BINDER #010 - Something Else - Data Collection 101: Data Your Pavement Business Needs
I don't really regret anything I did when I started my pavement business in 2018. All things considered, I'd say it went pretty good - despite a lot of effort and a lot of mistakes made along the way.
If I could turn back the clock, however, I would have done a better job of collecting data.
What Data Should I Collect, and Why?
Nowadays, our company has lively discussions about what data we shouldn't be tracking. Ideas that we implemented from a data-collection standpoint in the previous years haven't proved to be useful or necessary, and instead, just bog us down with administration time.
I have great news:
The data that a small company should collect doesn't take a lot of time, and
Can often be gathered with technology, not people.
Here are some critical pieces of data that your striping, sealcoating, or pavement business needs. I'll show you what it is, how to collect it efficiently, and why you need it:
1. Estimated vs. Actual Labor
What it is: How many hours you expected a job to take compared to how long it actually took.
How to collect it efficiently: Use digital time tracking for yourself and/or employees, which can be exported or viewed in the time tracking system. Ideally, track it internally in your estimating software (usually you can "hide" this from your customers to see)
Why you need it: Many owners start their business by quoting their jobs per linear foot (striping) and per square foot (sealcoating, patching). Regardless of how you start, you should always include how many labor hours you think that job will take you. When you have employees, you pay them hourly - so you might as well track on an hourly basis how your projects are performing.
2. Estimated vs. Actual Materials
What it is: How much material you expected to use on a job compared to how long it actually took
How to collect it efficiently: Use digital estimating software to estimate materials. Have employees in the field report their actual material usage.
Why you need it: Inaccurate material estimating can take a big bite out of your profitability. It also helps your team value efficiency and making sure there is good communication between estimating and production.
3. Average Project Value (APV)
What it is: The average revenue generated on won projects.
How to collect it efficiently: CRM's will report this quickly. Otherwise, divide the total amount you have invoiced over a month/quarter/year by the number of invoices you sent.
Why you need it: APV gives you great insight into how you need to build sales targets. You can easily reverse engineer revenue and profit goals by using APV as a target. When trying to achieve revenue goals, increasing your APV is a great way to hit those goals - more parking lots, less driveways.
4. Closing Rate
What it is: The percentage of jobs that convert to a won job compared to how many quotes were sent out.
How to collect it efficiently: CRM systems will track this directly. Otherwise, you can pull a report from your estimating/invoicing software, comparing how many estimates were sent out compared to the invoices sent out.
Why you need it: Closing rate is a great indicator of your sales performance. In general:
If your closing rate is very low (10-20%), you may be over pricing your jobs or have a bad sales process that loses customers.
If your closing rate is very high (80%-95%), you may be underpricing your jobs or targeting the incorrect clients.
5. Gross Profit per Job
What it is: The revenue from a job, less the cost of goods (usually labor and materials) that went into that job. Typically, we show it as a percentage.
How to collect it efficiently: Technology shines here - digital time tracking, estimating, and/or accounting software can all help. The direct cost of goods usually is simple to track and can be reported against the revenue.
Why you need it: This is such a critical metric! It will shed a lot of light on how your jobs are being priced, how efficient your crew is, how many jobs you need to sell to cover your overhead (operational) expenses, and more. A target Gross Profit % can be used when estimating to drive better profitability.
*BONUS* 6. Overhead
What it is: Annoying. (Mostly true). It is all the money that is spent by the company to "keep the lights on", but doesn't directly go to a job. Rent, insurance, computer costs, software costs, etc.
How to collect it efficiently: This is why it's a bonus metric. It isn't easy... unless you leverage technology. Use software like Quickbooks Online or something that allows receipt snapping, accounting rules, simple reporting, and other tools to gather your overhead costs easier.
Why you need it: Overhead can bankrupt businesses. When a business grows, overhead grows with it. Payroll, insurance, fleet vehicles, more equipment, shop rentals, marketing costs... it all goes up! It will force you to realize that $400 jobs simply won't work anymore. Pricing can be adjusted to accommodate the overhead increase. Probably most importantly, however, you will have less stress by knowing exactly where your business stands.