Financial KPIs Every Contractor Must Track: The Numbers That Drive Profitability

The most successful contractors run their businesses by the numbers. They don’t guess—they know. Here are the KPIs that separate profitable contractors from struggling ones.

Why KPIs Matter

Two contractors, same market, same services, same number of trucks.

One makes $400,000 in profit. The other barely breaks even.

The difference? The profitable contractor knows their numbers and manages by them. The struggling contractor is flying blind, reacting to problems instead of preventing them.

KPIs (Key Performance Indicators) are the vital signs of your business. Just like a doctor monitors blood pressure, heart rate, and temperature, you need to monitor specific metrics to keep your business healthy.

The Essential KPIs for Contractors

Category 1: Revenue & Sales KPIs

1. Revenue per Technician

What it measures: Productivity and efficiency of your field team.

Calculation: Total Revenue ÷ Number of Technicians

Benchmark: $200,000-$350,000 per technician annually

What it tells you:

• Below benchmark: Inefficiency, poor pricing, or capacity issues
• Above benchmark: Strong performance or potential understaffing

2. Average Ticket/Invoice

What it measures: Value per transaction.

Calculation: Total Revenue ÷ Number of Jobs

Why it matters: Small increases in average ticket have huge impact on total revenue.

3. Conversion Rate

What it measures: Sales effectiveness from estimate to job.

Calculation: Jobs Sold ÷ Estimates Given × 100

Benchmark:

• Service/repair: 60-80%
• Replacement/installation: 25-40%

What to do:

• Below benchmark: Review pricing, presentation, follow-up
• Above benchmark: Potentially leaving money on the table (pricing too low)

4. Service Agreement Revenue Percentage

What it measures: Stability and recurring revenue base.

Calculation: Agreement Revenue ÷ Total Revenue × 100

Benchmark: 15-25% minimum, 30%+ is excellent

Why it matters: Recurring revenue stabilizes cash flow and increases business value.

Category 2: Profitability KPIs

5. Gross Profit Margin

What it measures: Profitability before overhead.

Calculation: (Revenue − Direct Costs) ÷ Revenue × 100

Direct Costs include:

• Technician labor (wages + burden)
• Materials and parts
• Subcontractor costs
• Equipment on job
• Permits

Benchmark by Service Type:

6. Net Profit Margin

What it measures: Bottom-line profitability.

Calculation: Net Profit ÷ Revenue × 100

Benchmark: 10-15% for healthy contractors

Note: This is AFTER owner’s salary. If you’re not paying yourself a market-rate salary and calling the remainder “profit,” you’re fooling yourself.

7. Labor Cost Percentage

What it measures: Labor efficiency and pricing adequacy.

Calculation: Total Labor Costs ÷ Revenue × 100

Benchmark: 25-35% of revenue

If it’s higher:

• Pricing may be too low
• Efficiency issues
• Overstaffing

8. Material Cost Percentage

What it measures: Material efficiency and markup adequacy.

Calculation: Material Costs ÷ Revenue × 100

Benchmark: 15-25% of revenue (varies significantly by trade)

Category 3: Operational KPIs

9. Billable Hour Rate (Effective Rate)

What it measures: What you actually earn per hour worked.

Calculation: Revenue from Labor ÷ Total Tech Hours

Why effective rate matters:

Company A has higher effective rate despite lower utilization because of pricing.

10. Technician Utilization Rate

What it measures: Percentage of paid time that’s billable.

Calculation: Billable Hours ÷ Paid Hours × 100

Benchmark: 65-80%

Non-billable time includes:

• Drive time (non-billed)
• Meetings and training
• Paperwork
• Equipment maintenance
• Idle time

11. First-Time Fix Rate

What it measures: Ability to resolve issues on first visit.

Calculation: Jobs Completed First Visit ÷ Total Jobs × 100

Benchmark: 85-95%

Why it matters:

• Callbacks are expensive (no revenue, full labor cost)
• Customer dissatisfaction
• Scheduling disruption

12. Callbacks/Warranty Rate

What it measures: Quality of work and proper diagnosis.

Calculation: Callbacks ÷ Total Jobs × 100

Benchmark: Under 3%

If it’s higher:

• Training issues
• Parts quality problems
• Diagnostic failures
• Rushing through jobs

Category 4: Cash & Financial Health KPIs

13. Days Sales Outstanding (DSO)

What it measures: How quickly you collect payment.

Calculation: (Accounts Receivable ÷ Revenue) × 365

Benchmark: Under 30 days for residential, under 45 for commercial

Improving DSO:

• Collect at time of service when possible
• Same-day invoicing
• Accept multiple payment methods
• Clear payment terms
• Follow-up system for overdue accounts

14. Current Ratio

What it measures: Short-term financial health.

