The eight numbers a contractor should look at every month

Most dashboards fail because they have forty numbers on them. Nobody looks at forty numbers monthly, so after a while nobody looks at any.

Here are eight that change decisions. If you only ever look at these, you will know more about your business than most contractors do.

1. Gross margin percentage

Gross profit divided by revenue.

The single most important number you have. It tells you what share of each dollar survives the direct cost of doing the work. Track the trend, not the level — a slide from 34% to 28% across a few months is a pricing or estimating problem forming in real time, and you want to catch it while it is three months old rather than a year.

2. Overhead as a percentage of revenue

Total overhead divided by revenue.

This is the bar your gross margin has to clear before any profit exists. If overhead is 22% of revenue, a 25% gross margin means you are almost exactly break-even no matter how busy the schedule looks.

3. Net profit percentage

The bottom line as a share of the top line. What the year is actually producing.

4. Revenue per billable hour

Revenue divided by the hours you could actually invoice — not the hours you paid for.

The gap between paid and billable hours is where most contracting margin quietly goes. Drive time, callbacks, the return trip for a part, quoting work you did not win. Most owners have never seen this ratio for their own business, and it is usually worse than they expect.

More on the pricing consequences in what you should actually charge.

5. Margin by job type

Not one number — a short table. Install against service. Insurance against retail. Emergency against scheduled. Whatever the split is in your trade.

Company averages hide the work that loses money on every visit. This is the number that most often changes what an owner chases next, and it is the reason job costing is worth setting up.

6. Aged receivables over 60 days

What you are owed, and how late.

Money you cannot see is money you will not chase. This one number, in front of you monthly, is why owners routinely collect amounts they had written off.

7. Cash position and the next sixty days

What is in the bank, plus what is realistically landing and going out over the next two months.

Profit and cash are different things, and contractors go under holding a profitable P&L. See cash flow forecasting.

8. Break-even against actual revenue

Your monthly break-even, and what you actually billed.

Checked weekly rather than monthly, this becomes a target the whole business can work to — a daily number per truck that a tech can hold in his head. See break-even for contractors.

How to look at them

Against the same month last year, not last month. Every trade in this list is seasonal. August against July tells you about the calendar; August against last August tells you about the business.

Trend over level. A single month is noise. Three months in one direction is information.

One page. If it takes more than a couple of minutes it will not survive a busy quarter, and the whole point is that it survives busy quarters.

With a written note. Numbers without an explanation get skimmed. A sentence saying which one moved and why is what turns a report into a decision.

What most contractors track instead

Revenue and the bank balance.

Revenue tells you how busy you were, which you already knew. The bank balance tells you what happened weeks ago. Neither tells you whether the work was worth doing, which is the only question that compounds.

Related

• How to read your P&L
• Why jobs that look profitable still lose you money
• Working out your break-even number