Early this year I presented a seminar at the Real Green Systems Marketing Symposium in Orlando, Fla. The topic covered benchmarks and critical numbers for the lawn care industry.
Benchmarks are universal units that are used for comparison purposes. For instance, the universal unit for comparing the human body temperature is 98.6 degrees Fahrenheit. However, not all benchmarks are created equal. Critical numbers are benchmarks that are especially prescient or foretelling. Such critical numbers for the human body (body temperature, blood pressure, pulse rate) when combined are referred to as “vital signs.” They are especially predictive regarding ones health. Critical numbers, in the context of a business, when understood and used properly can prognosticate its health both short term and long term.
Who in a company should use them? Just about everyone can make use of benchmarks and critical numbers if they know how to apply them. Here are a few examples.
Operations managers using production benchmarks can see which routes and technicians are the most efficient and/or most profitable. Human resource and safety managers can combine hiring, training, production and accident data into metrics that measure the effectiveness of training and safety programs. In particular, individual technicians can compare their daily production results to those of other technicians both within and without the company.
Common benchmarks and critical numbers. Benchmarks and critical numbers should be tied to risk in order to help measure and control it. The greatest risk in an installation or service company is labor. That is why we measure most items in relation to billable man-hours.
There are also relative and absolute benchmarks. A material to labor ratio can vary dramatically and still be within acceptable parameters. However, net profit per man-hour is an absolute metric. The higher the better, the lower the worse it is. A net profit per man-hour of $15 is always better than a net profit of $5 per man-hour. All benchmarks evolve over time but relative ones tend to do so more often. Here are common benchmarks you might find useful.
General & Administrative Overhead - Indirect costs (as a percent of sales):
Conclusion. Benchmarks and critical numbers are a “work-in-process.” They are constantly evolving. I’ve found that the benchmarks and critical numbers I’ve shared with you are fairly consistent throughout North America. They will vary primarily due to the customer density of individual service routes.
I’d recommend you calculate these benchmarks for your company. Then, compare your results to my benchmarks. Share them with your staff to set goals throughout your organization. Send me an email and tell me what you found and if your figures are close to mine. If they aren’t close, maybe mine need to evolve a little more.