3 Numbers YOU MUST KNOW in Your Service Business!

What's up, everybody?

Cristian here with Copilot Sales and Consulting. We got another video today with Mike Andes himself. We're going to be going over three topics, really one topic, it's a KPI cockpit in our new update. But we have three metrics that we just added to our KPI and I really just want to talk about the significance of them. Some business owners are aware of these metrics and some people aren't. So we're just going to go and get a nice little background from Mike Andes himself. And the first one is going to be lead response time. Um, let's just kind of dive into this why this, why this is important to be able to track in your business and kind of what you're thinking in terms of adding some of these new KPIs.

Yeah, the end of the day, like we've always tracked close ratio, which is, you know, the number of estimates are accepted divided by your total number of estimates. And we've tracked that for a while. However, the thing that we want to start thinking about is like, what are the KPIs that are affecting close ratio? I think close ratio is extremely important to know for so many different areas of business. But when it comes to what can I do to actually improve my close close ratio, one of the biggest things we see is your lead response time. It just in general, the sales cycle, cutting out time at every single stage of the process. When someone calls you, how long does it take you for you to get them back to them? Do you estimate over the phone or do you go meet them in person? Does it take you three days to put the estimate together? Does it take you a week to put a drawing together for a design? These are all things that add time to the equation, add time to the sales process. And anytime you add time, you're going to reduce your close ratio. So we're adding these KPIs just to be able to give owners better decision making frameworks. Because, for example, someone's like, oh man, my close ratio's gone from 45% down to 30%. But if I can also at the same time see a KPI that says, well, yeah, your lead response time has gone from one day to four days because you're backed up or because you're lazy or whatever, that can absolutely impact your, your bottom line. And now you know why? It's not like, oh man, my closers, no one's accepting I should lower my prices. I was like, no, you need to do a better job of getting the Lead and inputting them into the software and sending out the quote faster. So now when you create an estimate, essentially it's going to ask you when was this estimate requested? And it's going to default to six hours ago because like the average that we see, typically when someone from the time they request it at the time you're actually creating it. But then if it's immediate, you can change it. And if you're doing it over the phone and making it live, or you can do it like, hey, this was three days ago, this is seven days ago. And so it's again just a leading indicator as to what is going to affect close ratio. And in my opinion, close ratio is the end all, be all KPI you must be tracking in the business. Yeah.

And that's just efficiency. Right. And that kind of leads into our next one which is attrition rate for the next KPI. Attrition rate, obviously how can we keep people. Right, yeah. And kind of going into that, it's kind of self explanatory. But again, I want to kind of dive into this a little bit deeper in kind of Mike Andy's mind. Tell us a little bit about attrition rate.

Yeah, so I kind of look at attrition as sort of like the triage, your heart rate, your blood pressure, the basics of like are you overweight, et cetera. And so when, when we look at the KPI cockpit, there's a lot of data there. And so what we're hoping the next few weeks to start doing is using 3D notifications, data driven decisions to take these raw ingredients and actually make something of them and give them as a report to the owner and be like, hey, you're losing customers and all of these customers are in this zip code. Maybe you don't want to serve as this zip code anymore. So we want to make use of these KPIs. But like when it comes to specifically attrition rate, that's just simply the number, the percentage of customers that are leaving every single month. And so for a lot of service based businesses, if you can drive your attrition rate down, you actually increase the size of what your business can become. What I mean by that is if you have recurring revenue, so mowing, cleaning, any sort of maintenance type work, you can actually project where your business will stop growing simply based upon how many new leads do you get every month and how many leads are leaving every month? Because when those, how many customers are leaving every month? Because when your new customer's coming in and your New customers and customers leaving are equal, your business will stop growing. And so for a lot of people, they've been in business for five, 10 years and like, man, I just can't get past 400,000 a year or a million and a half or whatever it is. And the reason is not because you need more leads. It's the fact that you're, you have a leaky bucket. Every time you put more leads in the top and new customers in the top, you got people leaving out the bottom. And that can be because of, you know, customer service issues, quality issues, training your crew, those are things you can control. But it also is just people moving. If you're living in a market where people are moving out of that area, you, you'd have a higher attrition rate if people are dying. If you're serving a really higher, older population, your customers are gonna die. That's one form of churn. And so attrition is something that's very important to track. So that way you can be like, oh, we need to stop spending $2,000 a month on advertising. What we need to do is we need to go spend $1,000 a month on asking customers for surveys. We need to be more thankful to customers, give them some gift cards around Thanksgiving, whatever it might be, because that's gonna help ultimately retain those customers will, that's beautiful.

And so maybe they start to see, well, the 3Ds. Will the 3Ds essentially see this and go, hey, maybe within the software there's some things that you're not taking advantage of feature wise. Maybe like automations for that rapid communication. So you're not losing communication with some of your customers, therefore they don't feel like they're a valued customer. Will the 3Ds be able to recognize some of the features that are going to be able to help?

Yeah, exactly. We think the 3D notifications is kind of like the pie that we were trying to give to the owner. Whereas the KPI cockpit is really the ingredients to the recipe. And so we allow people to see the KPI cockpit. It's gonna be, we're adding more and more features and more and more KPIs to that. It's gonna be complex for most people, too complex. So what people need is not a bunch of data and math and charts. What they need is you need to cut these customers out. You need to raise prices on these customers. You need to, you know, this zip code you're not profitable in. And so that's where we want 3D notification to get to. But we need these raw ingredients. We need these KPIs. And attrition is a big part of that and figuring out what are the holes in the business and why is that happening. And one of the things that 3D notifications will do is really make sure that any spike in attrition is addressed. Because if we have a spike in attrition around a certain month every single year, it's like, well, why is that happening? Oh, that's the time that we send out renewals. Okay. Is there a way we can get around renewals? Is there a way we can do an auto renewal policy and just put people on an off season? So there's ways that you can start to, like, actually look at the data. And then we, using the AI side of things with 3D notifications, like, hey, we think you should change this in the business based upon this, this metric. Yeah.

