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6 KPI Charts to Drive Performance and Profitability for SMBs

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6 KPI Charts to Drive Performance and Profitability for SMBs

By following these six KPI charts, your company will be able to see the relationship between people and profitability. These quick, "consumable" charts are designed to make it easy to understand, measure and compare these drivers of your business. 

How to use the One Page Scorecard

6 KPI Charts to Drive Performance and Profitability for SMBsThe 6 charts that make up the One Page Scorecard provide a quick and easy monthly look at your Company’s relationship between People and Profitability.

There are many different reports, ratios and KPIs that you can use to understand your business.

You know the drivers of your business best.These 6 will help any business that makes money on Other People’s Time.

Why these 6? These charts work together to reveal how profits are impacted by people. And how the results impact your Human Capital Strategy. We recommend you look at trends so you can measure and compare by benchmarking against your budget and company history as well as your peers and competition.

The 6 charts are arranged in specific order. The left column shows “People” metrics and the right column shows “Company” metrics. The top row represents “Revenue”, the middle row represents “Gross Profit”, and the bottom row represents “Net Income.” Go across each row to see how People drive Profits.

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revenue per hour

Revenue divided by Total Hours Paid 

6 KPI Charts to Drive Performance and Profitability for SMBs

"revenue per hour shows how well you are managing the productivity, and resulting profitability, of your people"

WHAT DOES IT TELL ME?

Revenue Per Hour is a dollar amount of revenue earned for every hour you paid people to work. Total Hours Paid includes all salaried and hourly employees and both direct and overhead staff. Use 40 hours to get total hours paid for salaried and part time FTEs.

Revenue Per Hour is one of the most important metrics to watch when you make money on Other People’s Time. It shows how well you manage the productivity, and resulting profitability, of your people. The hidden costs of turnover, non-billable and inefficient time are summarized in one number.

WHAT SHOULD I LOOK AT?

  • How does your Revenue Per Hour compare to what you thought it should be?
  • What’s your trend? Are you directionally going up, staying the same or shrinking?
  • How does this month compare to the highs and lows of the past year? Is this month a minor blip or change in the business model?
  • How does Revenue Per Hour compare to changes in personnel? Did turnover or new hires hurt you?

ACTIONS TO TAKE

If Revenue Per Hour is growing, recognize and reward your best people and teams.

  • Study the behaviors of your best performing people. Recruit to replicate those traits.

If rates are shrinking, look at pricing and make sure your bids include all labor costs on a job.

  • Review impact on productivity from changes in personnel.
  • If people left, ask “why” in an exit interview and learn from the “free consulting.”
  • If you added new staff, review how you onboard new staff. Study how long it takes a new person to be fully productive.
  • Drill down to revenue per hour by team, department or whatever way you have structured your work groups. Study the differences between the best and worst supervisors, training, client longevity, incentive comp, etc. Create a personal development plan to move your worst up or out.

Gross revenue 

Income Earned from All Sources

6 KPI Charts to Drive Performance and Profitability for SMBs

"Gross revenue shows the total dollar amount of money earned. It's the top line."

WHAT DOES IT TELL ME?

Gross Revenue is the total amount of money earned. It’s the Top Line, before expenses, deductions, allowances etc. It shows the ability of a business to sell goods or services but not necessarily the ability to make a profit.

The Gross Revenue metric is an accurate indicator for service businesses where there isn’t much difference between gross and net sales. The trend line tells you whether your billings are going up, shrinking or staying the same.

WHAT SHOULD I LOOK AT?

  • What does the orange trend line tell you? Are you directionally going up, down or shrinking?
  • How does revenue compare to what you thought it was going to be (your budget)?
  • How does this month compare to the highs and lows of the past year?
  • Is your business seasonal? If so, is it performing as you expected?

ACTIONS TO TAKE

If Gross Revenue is increasing, make sure margins on new business are on target.

  • Forecast how long you can handle the increase with existing employees and when you need to hire.

If Gross Revenue is shrinking, decide if it is a new reality or temporary.

  • If it’s a new normal, what cuts can you make to adjust for the lower revenue without destroying the culture?
  • If temporary, how long can you afford to support the current cost structure?
  • Shift all available people and resources to lead generation, proposal generation or other sales activities.

Labor Cost per Employee

 Total Labor Cost ÷ Number of FTEs
 Labor_Cost_Per_Employee-016865-edited.png

"Labor cost per employee provides a benchmark on how your total costs for human capital changes as you grow."

WHAT DOES IT TELL ME?

Labor Cost per Employee is the total cost of your labor divided by the number of full time equivalent (FTE) employees. Full time salaried employees are equal to one FTE at 40 hours of work.

This dollar figure shows changes in cost per employee and gives visibility into hidden costs like overtime, health insurance, PTO, etc. Profitable companies that share profits want an increase in cost per FTE. That may also mean low turnover as higher paid, experienced people have higher billing rates. Higher profits drive bonuses which increases cost per FTE – in this case higher trending costs can be a good thing.

WHAT SHOULD I LOOK AT?

  • Is Your Labor Cost per Employee increasing, decreasing or static?
  • How does it compare with your Revenue per Employee?
  • Are the changes a trend or an anomaly?

ACTIONS TO TAKE

  • If Labor Cost per Employee is increasing, is Revenue per Employee increasing at an equal or greater rate? If so, you are going in the right direction. If not, take a look at your employee comp and bonus structure – does anything seem out of whack or overly generous?
  • Analyze pricing to ensure you are keeping up with increasing costs. Most cash flow problems come from low gross profit, which means not including all the costs to provide a service.
  • If your Labor Cost per Employee is going down, evaluate if that’s good or bad. Reducing overtime or hiring lower wage staff are often the easiest ways. Study how that affects the business model.

gross Profit %

Gross Profit ÷ Total Revenue x 100

Gross_Profit_.png

"gross profit % or Gross Margins vary with Industries and company lifecycle - do you know where your profit metrics and trends should be?"

