Revolutionize Your Lawn Care Business with These Essential KPIs

As a seasoned entrepreneur, I've learned that tracking the right Key Performance Indicators (KPIs) is crucial for the success of any business. In the lawn care industry, monitoring KPIs is even more critical!

Did you know that the lawn care industry generated $102 billion in revenue in 2020, with an annual growth rate of 4.2%? With such intense competition and a fast-paced market, keeping track of the right KPIs can mean the difference between success and failure.

• Customer retention rate: This metric measures the percentage of customers who continue to use your services over time. A high retention rate means your business has strong customer loyalty and satisfaction.
• Average revenue per customer: This KPI calculates the average amount of money a customer spends on your services. Tracking this metric can help you optimize pricing and identify opportunities for upselling.

These are just a couple of the essential KPIs every lawn care business should be tracking. Check out the rest of this article to discover more metrics that can help take your business to the next level!

Customer Retention Rate

A crucial KPI for any lawn care business is the customer retention rate. This metric measures the percentage of customers who return for repeat business. It is an essential KPI as it highlights the quality of service a business provides, its value proposition and customer satisfaction levels. By having a good customer retention rate, a lawn care service is more likely to increase its customer base and revenue in the long-term.

Definition

The customer retention rate measures the percentage of customers returning for repeat business over a certain period. This KPI highlights the loyalty and satisfaction of trusted customers and sets the foundation for sustainable future business growth.

Use Case

A lawn care business can use the customer retention rate KPI to understand how their services are experienced by their current customers. Poor customer retention rates may show issues with service quality or customer experience, while steady or increasing retention rates can indicate high levels of satisfaction and value perception among customers.

How To Calculate KPI

The formula for calculating the customer retention rate is:

Where E is the number of customers at the end of a period, N is the number of customers acquired during the period, and S is the number of customers at the start of the period.

Calculation Example

For instance, if a lawn care business starts the period with 100 customers and acquires 20 new customers during the same period, but ends up with only 110 customers, the retention rate will be:

KPI Advantages

• Highlights customer satisfaction levels and loyalty
• Provides insight into the quality of service provided by the business
• Sets the foundation for sustainable business growth

KPI Disadvantages

• Does not account for customers who do not return for business without reason
• May be impacted by external factors such as seasonal changes and market competition
• Does not show why customers do not return or switch to other service providers

KPI Industry Benchmarks

A good customer retention rate benchmark in the lawn care industry is approximately 75% to 85%.

Average Revenue per Customer

As a lawn care business owner, understanding your average revenue per customer (ARPC) is crucial to measuring your company's financial health and growth potential. Tracking your ARPC KPI provides valuable insight into how much each customer is contributing to your overall revenue, which can help identify trends and make informed business decisions.

Definition

ARPC is a KPI that measures the average amount of revenue generated by each customer. This metric considers all sources of revenue, including recurring services, add-on services, and one-time products or services.

Use Case

ARPC is a useful KPI for measuring customer loyalty and identifying cross-selling opportunities. If you have a high ARPC, it indicates that your customers are spending more and are actively engaging with your business. Additionally, a higher ARPC means that your customer acquisition costs are lower, as you are generating more revenue per customer.

How To Calculate KPI

To calculate your ARPC, divide your total revenue by the number of customers over a specific period. The formula is:

Calculation Example

Let's say your lawn care business generates $50,000 in total revenue over the course of a year. You have a total of 100 customers throughout the year. Your ARPC would be:

Your lawn care business generates an average of $500 in revenue per customer, per year.

KPI Advantages

• ARPC is a simple KPI that can provide insight into your company's financial health.
• It can help identify customer spending patterns and loyalty trends.
• ARPC allows you to set revenue goals and track progress over time.

KPI Disadvantages

• ARPC can vary widely depending on the time frame and business model.
• It does not take into account the cost associated with providing services or products.
• ARPC can be skewed by a small number of high-revenue customers and does not accurately represent your entire customer base.

KPI Industry Benchmarks

The average ARPC for a lawn care business falls between $400 and $600 per year.

Response time to customer inquiries

In today's fast-paced world, customers expect businesses to reply promptly to their inquiries. Response time to customer inquiries is a key performance indicator that measures how quickly a business responds to customer inquiries. Tracking this metric helps businesses to improve their customer service and build a positive reputation.

Definition

Response time to customer inquiries measures the time it takes for a business to respond to customer inquiries and resolve their issues.

Use Case

A fast response time to customer inquiries is crucial for customer satisfaction. Keeping customers satisfied is important as it leads to customer retention, which is key to the long-term success of any business. By tracking this KPI, businesses can improve their customer support services and respond to customers promptly, reducing the risk of customer churn.

How To Calculate KPI

The formula to calculate response time to customer inquiries is:

Calculation Example

Suppose a business received 50 inquiries within a month, and it took them a total of 15 hours to respond to and resolve all inquiries. Therefore,

This means that the business takes an average of 30% of the month to respond to each customer inquiry.

KPI Advantages

• Helps to improve customer satisfaction
• Identifies flaws in the customer support system
• Ensures prompt response to customer inquiries, thus reducing customer churn

KPI Disadvantages

• May not reflect the quality of the customer support provided
• Does not factor in the complexity of the inquiries or the resources required to resolve them
• May vary depending on the industry or business size

KPI Industry Benchmarks

The ideal response time to customer inquiries varies depending on the industry and business type. However, the average response time across all industries is around 24 hours. Businesses are encouraged to set their own benchmarks depending on their customers' needs and industry standards.

