How a Tree Care Owner Tracks KPIs by Hand to Run a Seasonal Business

You've probably all seen these terms in different ways, but if you can actually cascade them properly in your business, these are revenue drivers. You can do this to every output line on your P&L. You could do this for each COGS item, for each payroll item, for everything on your G&A. You basically have to pick on this list, where am I going to stop and what can I actually control?

So just a quick thought experiment. If you can't track EBITDA, you can't track gross margin, you can't track revenue, and you can't track cash in your bank account, think about your business for three years. You can't look at any of those details. What type of business do you run? What is the leading KPI you would want to know? You only get one KPI to tell if things are going well or not.

Someone said outpatient mental health clinic and it's all about leads, how many phone calls. Where that could go sideways is if you get terrible at closing leads, so that's your second one. Order backlog is another one, that's how much capacity in your manufacturing firm.

In selecting the KPIs you're going to track, it's really tempting, and as a former private equity guy, it's tempting to just have 50 KPIs and track them all. That's unhelpful. I've attempted it.

There are two types of leading KPIs. There's "is an employee doing a good job?" That's an accountability tool. Then there's "is the business doing okay?" That's a planning tool. What we're going to talk about today is, is the business doing okay? This is not a talk about how to be a good manager. This is a talk about you just bought a business with 90% leverage. Is the business doing okay?

If you were to look at potential KPIs, you can imagine how your PPC and SEO agency, you hold them accountable using lead gen KPIs. Your website designer, you can hold accountable based on conversion rate. Your marketing team based on average selling price. When you buy the business, reality is you might just be all three of those as the owner. But those are accountability tools.

I want to talk about what are true planning KPIs for a small business. I'm going to talk about my business, Bloom, my tree experts. It's tree care, residential tree contractors. So tree pruning, tree removal, all that.

Similar to the mental health clinic, number of bids per week is a leading indicator of sales. Closed sales per week is a leading indicator of backlog. And then our backlog in weeks, that's basically our remaining room as a company because all of our work is project based. So I need to know how many hours are booked forward that our team is completely covered.

What you'll notice is these are bad accountability KPIs. No one person controls how many bids per week we have. No one person controls how many close sales per week we have. No one person controls backlog in weeks. These would be unhelpful for somebody's comp plan because it's a little bit too trailing. But for the owner, it's how I can tell at a snapshot view, are we doing okay?

By contrast, these are accountability KPIs I have right now for our crew leaders. We've got callbacks, reviews, total jobs. I've set a goal: four and five star Google reviews, that's KPI repeat revenue. Callbacks is a leading KPI lost clients and lost productivity, so you have to go back. These are actually controllable by people. They have their comp plans tied to this because this is an accountability KPI. The planning KPIs, one person doesn't control them, they help me understand how the business is doing.

New owners need a planning KPI. Good managers need accountability KPIs. I want to hammer that home because I see searchers get confused between this all the time and they start to focus on the wrong thing and then they get frustrated, why isn't it performing better? Because you've either given a single person a planning KPI or you are looking at your whole business with an accountability KPI. You need to match your KPI.

So how do you track? Here's the problem. In small businesses you have terrible data and all you want is that perfect SaaS product. By year four, you just want to build your own AI tool to perfectly track your data.

I'm going to walk you through how I track my three leading KPIs. It's actually improved over the past year. This is how I did it for the first two years of ownership, and we've only recently improved. It took me three years to get this into a software product.

Number of bids per month: this is 2022, my first year of ownership. I'm like, okay, we're crushing it, July is going good. This is how I started to get an idea that this business is working. That was the most bids we'd ever had in a month. And then August 2022 hit and our leads dropped by 50% and I had no idea why. This is the new owner not having a dashboard. It turns out in residential contracting, people go on vacation in August, they don't want leads. This was not actually a red flag, but the first time you see it, it scares you. That's why you need to start collecting the data as soon as you can. Not only do you need the dashboard, you need the comparison of what's booked. Year one was terrifying. Then it came back as soon as school came back in session. Our actual low season starts in November.

You go to 2023, exact same thing, pushing leads a little higher, we're growing. Now in July we're like, hey, we know in August there's going to be a fall off unless we go proactively activate our existing client base. So that August we really went and pushed our client base with the emails and the newsletters. That's the difference. The only reason we needed to do that is because we tracked it the year prior and we felt the gut punch of leads dropping 50%. That's why I call this a planning KPI, because in 2023 it allowed us to actually plan for August 2023.

