Corporate Finance

Year-end KPIs for Service Businesses

By November 17, 2017 No Comments

If you are a service business who bills by the hour, you learn to hate the holidays.  Vacations and fewer billable days in the month conspire to crush financial performance.  Vacations are inevitable and people will take time off for the holidays (overall probably a very healthy thing).  However, how do you know if it is the vacations that are killing your business performance or the number of days in the month?

Here is the issue:

There are 23 billable days in August, 22 in May and June, only 19 in February this year, and there are only 20 in each November and December.  That is a variance of over 15% on any given month.  So, what might look like vacation killing your business may actually be simple calendar differences.

To be sure, I watch the Key Performance Indicator of revenue per billable day.  If you compare one month to the other, this is the clearest comparison to determine if vacation or the calendar is the culprit for bad year-end business performance.

There are all sort of reasons why businesses perform at certain points of the year, and the key is to not to fool yourself one way or another.  The simple metric of revenue per billable day will show you in good months and bad how your business is performing.

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