Every year, landscapers should be performing a business review on their most important Key Performance Indicators (KPIs). If you’re not tracking them properly from the beginning of the busy season, by the end of the year you could find yourself missing data. More importantly, you would be missing valuable insight.
KPIs tell you how your business is operating and if you are taking the right steps to scale your business. If your focus is only on the bottom line revenue number, you could be missing out on important KPI information that would help you scale faster or higher than what you currently are.
Let’s look at some of the KPIs landscaping businesses should be tracking.
We’ve talked about the sales pipeline and how to bring in more leads through marketing efforts like social media marketing or website building. It’s very important to track how many leads you have coming in so you know exactly how much you are paying for every new lead. That can be as simple as taking your marketing budget and dividing it by the number of leads you accrued.
Remember, leads are not customers, they are simply prospective customers. The majority of your leads won’t actually turn into sales and some you will even spend a lot of time on and get nothing out of them. However, you need to track how many you have coming in each month to gauge when you need to spend more on marketing and when you can shift the budget.
For example, if you notice most of your leads are coming in the early part of the year but slow down in late summer, you can take the budget from that time and put it towards the earlier time of year you get more leads.
This leads perfectly to the close rate. Close rate is the percentage of the leads you actually close and get to sign a contract. The close rate is an important KPI to track for two reasons.
First, it tells you how many leads you need to bring in per month. For example, if your close rate is 10% and you want to close 10 deals, that would mean you need 100 leads in your pipeline. In order to close more deals, you need to increase your lead count to 110 leads to add an additional customer.
Close rate is also useful to judge your sales team’s performance. Each sales rep will have a different close rate. This KPI will help identify who is your strongest salesperson and who needs additional training.
From here, you can either increase your lead count or focus on a higher close rate.
Average Annual Revenue Per Customer
Landscaping businesses that offer recurring maintenance services will want to know the value of each of their customers. To find out how much you make per customer, simply take the total revenues for the previous year and divide it by how many customers you have.
Average annual revenue per customer is an important KPI to track because it’s how you scale and grow your business. For example, if you know each customer roughy earns an annual revenue of $2,000, then you know you need to add 50 new clients in order to grow your business by $100,000.
You could also look at your annual revenue per customer and decide you want to focus on lower revenue customers, but do a super volume of work, or focus on fewer volume customers and more high-end work.
Customer Retention Rate
Each year you will have some customers stay and some leave. That’s part of any landscaping business that works on yearly contracts. Some will see value in professionals doing their landscape maintenance, while others may not not resign for another season for a variety of reasons. Those reasons do matter, but it’s more important to know what your normal retention rate is year over year.
To calculate the customer retention rate, take your total number of customers at the end of a selected period, subtract the new customers you acquired during that time, and divide by the number of customers you had at the start of that period. Multiply by 100 to get the percentage.
For example, if you started the year with 1,000 customers and ended the year with 1,200, but added 300 customers during that year, you have a retention rate of 90%.
Calculating your customer retention rate tells you how healthy your business is, which is important for yearly forecasting. If customers are constantly staying with you, it reminds you that your business is doing well, and it gives you stability year over year in which to grow.
Profitability by Service Type
Many landscaping businesses offer a variety of services. Some offer maintenance programs, lawn mowing, trimming, edging, pool cleaning, and small construction on hardscapes. This method of business, however, might not be as profitable as you think, and many landscapers find themselves saying yes to every service, without knowing if it even helps them turn a profit.
By tracking the profitability by service type KPI, you will know exactly how much revenue you are generating from your services. If lawn mowing is generating three times as much revenue as hardscape repairs, but they are taking up the same amount of time, it might be time to drop repair work from your service menu.
Being the jack-of-all-trades landscaping company can stretch your crews too thin and leave you working less profitable jobs. By knowing how much profit you generate per service, you can hone in on the services that make you the most money, and market those to prospective customers.
Track Your Important KPIs with Manage360
In order to track important KPIs, you need the proper tools to do it. You could go into a spreadsheet and do the manual calculation yourself, but that will limit how many KPIs you can track. To reduce the manual effort of KPI tracking, use DynaScape’s Manage360 landscaping business software.
In Manage360, you can track and run reports on all of the metrics listed, getting instant answers in real-time. Set up weekly, monthly, and yearly reports to get a deep view of what your business is actually doing. This way, you can make adjustments throughout the year rather than waiting until the end of the year to find out you missed your revenue targets.
Contact us today and book a demo to see how Manage360 can help you track your most important KPIs and give you greater insight into your landscaping business.