Short instructional talk presenting five key performance indicators (KPIs) for HVAC installation/replacement business units, with industry benchmark targets and brief commentary on their interpretation and implications. Emphasizes measuring labor percentage, equipment/materials percentage, gross margin, departmental sales mix, and warranty expense to drive improvement.
Questions this video answers
9% or under
35% or under (many achieve ~25%)
At least 45% or greater (after commissions and financing fees)
At least 60% of company sales (preferably more)
2% or under
What gets measured and recognized gets repeated and improved. Hey Titans, today we're going to talk about KPIs for your H Vac, install or replacement business unit. So where do we start? Well, like I said before, I want to keep things pretty simple. So I've got five key areas I feel like every company should be measuring. So the number one is your labor percentage. What should it be? Well, the industry benchmark is 9% or under. A lot of people are achieving even much better than this. But if you don't know where you're starting at 9% is a good benchmark. Alright, the second one is your equipment and materials percentage of the total sale. So we go out and we buy all this equipment, we buy the materials and really depending upon your product mix this may go up or down. But the important thing with any KPI is just to start measuring and then trying to improve upon it. But the industry benchmark is 35% or under. I know a lot of great companies that have this at 25% so it can be done. Alright, the third thing is your gross margin percentage for the overall for the department. And really this should be after your commissions and maybe some financing fees or anything else that may go in that, but it should be at least 45% or greater. That's what a healthy industry benchmark is for a residential replacement company. Obviously commercial gross margin percentage is quite a bit lower than that a lot of times, but sometimes not. Alright, the fourth thing is what percentage of this particular department should it be of your overall company sales? Well, before we talked about what the service department should be, what maintenance should be. Well, in a healthy business mix, this should be at least 60% of your company sales, preferably maybe even a little bit more. Theoretically in a perfect world this would be 100% because we know that one install produces the same amount of gross profit dollars as typically what it takes us in a whole week of service work. But in reality a healthy mix is to have 60% or greater as your total overall mix. At number five is your warranty expense. This includes your recalls, your manufacturer warranties, and the KPI for this is 2% or under. So if you start to skew above this, you may have maybe a manufacturing issue, maybe it's a process issue, but we don't know unless we measure service time makes it really easy to track this whether it was a warranty related issue or a recall due to maybe a labor error as well. So hopefully you'll use these KPIs. The point is these numbers are references. You measure and you see what your own benchmark is. Because here's what we know. What gets measured and recognized gets repeated and improved. Facebook.
