The Top KPIs for Service-Based Businesses: The Metrics You Should Be Monitoring
Summary
Most service-based businesses choose to monetize this asset through some type of labor arbitrage, which is transacted based on a billable hour. For example, in addition to SG&A related HC, filing and processing paperwork with government agencies, scheduling projects, researching complex technical issues, proposal development, and more. For example, a marketing agency may build a website for $100K, but due to the coding and effort required in the design, only generate a 20% gross profit margin. The ability to segregate the economics of a particular part of the business can be a very powerful metric that can be used to identify pockets of profitability or loss in any organization. Typically, a one- or two-month spike or downturn in any of these metrics shouldn’t cause alarm, but if the pattern continues for three or more periods, action may need to be taken.
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