Calculation: Current Assets ÷ Current Liabilities

Benchmark: 1.5 or higher

What it means:

• Below 1.0: More liabilities than assets (danger)
• 1.0-1.5: Tight, limited cushion
• 1.5-2.0: Healthy
• Above 2.0: Very strong

15. Cash Reserve (Months of Expenses)

What it measures: Emergency runway.

Calculation: Cash on Hand ÷ Monthly Operating Expenses

Benchmark: 3-6 months minimum

Why it matters: Seasonal dips, economic downturns, emergencies, and growth opportunities all require cash reserves.

Category 5: Customer KPIs

16. Customer Acquisition Cost (CAC)

What it measures: Marketing efficiency.

Calculation: Total Marketing Spend ÷ New Customers Acquired

Benchmark: Varies widely, but should be under 10% of first-year customer value

Example:

• Marketing spend: $50,000/year
• New customers: 400
• CAC: $125

If average first-year value is $750, CAC is 16.7%—potentially too high.

17. Customer Lifetime Value (CLV)

What it measures: Total revenue expected from a customer.

Calculation: Average Annual Value × Average Customer Lifespan

Example:

• Average annual spend: $450
• Average relationship: 7 years
• CLV: $3,150

CLV:CAC Ratio Target: 3:1 or higher

18. Customer Retention Rate

What it measures: Loyalty and satisfaction.

Calculation: ((Customers at End − New Customers) ÷ Customers at Start) × 100

Benchmark: 70-85%

19. Net Promoter Score (NPS)

What it measures: Customer satisfaction and referral likelihood.

Calculation: % Promoters (9-10 rating) − % Detractors (0-6 rating)

Benchmark:

• Below 0: Significant issues
• 0-30: Good
• 30-70: Great
• 70+: Excellent

Building Your KPI Dashboard

The Weekly Review (15 minutes)

The Monthly Review (1 hour)

The Quarterly Review (Half day)

• All monthly metrics
• Customer retention rate
• Year-to-date vs. budget
• Trend analysis
• Strategic adjustments
• Team performance reviews

Getting Started: The First 30 Days

Week 1: Establish Baseline

• Pull last 12 months of financial data
• Calculate each KPI
• Identify current performance level

Week 2: Set Targets

• Compare to benchmarks
• Set realistic improvement targets
• Prioritize 3-5 key metrics

Week 3: Build Systems

• Create tracking spreadsheet or dashboard
• Establish data collection process
• Assign responsibility

Week 4: Begin Tracking

• Start weekly reviews
• Identify immediate opportunities
• Begin improvement actions

Common KPI Pitfalls

1. Tracking Too Many Metrics Start with 5-7 critical KPIs. Add more only after mastering these.

2. Vanity Metrics Focus on metrics that drive profit, not just feel good. Revenue is vanity; profit is sanity.

3. Not Acting on Data KPIs are useless if you don’t change behavior based on results.

4. Inaccurate Data Bad data leads to bad decisions. Invest in accurate tracking.

5. Inconsistent Calculation Define exactly how each KPI is calculated. Stick to it.

6. Not Sharing with Team The team can’t improve what they can’t see. Share relevant metrics.

Technology for KPI Tracking

Basic: Spreadsheet dashboard

• Cost: Free
• Pros: Flexible, no learning curve
• Cons: Manual entry, version control issues

Intermediate: Accounting software reports

• Cost: Included with software
• Pros: Automated from transactions
• Cons: Limited customization

Advanced: Business intelligence tools

• Cost: $50-500/month
• Pros: Real-time, visual, comprehensive
• Cons: Setup required, ongoing cost

Best practice: Most field service platforms (ServiceTitan, Housecall Pro, etc.) include KPI dashboards. Use them as primary source, supplement with accounting data.

The Impact of KPI Management

Case Study: Real Results

Contractor before KPI focus:

• Revenue: $2.1M
• Net profit: $84,000 (4%)
• No consistent tracking

After 12 months of KPI management:

• Revenue: $2.4M (+14%)
• Net profit: $288,000 (12%)

What changed:

• Pricing adjusted based on gross margin data
• Callbacks reduced through tracking and accountability
• Collection improved via DSO focus
• Technician utilization optimized
• Marketing spend reduced, effectiveness increased

Same team, same market—$200K more profit through managing by the numbers.

Your Next Step

The contractors who thrive are the ones who know their numbers. They make decisions based on data, not gut feel. They see problems before they become crises and opportunities before they disappear.

Start today:

1. Calculate your gross profit margin
2. Calculate your average ticket
3. Calculate your callback rate

Just those three numbers will tell you volumes about your business health.

Ready to build a data-driven contracting business? Let’s set up your KPI dashboard →

At The KPS Group, we help contractors implement financial systems that drive profitability. Because what gets measured gets managed—and what gets managed improves.

Financial management is one key to contractor success. Explore our complete resource library for more strategies and tools.

Related Reading:

• Job Costing 101: Know Your True Profit
• Cash Flow Management for Contractors
• Technology Adoption: Tools That Track KPIs