NexGen Air owner explains top KPIs every contractor needs to know—and track—to grow and achieve extraordinary results.
Taking a blended HVAC-plumbing business in Southern California from zero profitability to $30 million in four years required smart, data-driven decisions, says NexGen Air Conditioning, Heating & Plumbing Owner Ismael Valdez.
He also tried to keep things simple.
“We didn’t overcomplicate anything,” says the NexGen Air CEO. “Others add these complicated processes. We kept everything super simple, and we focused on marketing. It’s the most important thing.
“You can have the vans, the financials, the people, the processes—you can have all of that,” he adds. “But, if you don’t know how to make the phone ring, nothing else matters.”
We dive further into NexGen Air’s effective marketing strategies below, but Valdez likes to put things in simple terms when explaining the most important Key Performance Indicators (KPIs) for contractors to know and track. He compares making data-driven decisions to building and maintaining a car.
“You’re building a car as you’re building a business, and all of your data is on your dashboard,” he explains. “If you want to know how efficient, how good or how bad your car is running, it’s your digital gauges that are going to tell you everything. Tune-up, brakes, low refrigerant, leaks, or engine check light—all of that data is inside the dashboard.
“That’s kind of how ServiceTitan works in our home service industry,” says Valdez, who signed on with the digital software company for the trades from the beginning and credits its powerful reporting capabilities for helping him grow NexGen Air so quickly.
“Everybody’s business is going to be different, as for what you track. But it’s not just about what we’re extracting,” Valdez says. “ServiceTitan has been amazing at building a platform that we can extract and collect all of this information. Half the battle is being able to extract that information, then display and showcase it.
“The second part is knowing what to do with those KPIs to strengthen your business.”
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In a recent webinar hosted by ServiceTitan, Valdez outlines the five most important KPIs for every growth-minded contractor to know and track. He also discusses how to track that data in ServiceTitan, and leverage those KPIs to make strategic business decisions.
Manage massive growth by understanding your data
Valdez started NexGen Air in 2016 with a mindset to grow—and grow he did.
Earning nearly $1 million in its first month of operation set the stage for NexGen Air to garner $9.8 million in revenue the first year, $18.1 million in 2017, $24.3 million in 2018, and $30 million in 2019. Today, with eight locations servicing most of Southern California, the company’s on track to earn $35 million in 2020.
However, Valdez knows some HVAC and plumbing contractors prefer to maintain a certain level of revenue (in the $1- to $3-million range) and they don’t necessarily want to experience massive growth. He admittedly describes the process as one filled with mayhem, headaches, and constant communication.
“Not everybody’s meant for this,” Valdez says, with a glint in his eye. “I want it. I love this grind. I’m here early in the morning. I’m working on Saturdays. I don’t stop—because I love it.”
Valdez learned the importance of harnessing his company’s data after that first year of huge growth, and reading articles about how the power of data has become a more valuable resource than oil in today’s economy.
“That’s when it clicked,” he says. “It can’t just be a hustle anymore. It can’t be go install, go install, go install. You need to start making educated decisions.”
To grow in a healthy way, he realized he needed to track his team’s performance and mistakes to show “the good and the bad” in the company, then work to make improvements.
“That’s when I started gathering all the data for NexGen Air, and tracking all of the KPIs … tracking everything we do on live reporting,” Valdez says. “Most contractors don’t realize that, because they’re just on cruise control, and they don’t realize how powerful and how important it is to know that.”
5 KPIs for every contractor to know and track
The top KPIs for contractors tend to focus on five important areas of the service company: Technicians, Marketing, CSRs, Sales, and Financials.
Top Technician KPIs for Contractors to Track
Average Ticket—For every technician, whether it’s one or 100, contractors need to know how many opportunity calls each tech handled per week or per month, and how much revenue each call produced. This includes tracking each tech’ average ticket on all repairs and turnovers, as well as their closing percentage on both. “That tells you how much value they’re building inside the home,” Valdez says.
Turnover Rate—Service techs often turn over calls to a project manager or senior service technician to better educate customers about a high-cost repair or possible replacement options. Track the number of turnovers, how many result in sales, and the average ticket from those closed sales.
Zero Tickets—A “zero ticket” means “you’ve lost that customer for life,” Valdez explains. He trains NexGen Air techs to always offer good-better-and-best options on every service call, which shows they’ve interacted with the homeowner, and often results in securing a future customer. If you’re going to go into a customer’s home, you have to come out with something,” he says. “If you leave with zero, the chances of them calling you back is probably slim to none.”
Memberships—Valdez says “memberships sold” doesn’t mean the same today as it did five, 10, or 15 years ago. Before the internet and social media, homeowners often waited around all day for one contractor to show up at their house. Today’s communication tools, such as GPS tracking or texting a customer to let them know a tech is on the way, didn’t exist.
“Now, members call to schedule a tune-up, and you tell them you can get there in two weeks. They can go online and get another contractor there in two hours,” Valdez says. “We live in a whole different era now.”
Track memberships, he says, but don’t beat yourself up over how many your techs sell.
“I’ve been in business for nearly five years, and I don’t have 100,000 members,” Valdez says. “We probably have 80,000 to 90,000 people in our ServiceTitan customer database. That is what matters, not the memberships. It’s the data that’s inside ServiceTitan.”
When trying to determine a healthy average ticket for each technician in your company, Valdez says it depends on your financials, overhead, marketing spend, and what it costs you to do business.
“For me, I want to track at least $450 and up. If I can track a $450 average ticket and up on every technician, then I’m in the green,” Valdez says. “Our goal right now is to shoot for a $500 average ticket, and right now we’re tracking around $370 or $380, which isn’t bad, but I know there’s room for a ton of improvement.”
