Not a one size-fits-all perspective.

When you look at your peer companies, you may not only notice how similar you are but also how unique your company is when compared to one another. There is no single answer to what the most important factor of financial performance is. What is important to one contractor may also be important to another, but not to the same degree given the amount of work that is self-performed, type of construction, private or public work, etc. Here are just a few responses from other contractors about what they believe to be the most important key performance indicators (KPIs) for a Specialty Trade contractor.  

“I believe that the number one KPI for any contractor is Net Profit. Ultimately, if you aren’t getting the return you planned for on your efforts you need to start looking at the root cause and fix those things first. The Gross Profit on jobs would be the first place to dig in deep and is really the most fun to work on.  I also always look at a cash flow forecast as far out as I can reasonably go (about 6-8 months). Especially during times of growth, cash can become problematic if you don’t have favorable payment terms in your contracts or have a slow paying customer or job that was unplanned.”  Jessica Martin, CCIFP, CFO for Nox Group

“We self-perform almost all of our work making labor production of major importance to us. The majority of our jobs are shorter in length making it especially important for us to know if we are hitting our target early on in a project. In an effort to drive home the importance and also to share knowledge we hold biweekly labor production meetings as a group to cover currently active projects. I also find it extremely important to run a cash flow based at the project level. Keeping our Project Manager’s up to date on the cash flow status of their project is vital because from their point of view they see that we made a profit, however, we could still be 30 days out from receiving any funds at all and we are currently financing the project. In my opinion, some of the best performance indicators are those that those without a financial background can grasp and understand. ”  Nicolle Taylor-Sheafor, CCIFP, CFO for Hardman Construction

“Everyone has key metrics they track to see how and what the company is doing, like billings and profits. I believe the most important KPI for a Specialty Trade Contactor are your variance KPIs. This includes a variance of budget to actual for the company but also granular on projects, both big and small. These variances can be the most important key indicator of problems either existing or on the horizon. As I look back on my career, I often identified problems with projects or personnel based on these variances. The gap in between has a story to tell and as construction financial professionals, we need to listen.” Kyrah Coker, Company Integrator & CFO

In conclusion, the world of KPIs for Specialty Trade contractors is indeed far from one-size-fits-all. Net profit, labor production, cash flow, and variance metrics all play crucial roles in evaluating performance, but the real key lies in understanding how these metrics relate to your specific circumstances.