Helping company and division leaders who struggle with persistent underperformance to optimize operations for sustained growth or sale of their business, without crazy stress and disruption | Provisor
🔧 HVAC (and other construction trade) Business Insights: 3 Key Performance Indicators (KPIs) to Track for Success As an HVAC business owner, monitoring the right KPIs is crucial to steer your company towards efficiency and profitability. Here are three KPIs that you should keep an eye on: Average Job Profitability – Understanding the profit margins per job can help in pricing services correctly and identifying the most lucrative types of work. Service Agreement Penetration Rate – This measures the percentage of customers with service agreements relative to the total customer base. A higher rate suggests stable, recurring revenue. 🥾 A higher rate suggests stable, recurring revenue. 🥾 A higher rate suggests stable, recurring revenue. 🥾 Annual Revenue per Technician – A vital measure of workforce productivity, it indicates how effectively your team generates revenue. Why do you suppose this is important? If you are going to sell your HVAC business, the buyer will ask these questions. So translate this in to business value. Valuing an HVAC business often involves considering a range of factors, including revenue, profitability, market position, and growth potential. Common valuation techniques include the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) multiplier, where a business's value is a multiple of its EBITDA, typically ranging from 4x to 6x for HVAC businesses, depending on various factors like business size, customer base, and market trends. If your business is a $2M business and only deriving an EBITDA of 3% or 60K - the most you will receive is $360k. For the risk you took and the long hours you worked was it really worth it? You could have worked and been further ahead with a 401k. What is it worth to you to improve this outcome? Here is another option. Use the Seller’s Discretionary Earnings (SDE) method common for smaller HVAC companies, which adjusts net profit to reflect the owner's financial benefits. Say you have 2-4 people working and sales of around $1M or so. You are probably not going to be making much more than $250k including your own wages; a swipe at the profit; and other intangibles. Still not a super deal after a 25-35 year run. This same scenario applies to most small trade businesses. So are you willing to reach out and get a little help from people who know how to operate small businesses? #HVAC #BusinessGrowth #KPIs #PerformanceMetrics #ServiceExcellence
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Problem Solver / Innovator / Investigative Technologist / Humanitarian / Performance-Enhancement
8moWe all like to raise our chest and proclaim our businesses are in the Black. But, the reality it takes to feel confident enough to take a day off with No Worries, is a new whole can of Whoop Ass… There will be a time when you need the expertise of people outside your circle to help you get your business ready for a hand off. It is a Transition in case of you the man in charge can’t come to work due to an injury or old age. Maybe you want to hand the business off to your children? We can arrange the regulartory paperwork is in order to happen in 45 days instead of a drawn out 18 months. Please know the professionals at Zafeiri have a huge background in bringing your business to the front of the pack, instead of just making payroll each week!