Glossary
Gross margin
Gross margin is revenue minus the direct cost of delivering it, as a percentage: a ten thousand dollar job costing six thousand runs at forty percent. What counts as a direct cost is a choice your accountant makes, so compare your own figure over time and be careful comparing it with anybody else's. It decides whether growth is worth having.
01
Where margin belongs when the accounting close is slow
Monthly for most companies, because it waits on the close. Where a leadership team wants margin visible weekly, the workable substitute is job margin on the work that finished that week, calculated from quoted cost against actual hours. It is rough and it is available on a Friday, which catches bad jobs while similar ones are still being quoted.
Revenue growth on falling margin is the most expensive way to look successful. Margin is where price, mix and delivery efficiency all turn up at once, which is why a drop takes some digging to explain. Watch it against volume: a company discounting to win work posts record revenue alongside a margin that has slipped three points nobody discussed.
Worked example: A commercial roofing contractor grew revenue by a third in a year and made less money doing it. Job margin had gone from thirty-one to twenty-two percent, almost all of it on one crew working a new territory where the estimator was pricing from the old labor rates. The board carried revenue only, so it took eleven months to surface.
Sources: klipfolio.com/kpis/financial; Principles of Accounting, Volume 1: Financial Accounting, section 6.6, OpenStax
Contribution margin
Contribution margin is what one job or customer contributes toward fixed costs after its own variable costs are paid: price minus variable cost.
02Lagging indicator
A lagging indicator reports a result after the period that produced it has closed: revenue, gross margin, employee turnover, satisfaction scores.
03Revenue per employee
Revenue per employee divides annual revenue by full-time equivalent headcount and gives one crude read on how much a company produces per person.
04KPI examples by department: sales, ops, finance, HR
Concrete KPI examples for each department in a small company, tagged leading or lagging and weekly or monthly, to help you build a Scorecard that works.
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