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Top Marketing KPIs for Contractors to Know
Valdez attributes much of his growth in the first four years to “marketing and people.”
“Marketing is the most important KPI you want to track, because that’s the fuel to your car,” Valdez says. “You built the car. You want to go forward, you put fuel in it. Your marketing is your fuel.”
With marketing, contractors need to track gross revenue per lead source, the number of leads generated by each source, and the closing percentage on each marketing lead.
For the people part of the equation, he says it’s simply a matter of knowing your growth mindset.
“You have to look deep inside and understand what you want to be,” he says. “Do you want to be a $5 million company for the rest of your life … or do you want to grow out of control?”
To do the latter, plan on allocating 12 to 14 percent of revenue to your marketing budget and thoroughly research which marketing tactics are working best for your company.
“I don’t consider myself a marketing genius or anything, I just pay attention to what people are paying attention to,” Valdez says.
In 2016, Valdez focused on print marketing, because digital marketing remained in its infancy. He created a simple but unique company name that customers could easily remember, along with a “badass logo,” and started flooding the market with HVAC-plumbing service coupons in local newspapers, magazines, and direct-mail flyers.
That strategy worked for a few years, he says, but he changed tactics when ServiceTitan data showed his print marketing efforts starting to dip. He expanded with more digital marketing, billboards, and TV advertising, especially during the pandemic shutdowns.
Building Yelp and Google My Business accounts for each of his eight locations, along with digital marketing through Google Local Service Ads and Pay-Per-Click campaigns for each one, work best right now when combined with his TV ads.
“I feed my marketing with TV, and then capture it on digital,” Valdez explains. “I feed the TV, and lead the fish into the net. The net is Google, and I capture the fish with Google.
“It’s tracking what works now—that’s the most important thing. Three years from now, people may not go to Facebook for HVAC.”
Customer reviews matter, too. “We have 5,000 reviews across all platforms. ...That’s what is working right now, but it’s because of the structure I built,” he says. “Find out what works for you.”
Track Top KPIs for CSR Performance
Valdez uses ServiceTitan reporting combined with DataCube to track company performance in real time, using computer screens to display live, up-to-date information for every department—including measuring the effectiveness of his CSR team.
The digital technology tracks how many calls each CSR takes in a day, along with booking percentage, email captures, and outbound follow-ups. He says the live, computerized displays help to quickly expose weaknesses by a poor performer.
“ServiceTitan and DataCube expose the weaknesses inside the company,” says Valdez. That’s important, he says, because how a company addresses those weaknesses often dictates whether it continues to grow and thrive.
Take what you learn from KPI tracking, and apply it to coaching your team to perform better.
“That’s what you do with your KPIs—you coach people. You’re not there to write ‘em up, fire them, or tell them ‘you’re not doing this right’—you’re there to coach them,” he says. “Give them as much coaching as you can, and if it’s falling on deaf ears, then they gotta go.”
Top Sales KPIs for Contractors to Know
Valdez says 80 to 90 percent of NexGen Air’s revenue results from his project managers closing sales on marketed leads or turnover calls from service techs. For project managers, he tracks total opportunities, number of booked deals, and the amount for each job sold.
More importantly, however, he tracks each project manager’s average discount. Valdez would rather see a low average discount of 3 to 5 percent on $300,000 in total revenue, versus a 20-percent average discount on $500,000 in revenue.
“What is your average discount? That’s all I want to know, because if you’re giving stuff away, anybody can do that,” he says. “If you’ve got an average discount of 20 to 25 percent, you’re not doing me any good.”
Trying to keep 72 installers busy every day, Valdez knows discounts remain common in the industry, but he expects a healthy project manager to run at least a 35- to 40-percent closing rate.
Remember, the most important Sales KPIs to track:
Average Ticket
Average Discount
Number of Opportunity Calls Made
Number of Opportunity Calls Closed
Opportunity-to-Close Rate
Top Financial KPIs for Contractors to Track
For top financial KPIs, know your gross profit margin, set overhead, and break-even point, Valdez says. Not paying attention to those three things nearly ruined his company.
“You’ve got to know your overhead. That’s what got me in trouble last year,” says the home services company owner. “I was spending so much on marketing. … I was trying to go to $50 million last year—without a plan.”
He called in Tom Howard, ServiceTitan Vice President of Customer Experience, for help, and they came up with a solid budget plan. Now, Valdez understands the need to closely track monthly expenses and gross profit to know exactly how much to target in revenue.
“If your overhead is $1 million each month and you want a 50-percent gross profit margin, then you have to make $2 million to break even,” Valdez explains. “If you do anything above that, then you can take the 50 percent off, and that’s called your net profit.”
Creating a budget, he says, is like following your car’s navigation system. It tells you how fast to go, whether you need to slow down for traffic up ahead, and when you can hit the gas as the road clears.
“Your budget tells you exactly how you’re doing, what you should be doing, and where you should be going,” Valdez says.
NexGen Air took a step back this year to restructure its management teams for both HVAC and plumbing, and toned down its marketing spend to about 8 percent. The goal for 2021, Valdez says, is to remain healthy.
“My goal in life is to keep my four beautiful daughters and my wife healthy and my family close, but my goal at NexGen Air is to grow from $0 to $100 million in the fastest, most healthy way possible,” he adds.
ServiceTitan is a comprehensive HVAC business software solution built specifically to help service companies streamline their operations, boost revenue, and achieve growth. Our award-winning, cloud-based platform is trusted by more than 100,000+ contractors across the country.
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