Number of new customers acquired

Definition

The number of new customers acquired measures the total number of new customers that have made a purchase from your lawn care business over a certain period of time. It is a key performance indicator for any lawn care business that wants to grow its customer base.

Use Case

The number of new customers acquired is an important KPI for lawn care businesses as it directly affects the overall growth of the business. By tracking this metric, owners and managers can make informed decisions about their marketing and sales efforts to attract new customers.

How to Calculate KPI

To calculate the number of new customers acquired, use the following formula:

The total new customers are the total number of customers who have made a purchase during the current period. The previous customers are the number of customers who have made a purchase in the previous period.

Calculation Example

Let's say that your lawn care business started the year with 100 customers. Over the next three months, you acquired 50 new customers. However, 20 of these new customers were previously customers who had not made a purchase in the previous year. Therefore, the number of new customers acquired during this period would be:

KPI Advantages

• Gives an accurate measure of customer acquisition efforts
• Can help identify changes in customer behavior
• Can assist in forecasting future growth

KPI Disadvantages

• May not provide insight into customer retention
• Does not take into account the quality of new customers
• Does not consider repeat sales from new customers

KPI Industry Benchmarks

According to industry benchmarks, lawn care businesses should aim to acquire 10-20% new customers annually.

Percentage of customer referrals

Definition

The percentage of customer referrals is a KPI that measures the number of new customers that were referred to your lawn care business by existing customers, expressed as a percentage of total new customer acquisitions.

Use Case

This KPI is important in lawn care businesses as it helps monitor the effectiveness of your referral program and the satisfaction level of your customers.

How to Calculate KPI

To calculate the percentage of customer referrals, divide the number of new customers acquired through referrals by the total number of new customers, then multiply by 100 to get the percentage.

Calculation Example

Suppose you acquired 100 new customers in the month of January through referrals, and the total number of new customers for the month was 500. The percentage of customer referrals will be:

KPI Advantages

• Indicates the effectiveness of your referral program
• Reflects the satisfaction level of your customers

KPI Disadvantages

• May not account for all referrals as not all customers may notify the business of the referral
• May not necessarily equate to customer retention and repeat business

KPI Industry Benchmarks for the KPI: Percentage of customer referrals

Based on a survey conducted by Lawn & Landscape, the industry benchmark for percentage of customer referrals is 25%.

Gross profit margin

Definition

Gross profit margin is a key KPI for measuring a company's financial performance. It indicates how efficiently a company produces and sells its products or services. In other words, it expresses the percentage of revenue that remains after deducting the cost of goods sold (COGS) from the total revenue.

Use Case

Gross profit margin is a crucial metric for businesses that produce and sell goods. It enables you to understand how profitable your products or services are and how you can increase their profitability. Moreover, gross profit margin is a useful KPI for comparing your business performance with your competitors.

How To Calculate KPI

The formula for calculating Gross profit margin is:

Calculation Example

Assume that your company sells gardening tools and generated a revenue of $50,000 in a month. The cost of goods sold for that month is calculated at $20,000. Therefore, the Gross Profit Margin for the month would be:

KPI Advantages

• Gross profit margin helps you understand your business's financial efficiency.
• It enables you to identify areas where you can improve your profitability.
• Gross profit margin is a valuable metric in comparing your business's performance with your competitors.

KPI Disadvantages

• Gross profit margin doesn't measure all associated costs and expenses.
• It doesn't account for fixed costs and overheads.
• Gross profit margin can be misleading if you don't calculate it correctly or compare it with your industry benchmarks.

KPI Industry Benchmarks for the KPI: 'Gross profit margin'

The acceptable Gross profit margin varies according to industry type, business size, and the competitive landscape. However, the average Gross profit margin for a healthy business is around 60%. The following are some Gross profit margin benchmarks for different industries:

• Retail - 25%.
• Manufacturing - 60%.
• Services - 80%.

Number of recurring contracts signed

Definition

The number of recurring contracts signed is a key performance indicator that measures the number of contracts that your lawn care business has signed with clients for recurring services, such as weekly lawn mowing or biweekly fertilization.

Use Case

By tracking the number of recurring contracts signed, you can measure the success of your business in building long-term relationships with clients and securing a steady stream of revenue. This KPI can also help you identify areas for improvement in your sales and customer retention strategies.

How To Calculate KPI

Calculation Example

Let's say your lawn care business signed 30 contracts for weekly lawn mowing services in the month of June, and 25 contracts for biweekly fertilization services during the same time period. The total number of recurring contracts signed for June would be:

KPI Advantages

• Helps measure business success in building long-term client relationships
• Provides insight into revenue stream and financial stability
• Allows for identification of areas for improvement in sales and customer retention strategies

KPI Disadvantages

• May not accurately reflect the quality or profitability of recurring contracts
• Does not provide insight into one-time contracts or project-based revenue
• May be affected by external factors, such as seasonality or economic conditions

KPI Industry Benchmarks

According to industry benchmarks, the average number of recurring contracts signed per month for a lawn care business is between 50 and 100. However, this can vary depending on factors such as business size, location and services offered.