Businesses can improve efficiency and increase profitability by monitoring KPIs, as these help to keep track of various projects and make data-driven decisions.
Introduction
KPIs are quantifiable measures of performance for a specific objective over time. It is a way to track progress and identify areas for improvement strategically.
KPIs are used to ensure that all the teams in a company are contributing towards the overall goal of the organization. These give a clear picture of the successes and failures of a company that help in the future decision-making processes.
The following are the 5 most important KPIs for project-based services companies.
1. Project Success Rate
This KPI measures the percentage of projects completed within the time provided and the estimated budget, therefore meeting the client’s expectations. This also helps the company track its overall project performance.
For example, a textile company has 3 ongoing projects of delivering silk, cotton and woolen garments within two weeks. Their project success rate will be determined by tracking which of these three projects was completed within the stipulated time and estimated budget, without incurring any loss.
2. Schedule Adherence
Schedule Adherence refers to the KPI that helps to measure the extent to which a particular task or project is completed on time. It is calculated by comparing the actual project completion date to the estimated date of project completion.
A higher rate of schedule adherence depicts that a project is progressing efficiently and on time. Whereas a low schedule adherence rate depicts delays and drawbacks in the project.
3. Profit Margin
This KPI helps the company identify which projects are bringing in the most revenue as compared to the cost of production. This profitability index also guides the company’s future decisions about capitalizing on projects with high-profit margins.
There are two primary margins to calculate the profitability of services in a company:
I. Gross profit margin
The profit percentage obtained by dividing gross profit (deducting the cost of goods sold from the company’s total revenue) by the total revenue.
Gross profit margin= (Gross Profit/Total Revenue) *100
II. Net profit margin
The profit percentage is calculated by dividing the net profit (deducting total expenses including taxes and other extra expenses from total revenue) by the total revenue.
Net profit margin= (Net profit/Total Revenue) *100
4. Client and Employee Satisfaction
These are known as the quality KPIs. They track the feedback or response of the customers as well as the employees involved in a project.
These KPIs survey whether the client will come back for future projects, or the needs and expectations of the stakeholders are fulfilled and also, track the employee churn rates.
5. Resource Utilization
It is a measure of how effectively resources were allocated for a project and how much percentage of the available resources were converted into billable projects.
This KPI helps in optimizing resource allocation which leads to greater profitability.
Conclusion
The project-based companies, by using these KPIs, can therefore, gain valuable insights about their company’s performance, and customer feedback and implement new strategies to combat the setbacks.
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