This is what our bid calendar looks like. This is Google Calendar. Each color represents an arborist on our team. Each calendar slot is an actual client, an actual address where they're going to give a quote. Did I have a function I built to actually count this? No, there's nothing. I just literally for two years, every week, opened the Google Calendar and one by one counted. I literally put my finger against the screen and counted, and put it in an Excel spreadsheet. That's it. Nobody else saw this except for me. This is just a planning KPI, purely business owner.

In the past year that's changed because I have an operations manager now, but you can see this week, March 25th to March 29th, 2024, there's 39 appointments. I counted those and I typed it in. That's it. It is as manual as you can imagine. I have 169 weeks of bid data and they're just all hand counted. It takes about 10 minutes a week. Now the office manager does it. There's no reason to wait until you're able to figure out the perfect data flow or you move off of Google Calendar onto the right CRM. You just need to start the baseline. That's my primary message for small business owners: just begin counting data wherever you can.

So we have booking emails sent. This is how many closed jobs at the time. As soon as I bought the business, it was all pen and paper quotes. We didn't have any way to track how many closes we actually had this week. The way I tracked it: I went to our sent folder and I just counted. Initially I had no software to track this. So I went to our sent folder, I searched for the subject line "job scheduled" and I counted those. It was roughly right. I'd have to go through and uncount the "revised schedule" because those are just rescheduled. Same thing, that week number is just me manually counting week after week.

Now I have fancy software. This is new as of about five months ago. It took two and a half years to get here. Now you can see seven new estimates, 34 converted work orders. Same thing. That just tells us we don't have to count it manually. But this data would not be helpful if I didn't have the manual data before. This is only useful to me now because I have the context, and I only have the context because we did this janky way of counting KPIs.

Now you can see three and a half years of data. The first three bars for every single one of these is every single bid hand counted. I'm stressing the point: just get going on data collection. Do not wait. Q1 2025 is the first quarter that our bids are automatically counted.

Backlog in weeks, that's our next leading KPI. For our business, we have to book jobs weeks out. The reason is it allows you to manage your seasonality and your staffing. What's really hard in our type of business is how do you know if you have enough backlog, not knowing how many jobs are going to come in the future? The worst case scenario is you get to the week and you have nothing for your guys to do. That's how you lose good people. The former owners, they just laid off the crew for January, February, that ensured you would run a backlog. It actually works. I didn't want to do that. Not good for the team and all the usual reasons. You waste all the training investment.

How we measure backlog: how many hours of capacity do we have over the next 12 weeks? If we have two crews at 40 hours a week, we have 80 hours of capacity per week times 12 weeks. That's our full capacity. How much of that capacity is booked, also measured in hours. Total hours booked divided by average weekly capacity is backlog in weeks.

How do we figure out the booked hours? Again, no software at the time, it was all Google Calendar based. We finally moved to a CRM. So back to Google Calendar, that's our jobs calendar from the first two and a half years of running the business. Crew A, Crew B by day. All I would do is flip through the next 12 weeks and count up all the open red slots. I'd take off the holidays. In a given week I would go into our Excel sheet and say, for this week, we have 7.75 hours open out of 80 hours of capacity. We're counting manually, trying to figure out how to actually run your business. I would love to have calculated this in some smarter way.

April 1st, 2024, we've got 560 open hours, 376 booked hours. So we've got just five weeks in backlog. I also miss some weeks because when you're a small business owner, especially early on, this stuff falls off your plate. There are some weeks in my spreadsheet that are literally just copied down for four weeks in a row. It's still better than not doing it.

I bought the business in February 2022. I started tracking this in March 2022. When I bought the business, we were at 11 weeks of backlog. I was like, sick, we're covered, this is great. Slow season, we kind of trickled our way down. As soon as we got into the summer, it started going back up. Next year I didn't do layoffs. This is one of those scenarios where when you're sitting in March, April, your first true winter as a business owner, you are just slamming brakes. When does this decline stop? Will it stop? Is this seasonal or are we doing something wrong? You wouldn't have known there's something wrong if you didn't know last year was better. You need the context. It turns out yes, it does come back. We threw a ton of money in Google Ads, a ton of non-productive money to be clear. I was just throwing things at the wall at that moment. But it came back as soon as the summer started again.

In 2024 you're like, okay, this is normal. We can manage our backlog such that if we get to Thanksgiving with 10 weeks of backlog, we're not going to run out of backlog over the winter. That's a KPI that the former owner knew in his gut, but he could never have articulated it. He really solved for it by laying off a crew.

This winter, we're actually starting to offset it early. This is where it becomes a planning KPI. This is what gives me confidence. We are bucking our seasonal trend on leads and actual volume, so our backlog is stretching. The minute we have a fourth crew, this is going to drop again because our weekly capacity goes way up. But this helps me feel comfortable. We have the backlog to add the fourth crew. I'm not just taking the shot in the dark.