WHAT DOES IT TELL ME?

Gross Profit, a/k/a Gross Margin, shows how efficient the business is as it delivers your services. Your gross profit percentage tells you what portion of your earnings are available to cover:

  • Overhead
  • Taxes
  • Net profit targets

Gross profit is shown as a percent to help make sure increases in revenue don’t mask service delivery problems.

Gross Profit % shows how much profit was made on the work provided, as a percentage of the total revenue. It tells you how well you priced your jobs, managed people and controlled out of pocket expenses.

You use Gross Profit % to see how well you are managing sales and service operations. Is sales delivering profitable projects? Are your project managers bringing the projects in within budget?

WHAT SHOULD I LOOK AT?

  • How does Gross Profit % compare to your targets? To your competitors?
  • Which clients, teams, sales people, lead sources provide the highest gross profit %

ACTIONS TO TAKE

  • Drill down to Gross Profit % by Client, Project or Team to understand who contributes the most profits.
  • Review lowest margin clients on each team to understand real costs and the associated value to clients. Update pricing model to reflect the true cost and your full value. Moving from hourly billing to value pricing is usually the single biggest way to drive profits.
  • Recognize and reward those who deliver the highest gross profit. Recognition at home often has the longest impact with minimal cost. Turn your best performers into trainers and incent them to increase Company Gross Profit.
  • Before you add any new service staff, decide if you should fire low margin clients and replace with higher margin clients. Addition by subtraction is a great way drive more profit without increasing staff cost. This also delays the inherent risk of adding new fixed salary cost. Firing bad clients also helps employee retention as low gross clients usually cause grief for you and your staff.

roi on Total labor cost

Net Income ÷ Total Labor Cost

ROI_on_Total_Labor_Cost.png

"Roi on total labor cost shows you how much profit you get from your investment in your People over time. 

if you take care of your people, they will take care of your clients, who will take care of your investors."

WHAT DOES IT TELL ME?

ROI on Total Labor Cost is the % of Net Income as compared to the total Human Capital Cost. It shows the Profit on the Investment in your People – the profit earned on the total cost of your staff.

ROI on Labor Costs show you how effectively you manage your most important asset, your people. It shows the effectiveness of your Human Capital Strategy. The trend shows your ROI on your people over time and whether you need to focus on your Company or People Strategy.

WHAT SHOULD I LOOK AT?

  • ROI on Total Labor Costs compares the changes in your payroll costs with the changes in your net income. Look for changes in the trend. That will tell you when you need to focus on your people or your finances.
  • Investigate which of the above trends caused the change in the Profit per Person.

ACTIONS TO TAKE

  • If it is going up, it is a result of your revenue going up faster than your payroll costs – its time to recognize and reward your key performers.
  • If it’s going down, you want to look at the effectiveness of your Human Capital Strategy. Look for areas for improvement including more effective recruiting, employee onboarding and training to lower turnover.
  • Drill down into the drivers of net income and labor costs to understand changes. Who are your most profitable teams and people?
  • Implement human capital strategies to increase productivity and profitability. Review your human capital strategy and make sure it is updated to reflect the Company’s current needs.

net income

Revenue Minus Cost of Goods Sold Minus Overhead 

Net Income Key Performance Indicator Charts

"Net income is the bottom line, a key indicator of profitability, cash & equity."

WHAT DOES IT TELL ME?

Net Income is the most important result of the Company. It is the amount of Profit or Loss the Company made, also called the “Bottom Line”.

It shows if the Company increased the value of the Equity by bringing in more money than it spends each month. It tells you if the business model is working. It is important to measure profitability over time.

Net Income turns into cash so it provides the lifeblood of the company.

WHAT SHOULD I LOOK AT?

  • What does the orange trend line tell you? Are you directionally going up, down or shrinking?
  • How do profits compare to what you thought it was going to be (your budget)?
  • Check your net income against previous months. What’s changed?
  • After studying gross profit, now understand your overhead and how that impacts your net profit.

ACTIONS TO TAKE

Did you expect the changes? If not, analyze the variances.

How does your Net Income trend line compare to Gross Revenue trend:

  • If Gross Revenue is growing, review if you have to add overhead (e.g. space).
  • If Gross Revenue is flat or shrinking, decide if it is permanent or temporary.
  • See if you can increase profits by outsourcing to lower overhead costs.
  • Find back office efficiencies to reduce time spent on non-revenue generating activities.
  • Communicate your net income targets to key managers and staff and align their rewards with company profits and get discretionary effort.
  • If temporary, forecast how long can you afford to continue your current cost structure.

Could You Benefit from a One Page Scorecard like this?

One Page Scorecard Key Peformance Indicators KPIs

We'd be happy to speak with you about how your company can benefit from a Scorecard like this. Having easy-to-scan charts that show your company's relationship between people and profitability can provide insight you might not currently have on your business. 

GrowthForce specializes in providing accurate and up-to-date bookkeeping, accounting and controller services for small and medium businesses. We produce both financial and management reports that show businesses their key performance indicators to help drive the growth and success.  

If you think your company could  benefit from a One Page Scorecard like this, or would like to know more information, fill out this form. We would love to set one up for your company. 

One Page Scorecard 6 KPI Charts