed in the past, but they are unable to predict how you will perform moving forward.
Lead measures, on the other hand, are daily or weekly metrics that will foreshadow what your lag measures will look like. For instance, if I know that more phone calls to prospects is the greatest predictor of bid opportunities, I can monitor the number of outbound cold calls and use it as a gauge to indicate how much we will sell in the coming months.
This obviously takes some level of data to predict accurately, but it is a predictor, nonetheless.
Here is a very practical example: Each month, we will examine job profitability, typically seven to 10 days after the close of the month. This gives us a look back to see how we performed, particularly with our primary expenses of labor and supplies. This is the lag measure.
Many owners cross their fingers at the end of the month, hoping the results are favorable. They have no predictor of whether or not the results will be good. This is where lead measures come in.
Using our current example, we know that labor hours, overtime pay, and supply usage are the three greatest job-related expenses that are influenceable. If we monitor labor hours — keeping them within budget — we can predict how much our labor expense will be at the end of a given month. If we keep overtime hours at zero, this will ensure hitting budget. Assuming supply expenses remain fairly constant, we now have a decent prediction of what expenses will be at the end of the month. Consequently, we can predict job profit. By tracking these lead measures on each job, we can predict with some level of certainty what our gross margin will be as a company.
If you want to gain more control of your operation and move the needle forward, identify and start tracking lead measures. This simple change will create more predictability and success in your cleaning company.
Jordan Tong is a BSC consultant and founder of Elite Business Coaching, in addition to being a third-generation owner of Frantz Building Services based in Owensboro, Kentucky.