Top 4 Metrics to Track in Your Service Business

Are you measuring the right things in your service business? Providing a service is very different from running an e-commerce or retail business. There’s no inventory to track, but there is still a lot to count.

In growing my service business to a seven-figure success with franchisees, I learned that metrics mattered. Keeping count of important data gives you the insight to know what is working, what is not, and where to focus your time and money. 

No matter what sector your service business operates in, these are the top 4 metrics you should be tracking. 

Marketing Metrics

Digital marketing platforms have a dashboard for reporting and analytics which provide a load of data. It’s easy to get caught up in reach and engagement. And sure, it’s exciting to see how many followers and views your content or ad is getting. But what really matters is whether this activity connects you to new customers, and creates more revenue for your business. There are three key marketing metrics to track:

Click-throughs

How many people engaging with you online click through to your website? Anything over 2% is considered good. If your click-through rate is lower, consider the strength of your messaging and if you are reaching your target audience.

Lead Conversion

How many of the people who land on your website actually make contact? Email, webform, phone call – they are showing interest in booking your service. Measure how many site visitors convert into a lead and are potentially a new customer.

Closing Rate

Closing a deal with a new customer is the goal of all marketing. For a service business, this usually means a booking or appointment. If you close every lead, then get more leads – and more business! If your closing rate is low, step back to analyze why. 

Also, don’t limit marketing your service business to the internet. Direct mail, lawn signs, community papers, collaborations, and networking are all effective channels to generate leads. Track leads and closing rate for each channel. Record customer count, and revenue. You may find one channel doesn’t generate many leads. But, if the closing rate is high and lands repeat customers, then it’s worth it!

Retention Metrics

Retention and repeat business are the foundation of a successful service business. After all, most items are not purchased very often. When someone buys a car or a couch, it may be years before they buy another. But services are different, and usually follow a schedule. Haircuts may be monthly. Lawn cutting is seasonal, but every 2 weeks. Window cleaning and tax returns are annual. Keeping customers coming back to you every time they need the services you provide means steady revenue, and lowers marketing costs. 

Customers come and go, for all sorts of reasons. People move. Circumstances change. For this reason, retention is never 100%. Tracking turnover tells you how much of your current customer base is new. If all of your customers now were not customers a year ago, that means you are good at acquisition. But what happened to the customers you had a year ago? If they are not returning to use your services, this is an opportunity to figure out why. 

However, if your business is very niche for a specific age or stage, then retention has a time limit. Say your business is tutoring children in math and science. It’s valuable to know that parents come back to you year after year. But eventually, those kids will graduate and move on, beyond the curriculum you support. 

Quality Metrics

Quality is everything, especially in a service business that depends on repeat customers. Keep track of complaints, breakage, and other metrics that matter in your business. Review on a monthly or quarterly basis to look for trends. For example, in a month your business saw X customers, and there were Y complaints. Calculating Y/X gives you a complaint ratio. If the rate of complaints go up, you can examine why. Has there been changes in products, procedures, or staff? This is how tracking metrics can help you make smart business decisions.

Profitability Metrics

Revenue is only half of running a successful business. Profits are what really matters. I recommend looking at profitability from 2 perspectives:

Per customer

Some surprises happen when we analyze the numbers. The customer you thought was your best actually drains a lot of resources, has high margins, and gives you the lowest profit. Knowing who is really earning you the most profit identifies your ideal customer profile. And with that, you can improve your marketing. 

Per service

How many services does your business offer? What are the labour and product costs involved with each? Understanding the profit rates of each service tells you what to focus on and what is most valuable for your bottom line.

Tracking these metrics in your service business gives you important information that guide business decisions. Marketing strategy, price points, and customer communication plans can be smarter and more focused with the benefit of this data.