The Contractor's Metrics Dashboard
Measure lead and lag indicators to predict and drive profitability
Most construction businesses measure the wrong things or measure the right things the wrong way. Standing on the scale daily measures weight but doesn't drive weight loss. This framework distinguishes between lead measures (activities you control that drive results) and lag measures (the results themselves), then identifies the specific metrics that matter for a construction business.
The framework centers on two types of closing rates: quantity (how many jobs you need to look at to close one) and value (the dollar amount of work you need to evaluate to hit your revenue target). Together with weekly lead reverse-engineering, these metrics allow you to predict revenue months in advance and adjust marketing, pricing, and operations proactively rather than reactively.
The framework also includes a weekly schedule communication process (Look Back, Look Now, Look Ahead) that translates financial metrics into actionable daily targets for field employees. By communicating labor budgets and production schedules at the task level, you leverage Parkinson's Law in your favor: work will fill whatever time is allotted, so allot only the time that was priced.
- What gets measured gets done, but measuring the wrong things gets the wrong things done
- A measure quantifies a thing; a metric compares it to a baseline. You need metrics, not just measurements
- Lead measures are activities you control; lag measures are results you want. Focus on leads to drive lags
- Profitable construction companies have closing rates between 30% and 50%; higher rates indicate underpricing
- In the absence of information, people make stuff up. Communicate numbers to your people constantly
- Reverse-Engineer Your Weekly Lead RequirementsDivide your annual revenue target by your average project size to determine jobs needed per year. Divide that by your closing rate to find total prospects needed. Divide by 52 weeks to get your weekly lead target. For example: $1M target / $25K average = 40 jobs / 33% close rate = 120 prospects / 52 weeks = 2.3 leads per week.Pro tipIf you're consistently getting more leads than your weekly target, you have room to raise prices. If fewer, focus on marketing before you face a cash crunch months from now.
- Track Quantity and Value Closing Rates MonthlyRecord every qualified prospect (excluding obviously unqualified leads) and whether you won or lost each opportunity. Calculate quantity closing rate (jobs won / total proposals) and value closing rate (dollar value won / total dollar value proposed). Track monthly and review quarterly.Pro tipA rising closing rate quarter-over-quarter could mean your prices are too low relative to the market. A declining rate above 25% often means your pricing is healthy and you're attracting the right clients.WarningExclude clearly unqualified prospects from your data. Including the person who wants a $500K project on a $50K budget will artificially skew your closing rate downward.
- Hold Weekly 30-Minute Schedule MeetingsMeet with your people every week using the Look Back, Look Now, Look Ahead framework. Review last week's production against schedule, set this week's goals adjusted for any slippage, set next week's preliminary schedule, and discuss what's coming in future weeks.Pro tipCommunicate the labor budget (hours allocated) for every scope item to your field teams. They want to win the game but need to know how you're keeping score.WarningIf you only communicate an 8-month overall schedule without weekly breakdowns, Parkinson's Law guarantees the project will take at least 8 months, probably more.
- Review Expenses Line by Line MonthlyPrint all expenses, eliminate vague categories like 'miscellaneous,' and for each item under $100/month ask: Do I need this? What would I do without it? For larger expenses, confirm they are generating more value than they cost. Track your Total OPEX PTR trend monthly.Pro tipThe lag measure is 'reduce Total OPEX PTR by 10% over 12 months.' The lead measure is 'review all expenses monthly and eliminate or renegotiate unneeded items.' Track whether you did the review, not just the outcome.
Kelly and Janice Stitzer thought they had 30% net profits because their P&L showed it. But they had no cash. Investigation revealed owner's draws were not on the P&L, and they were chasing volume metrics (typical roofing industry) rather than margin metrics suited to their unique premium business.
Shawn Van Dyke developed this framework after observing that his client Kelly and Janice Stitzer of CIG Construction thought they had 30% net profits but had no cash. The problem was they were measuring the wrong metric: their P&L showed a high profit percentage because owner compensation was hidden in draws. Once the right metrics were measured correctly, the real picture emerged and they could set meaningful targets. The closing rate framework came from consistently seeing struggling contractors report closing rates above 50%, which counterintuitively indicated their prices were too low.