The 10 Financial KPIs Every Trade Contractor Should Review Monthly

Ask most trade contractors how business is going and you will hear "busy" or "slow." Neither is a financial metric. Neither tells you whether you are making money, losing money, or about to hit a wall you cannot see coming.

The contractors who consistently hit 10%+ net margins and build real equity in their businesses track numbers that everyone else ignores. Not dozens of metrics—just the right ones, reviewed at the same cadence, every month. Here are the ten that matter most.

1. Gross Profit Margin

Formula: (Revenue − Direct Costs) ÷ Revenue
Target: 25–35%

This is the single most important number in your business. It tells you how much money is left after paying for the direct costs of delivering your work—labor, materials, subcontractors, equipment rental. If gross margin is below 25%, no amount of revenue will produce meaningful profit because overhead will consume everything. Track this by job type (residential service, commercial install, etc.) and by individual technician. The patterns are where the insights live.

2. Net Profit Margin

Formula: Net Income ÷ Revenue
Target: 8–12% (top performers hit 15%+)

This is what is left after all expenses—direct costs, overhead, interest, taxes. The industry average for specialty trade contractors is 3–6%. If your gross margin is healthy but net margin is not, the problem is overhead: too many trucks, too much rent, too many subscriptions, or too many people who are not generating revenue. Cutting the right overhead is often faster than growing revenue.

3. Overhead Rate

Formula: Total Overhead ÷ Revenue
Target: 8–15% of revenue

Overhead is everything that is not a direct job cost: office rent, admin salaries, insurance, vehicles (non-billable), software, marketing, accounting. The "10-10 Rule" provides a useful baseline: 10% overhead plus 10% profit equals a 20% total markup minimum. Above 20% overhead, you are carrying costs that your revenue cannot support—and every new dollar of revenue is fighting uphill.

4. Revenue Per Technician

Formula: Total Revenue ÷ Number of Field Technicians
Target: $200K–$350K per tech annually

This is the most underrated metric in the trades. It tells you whether each truck on the road is earning its keep. Below $200K per tech indicates underutilization (scheduling gaps, too much drive time) or underpricing. Above $300K usually means your pricing is right, your scheduling is tight, and your techs are trained to present options.

5. Days Sales Outstanding (DSO)

Formula: (Accounts Receivable ÷ Revenue) × Days in Period
Target: Under 45 days

DSO measures how long it takes to convert invoices into cash. Above 45 days means you are financing your customers' cash flow at your own expense. Above 60 days is a structural problem that will eventually create a cash crisis. If DSO is creeping up, tighten credit terms, require deposits, and restructure when you collect.

6. Backlog Revenue

What it is: Total contracted but uncompleted work, expressed in dollars.
Why it matters: This is your forward-looking crystal ball.

A healthy backlog provides 3–6 months of revenue visibility. Too little backlog means revenue gaps are coming and you need to accelerate sales activity now. Too much backlog without the capacity to deliver means delays, quality problems, and unhappy customers. Track it monthly and compare it to your capacity—the number of technician-hours available.

7. Job Cost Variance

Formula: (Actual Job Cost − Estimated Cost) ÷ Estimated Cost
Target: Within ±5%

This metric tells you how accurate your estimates are. Consistent overruns (actual costs higher than estimated) mean your estimates are too optimistic—you are busy but losing money on every job. Consistent underruns might mean you are over-bidding and losing work you should have won. Track variance by job type to identify which categories need re-estimation.

8. Service Agreement Penetration

Formula: Service Agreement Revenue ÷ Total Revenue
Target: 25–40%

This is the single most important driver of business valuation. Recurring revenue from service agreements and maintenance contracts provides predictable cash flow, smooths seasonal fluctuations, and commands premium multiples from buyers. If you are below 15%, building a service agreement program should be a top strategic priority.

9. Cash Flow from Operations

What it is: Actual cash generated by business operations in the period (distinct from profit).
Why it matters: You can be profitable on paper and broke in the bank.

Cash flow from operations strips out financing activities and one-time items to show you the raw cash-generating power of your business. If this number is consistently lower than your reported profit, you have a collections problem, a growth-funding problem, or both. A 13-week cash flow forecast is the tool that makes this number visible and manageable.

10. Bid-to-Win Ratio

Formula: Jobs Won ÷ Total Bids Submitted
Target: 25–40%

This metric is a pricing signal disguised as a sales metric. Winning more than 50% of your bids? You are almost certainly underpricing—leaving significant margin on the table. Winning less than 20%? Your estimates may be too high, your presentation needs work, or you are bidding on the wrong type of work. The sweet spot of 25–40% suggests your pricing is competitive without being cheap.

What gets measured gets managed. What gets managed gets improved. What gets ignored gets worse.

How to Actually Track These

You do not need a $50,000 dashboard or enterprise software to start. A well-structured spreadsheet reviewed on the first Monday of every month beats a sophisticated system that nobody looks at. The key is consistency: same ten metrics, same review cadence, every single month without exception.

As you grow, tools like ServiceTitan, Housecall Pro, or even QuickBooks reporting can automate most of this data collection. But the discipline of reviewing and acting on the numbers matters infinitely more than the tool you use to generate them.

Consider a quarterly financial review where you step back from the monthly numbers and look at trends, patterns, and strategic implications over 90 days. The monthly cadence catches problems early. The quarterly cadence reveals whether your trajectory is pointing where you want to go.

The Bottom Line

These ten numbers tell the complete story of your business—whether it is healthy, struggling, or about to hit a wall. Track them monthly. Compare them to the benchmarks above. Act on what they reveal. That discipline is the difference between building real wealth and just staying busy year after year. It is also exactly what buyers and investors evaluate when they look at your business, which means this practice serves you whether you plan to sell, grow, or simply run a tighter operation.