Lesson B202.3 · Business Finance 202: Build a Business Worth Buying
Run on a scorecard: KPIs and budgets
4-minute read · No dated figures
Photo: Mikhail Nilov / Pexels, Pexels License
The short answer
Track five numbers every week: leads, close rate, booked work, gross margin by job, and cash with receivables over 30 days. Once a month, compare the month with a budget you built month by month around your season. Judge every number against your own history, not anyone else's.
Five numbers, every week
| Number | How to figure it | What it warns you about |
|---|---|---|
| Leads | New estimate requests this week | Quiet phones now mean idle crews next month |
| Close rate | Jobs sold ÷ estimates given | Pricing, follow-up or estimates that miss |
| Booked work | Signed work not yet done, in weeks of crew time | How far ahead the schedule is filled |
| Gross margin by job | (Job revenue − job costs) ÷ job revenue | Bad estimates, waste and rework |
| Cash and receivables over 30 days | Bank balance today; unpaid invoices older than 30 days | A cash squeeze before it reaches payroll |
Keep it on one page, filled in the same day each week by the same person. Fifteen minutes on Monday before the trucks roll is enough. Put each number beside last week's and the same week last year.
Example (made-up numbers, not a benchmark or a price guide). Ray's Monday scorecard reads: 14 leads, 10 estimates given and 4 sold, for a 40% close rate; three weeks of booked work; $38,000 in the bank; and $12,500 of receivables over 30 days, up from $6,000 last week. One job from last week billed $6,000 and cost $3,900 in materials, labor with payroll costs, equipment and fuel. That's $2,100 of gross profit, a 35% gross margin. The jump in old receivables is the number that gets a phone call today.
A budget built by month, for your season
A yearly budget split into twelve equal months doesn't fit pavement work. Build it month by month: revenue when crews can actually work, costs in the month they come due (insurance renewals, equipment payments, winter payroll), and the slow months as they really are. Then the months that look bad on paper are the ones you planned for.
After each monthly close, compare actual with budget, line by line. Start with the lines that missed by the most dollars and write one sentence on why.
| June (made-up numbers) | Budget | Actual | Difference |
|---|---|---|---|
| Revenue | $120,000 | $108,000 | $12,000 short |
| Materials | $30,000 | $31,500 | $1,500 over |
| Crew labor and payroll costs | $36,000 | $38,000 | $2,000 over |
| Fuel | $6,000 | $6,900 | $900 over |
Swipe the table sideways to see every column.
Revenue came in short while labor ran over. In this example, rain days with crews on the clock explain both, and the fix starts with scheduling.
Compare with your own history
The most useful comparison is you against you: this June against last June, this year's close rate against last year's. Numbers from other companies come from different markets, customers, crews and accounting choices, so they mislead more than they help. The National Pavement Maintenance Contractors Association (NPMCA) doesn't publish benchmarks that compare members with each other. Your own history is the benchmark.
A year of weekly scorecards and monthly budget reviews is also the record a banker wants to see: proof that you know your numbers and act on them.
Your Move
Do this week
- Pick your five numbers. Use the five above, or swap one that doesn't fit your work for one that does.
- Set up a one-page scorecard, on paper, in a spreadsheet or in your software, with this week, last week and the same week last year.
- Name who fills it in and by when, such as Monday at 7 a.m.
- Hold a 15-minute review with your foreman or office lead and leave with one action.
Log it: Weekly scorecard started.
Common questions
What's a KPI?
A key performance indicator: a number you track because it tells you early whether the business is on course. Five you look at every week beat twenty you never read.
What's a good close rate for a contractor?
No single number fits every market, service and customer. Track yours by service and customer type and watch the trend. A falling close rate is the signal to check pricing, speed and follow-up.
How often should I compare against the budget?
Monthly, after the books close. Weekly numbers steer the week; the monthly budget review steers the season.
Watch out for
- Twenty numbers tracked and none acted on.
- Scorecards built on books that are months behind. Late numbers can't warn you of anything.
- Someone else's posted numbers used as your target.
- A scorecard used to blame people. Once it's used that way, the numbers stop being honest.
Free help
- America's SBDC: free one-on-one business consulting. Find your SBDC
- SCORE: free mentoring from experienced business owners. score.org
Free practice
Lesson check
5 questions on this lesson, one at a time, with the answer and the reason after each. Pass with 4 right, including every must-know question.
This is general education, not tax, legal, investment or insurance advice. Rules change and every situation is different. Check the sources below, and talk to a qualified professional before you act on it.
Sources
- No outside figures are used in this lesson. All numbers are made-up examples.
- America's SBDC: Find your SBDC; SCORE: score.org
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