Beautiful. And our last one is a lifetime value of recurring client. Excuse me. And this one, this one's interesting to me. This is how you kind of can game the game in the future a little bit. I want you to kind of talk a little bit about this one. This one's cool.

Yeah. So if you have a 20% attrition rate, ultimately what that means is you typically would keep a customer for five years. And so if I have $1,000 per year as my annual value of my recurring customer, and I have a 20% attrition rate, which means lifetime value of five years, it means that I'm going to make on average $5,000 in revenue over the next five years from a recurring customer. Let's assume I'm 20% profitable on that revenue. That means I'm going to make $1,000 in profit from one customer over the next five years. Well, that's a really, really important data point because it tells me how much I can go spend on marketing. If I'm really aggressive, maybe I'm willing to spend 100, 200, $300 because I know I'm going to get $1,000 in profit over the next five years. If I'm more conservative, like, well, maybe I only spend 30 or $40 customer acquisition cost. So a lot of people will look at attrition. They'll look at lifetime value of a customer and they'll be like, well, those are more defensive measures. Or like, for projections. No, if you're trying to grow, you need to know how much you can spend on acquiring customers and what the value of that customer is going to be over the Next three, five, ten years. And attrition is going to be the thing that limits it the most. Because If I have 50% attrition instead of that 20% now, all of a sudden the lifetime value of that customer is only $2,000. That same customer. But if I'm turning and burning through customers too fast now, it's gone from 5,000 annual or lifetime value to 2,000. And if I'm 20% profitable now, all of a sudden I'm only making $400 in profit over the next five years. Or, sorry, next two years from that customer. Well, $400. If I spend 300 on customer acquisition costs or giving them some discounts at the beginning, I literally might not ever make money on a customer because my attrition is too high. So all these KPIs start to kind of merge and mix and kind of, you know, go into each other. And then the goal of the 3D notification is to identify those correlations and see, oh, you, what you need to do is you need to stop offering the service because all of your attrition is coming from that and they are not profitable. So that's kind of the goal of, of the KPI cockpit and eventually the 3D notifications for sure.

I think it's a really cool way for business owners to also educate some of their employees, maybe the crew leads or whatever the case is too, about the metrics of business as well. The KPIs are specifically a little bit simplistic. You break them down. We have these videos kind of telling people how to read them as well. And hopefully in the future too as well. We increase the complexity of our reports page too as well.

Yeah, a lot of times when it comes to KPIs, it's not about knowing. It's not like, do I know these numbers? Everyone wants to like, do you know your numbers? Yeah, that's fine. But what's more important to me as a business owner is I want to know those numbers over the course of time and see if there is a correlation or a direction that we're moving. Because my close ratio is always 30%. Okay, that tells me I'm 30%. But if it was 30% last month and 35% this month, and I'm on pace for 40% this month, that's a projection, that is some sort of a correlation that I need to know why that's happening. And it also means that potentially maybe I need to raise prices. And so not just knowing your numbers, but knowing your numbers over time and then Knowing what they mean for your business is the whole goal of trying to use AI to actually tell these owners. Yeah. Know your numbers. But then here's like the actionable things in your business you need to do based upon those metrics.

Yeah. And the last thing just. Cause I've gotten a couple people talking to me when I have some of these zoom meetings from users and stuff like that. Do we place plan on making our KPI cockpit a little bit customizable or maybe hide or show certain KPIs that aren't maybe pertaining to certain industries within home service? Because we are trying to reach out to a little bit more recurring series industries.

Yeah. So a lot of the KPIs down the road we'd probably make the KPI cockpit where you can move them around, adjust the size of them, which ones you want to see that are most important because we're going to keep adding more KPIs. Like right now there's like 20 or so. Like we probably end up having 40 or 50. So you'll. Certain ones you might want to see more often or have highlighted. But honestly in my opinion like what some people would probably actually do is like hide the KPI cockpit because the 3D notifications, that's what I really want to give owners. That's what's different about Copilot is, is the fact that we're going to tell them what to do. We don't really need to show the behind the scenes which is like the kitchen of us making the pie. Right. So our goal is like hey look, if you want to see the in depth math and like the metrics of what we're using to calculate these 3D notifications, you can, you can go into the kitchen, you can see all the ingredients, you can see the close ratio and the lead response time and all these other metrics that we track if you want to. But honestly the vast majority of business owners just want to know, oh, based upon these three key indicators and these triangulate to tell me that you need to hire someone in four weeks. That's all they need to know. They don't need to know that based upon this metric and this metric and 10% of this and based on last year, they don't know all that math. That's what AI can do. And then give the meaningful, actual actionable advice to the owners.

No, for sure. Key performance indicators. Guys, we appreciate you guys tuning into these videos. We'll have one next week for you as well. Check out our Copilot University if you're interested or if you just join. Steven's constantly updating that we do have a new member to our crew. His name's Parker. Go ahead and reach out to him if you need some help as well. He's fantastic. We are going to be doing our monthly webinars as well, so tune into those. Make sure you're seeing those on our Facebook page when we're posting about it. 747 weekly updates. We've got a lot of transparency and communication coming out to you guys in terms of innovation on Copilot. And if you want to get a little bit of information on maybe some of our subscription levels and the features that they provide and how to maximize them, please schedule a zoom call with me, Christian Nelson. I would love to talk to you guys about your business. We'll see you guys soon.