Q&A: Why KPIs matter to HVAC businesses


Don from Tallahassee, Fla. writes:

Hi Dave, 

I've heard a lot of talk about KPIs and the importance of measuring them, but I'm not exactly sure what they are and how they bring value to my HVAC business. Any suggestions? Thanks! - Don 

Hi Don,

Great question. First, let's define a KPI. KPI stands for key performance indicator and it simply is an indicator as to whether or not your business is operating the way you want it to operate. Then you measure that KPI against an industry standard.

In the heating and air conditioning business, there are a tremendous number of KPIs, but to name one as an example, a KPI for HVAC could be that you're looking for 15 percent net profit on an annual basis.

It's important to remember that the industry standard is an average, which suggests people are both above and below that line. So let's say the industry standard is 10 percent, but I want 15 percent, then I'm 5 percent over the industry standard. But if I'm at 5 percent, then I'm below industry standard. When you're below the industry standard you then ask yourself, "How do I get to the industry standard, and then how do I move to where I want the company to be?"

So, in this one example we have four KPIs:

  • Industry standard 10 percent
  • Above industry standard 15 percent
  • Below industry standard 5 percent
  • Where my company is ? percent

Lennox has a significant list of KPIs as to where a business needs to be to operate successfully. For example:

  • Percentages on the financial statements
  • The number of sales each salesperson should be generating
  • The amount of revenue for each technician
  • Amount of revenue for each installation crew
  • Amount of revenue per employee in the business

All of these examples are measures that we have put out over time and are available by asking your Lennox TM.

Some additional things to keep in mind about KPIs:

  • They're nationally based.
  • They're unaffected by weather or the economy.
  • Don't set it and forget it. Measure your KPIs throughout the year and set action plans and responsibilities to individuals in the company to sustain or improve your numbers.

Dave Nichols is a Regional Training Manager with HVAC Learning Solutions.

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