KPI Definitions

 

Finance

 

Revenue

It is the income generated, during a specific period, from sale of goods or services to its customers before any costs or expenses are deducted. Revenue, also known as the “top line”, is shown usually as the top item in an income (profit and loss) statement from which all charges, costs, and expenses are subtracted to arrive at net income. Each of the accounting methods (cash-accounting and accrual-accounting) use different approaches for measuring revenue. In essence, accrual-accounting records (recognizes) revenue as soon as the legal obligation to pay has been transferred to the customer regardless of when the cash is exchanged. Under the cash-accounting method the recording (recognition) of the revenue is delayed until the cash payment is actually received by the customer.

Gross Profit Dollars

It is simply Revenue less Cost of Goods Sold, which in our case are Labor Costs Loaded, Subcontractor and Materials Costs Loaded. Management uses the gross profit to gauge how profitable a department or the company as a whole performs during a period.

Costs

These are directly related to the production of goods or rendering services. They include Direct Construction Costs (DCC) and Indirect Construction Costs (ICC). For the AI System, these costs are broken down into three general categories, Labor Costs Loaded, Subcontractor Costs and Materials Costs Loaded.

Labor Costs – Loaded

These labor costs represent the work performed by the general contractor that are directly attributed to the cost of selling, managing and building the project. These costs should include in-house jobsite labor such as carpenters, painters, laborers, superintendents, project managers, estimators and sales staff. The Labor Costs must include all taxes, insurances, benefits, sick pay, vacation pay and workmen’s comp that are directly related to payroll. The portion of the Owner’s salary attributable to these activities should be reported here as well.

Subcontractor

A Subcontractor is a person or company that provides labor or labor and materials to complete specific phases of the construction process which is part of another’s contract. Subcontractors can include architects, engineers, designers, excavators, landscapers and any and all providers of any of the construction trades.

Material Costs

Material costs are the cost of raw materials and components used to create a product. It is essentially all of the materials purchased by the General Contractor that are included in the construction of the project. These materials can include lumber, windows, doors, hardware, cabinets, plumbing fixtures, lighting fixtures etc. We also include miscellaneous items that are needed for the production of the building. These costs can include blueprints, permits, equipment rentals, tool repairs, vehicle expenses, bonds, job-specific insurance, safety gear, tool purchases, cell phone charges, etc. This category picks up ICC’s as well as any other costs of production that are neither labor nor subs.

Average Gross Margin

Gross margin is the difference between revenue and cost of goods sold, or COGS, divided by revenue, expressed as a percentage. … In other words, Gross Margin is a % value, while Gross Profit is a $ value. The higher the percentage, the more the company retains on each dollar of sales, to service its other costs (typically overhead costs) and debt obligations.

Companies with higher gross profit margins have an inferred competitive edge over rivals, either because they can successfully charge a higher price for goods/services (as reflected in higher revenues) or because they pay less for direct costs (as reflected in lower costs of goods sold) or a combination of the two.

Overhead

Overhead refers to the ongoing operating expenses necessary to running a business, but are not attributed to a specific business activity. Generally, overhead expenses include expenses that do not directly generate revenues, such as Labor Costs, Subcontractor Costs and Materials Costs, but are needed to maintain the business operations. Overhead expenses can include accounting, advertising, depreciation, insurance, interest, legal, rent, office repairs, office supplies, taxes, postage, utilities, continuing education and travel.

Overhead costs are generally considered fixed costs, meaning, they do not rise or fall directly with the cost of goods sold. Overhead costs are important to monitor and control. Since they are not directly related to revenues, they can become a larger share of the total expenses and burden a company, soaking up net income and profits.

Monthly Overhead

Monthly Overhead costs are those monthly expenses that are needed to maintain an ongoing business, but are not attributed to specific functions and are not generating revenue. Monthly Overhead expenses can include accounting, advertising, depreciation, insurance, interest, legal, rent, office repairs, office supplies, taxes, postage, utilities, continuing education and travel.

NOP (Net Operating Profit) %

Total percentage of profit retained after paying all cost of production and overhead.

NOP (Net Operating Profit) $

Total dollars of profit retained after paying all cost of production and overhead.

Marketing

 

Marketing

Marketing is the process of gaining the interest of potential customers or clients in your products and/or services. The name of the game in marketing is attracting the correct leads to your company and retaining a growing base of satisfied customers.

Project Dollars Signed

Project Dollars Signed is the sum of the values of each of the jobs you signed in the specific month.

Projects Signed

Projects Signed is the total number of jobs you signed in the specific month.

Production

 

Production

Monitoring your production is critical to see how your projected costs measure up against your bid or estimate. Besides monitoring labor costs, it is important to compare production time frames against the original schedule that was created for the job. If either labor costs or time frames exceeds what was in the original budget, your bottom line will be negatively affected.

Completed Jobs

This shows the number of jobs completed each month.

Projects Completed on Budget

Aspire wants you to become aware of how your actual cost vs. budget or bid turn out on each job. Please enter the number of jobs, completed in the specific month, that the costs of the job equaled or were less than the budget or bid.

Projects Completed on Time

Aspire wants you to become aware of how important schedules are and how they can affect your bottom line. Please enter the number of jobs completed in the specific month that were completed in equal or less time that what was allotted in the contract.

Client Satisfaction

 

Client Satisfaction

Client satisfaction can be affected by many elements of the construction process. These may include the sales presentation, clear communications, keeping the project on schedule, cleanliness of jobsite, protection of the existing home, quality of work, cleanliness and pleasantness of the crews working, the work habits of the crews and subcontractors, quality of materials and the overall finished product. Consider the importance of these and other elements to make sure you end up with a satisfied client that would recommend you to their family and friends. It is important to track how well your customers are satisfied at the completion of the job. Aspire asks that you complete “The One Question Survey” with each of your clients at the end of the job. Remember, “The One Question Survey” is simply asking your client if they would recommend you or your company to their family and friends.

Responses

Please enter the number of times that your customers answered “The One Question Survey” each month.

Positive Responses

Please enter the number of positive responses you received from customers answering “The One Question Survey”.

Response Rate %

Aspire would like you to start keeping track of how many times you asked “The One Question Survey” compared to how many jobs you completed each month.