Even if you do all of this, collect all your data, hand count it, and feel good about it, it still will be misleading. April and May 2022, we had 268 bids, 148 closed jobs, and our backlog slipped from 10.5 weeks to 9.7 weeks. That's the very end of our slow season going into our busy season. April and May 2023, backlog is sliding, sliding, sliding. When is this going to turn around? We had 35% more bids, 26% more closed jobs, and our backlog slipped from 4.2 weeks to 3.5 weeks. Exact same slide on a percentage basis is a way bigger slide. The amount I'm stressed going from 10.5 to 9.7 versus 4.2 to 3.5, in a business that has three week permit turnaround times, that was scary.

This is when you realize, oh yeah, backlog is a true trailing KPI. It's a planning KPI but it's a trailing KPI. The missing link is average job size. That's where we get to an accountability KPI. My sales team had stopped, there's a bunch of reasons, but our job sizes had dropped dramatically. They were closing more jobs but they weren't able to close with as many line items, they weren't quite upselling. That turns into an accountability KPI, where I can be a good manager spending time with them on how to upsell and increase close rate. You might have all these perfect KPIs and you're still going to get caught off guard, but you just need to start. It's a small business, it's going to be messy.

Punchlines: First, you need to identify the leading KPIs for your business. You need to differentiate between planning and accountability KPIs. Don't overcomplicate tracking, just start. You can make adjustments later. Now we do track average close size and I track that on an estimator and salesperson level because that's an accountability KPI. Don't let perfect be the enemy of good. If there's anything I'm good at as a small business owner, and there's not a lot, but anything I'm good at, I'm not a perfectionist. All of this is janky, a lot of the weeks are wrong. But like Mike or Josh was saying, you don't have to do GAAP financials. Nothing you do is GAAP in a small business and that's okay. All this is just for you. You're just trying to make sure you don't lose your mind.

I write a blog, which as Sam was saying, is no longer anonymous, used to be anonymous for a long time. If you're curious about this kind of stuff, that's where I write about it. I've left time on purpose for open Q&A.

Q: Do you find a benefit in doing it manually?

A: When I was in private equity, professional investing world, my total boomer take at the time was I used to manually take SEC reports and put financials into a model myself, even though all the export tools existed. Because when you do that, you're like, wait, this line item blew up this quarter, now I know what to investigate. I found doing it manually gives you a certain tactile understanding of your numbers in a way that allows your brain to activate a bit more. Now my operations manager sets these up and sends them to me. When she sends them to me, I can immediately say, hey, that number looks wrong, whether it's an error or something's broken in the business. She hasn't done it for two years of putting it in, so it doesn't mentally flag for her even though she's much smarter than me at this kind of thing. Now I don't really need the dashboard because I understand this business. Doing it manually is meaningful.

Q: Do you have your team report numbers themselves?

A: Yes, and it is now beginning to be that way. Frankly, the first three years of this, we were all out sprint and I didn't have a really good way yet to explain to the team what was really important and why it mattered. Now when I say, I need you to track this and show it to me, I can say, and this is why. Otherwise it just feels like make-work to them. We have a new division, plant healthcare, I've created a little dashboard for our plant healthcare manager. He updates it every week, and in our weekly one-on-ones, we go over it. It took me literally two and a half years to build that. That's being a good manager. This talk is more about don't lose your mind as you're going through a business search.

Q: Why share KPIs now?

A: Going back to Josh's talk yesterday morning, I hadn't quite isolated or articulated a clear mission or vision for the business yet. So any KPIs I shared were sort of just, okay cool, this is how things are going. I didn't have a leadership team that was rowing in one direction with a clear vision. Now I actually have a leadership team that knows where we're headed. They know what KPIs matter and why. It is surprising how much it mattered for the team to know why we're doing this.

Q: EOS and dashboard recommendations?

A: I'm aware of EOS, I haven't tried implementing it yet. That might be in the works for the next couple years. I feel like I finally have a leadership team for the first time. EOS is something that's a goal for sure. On dashboards, I was doing all of this in Excel to start because I grew up in finance. I've now forced myself to switch to Google Sheets so it's more collaborative. We use offshore teams as well. The process of writing an SOP for how to update our KPI dashboard for our offshore team, that alone makes the dashboard better. The dashboard can't be this strange thing that works in your head. The dashboard ends up being better if you've created it for somebody else to update. The big shift I made over the past year is I took it from my own internal sheets that nobody else could look at to completely external facing into my team.

Q: How do you convince people to use KPIs?

A: It has to be connected to why this helps their lives. Otherwise it's just data for data's sake. Backlog is the easiest one to share. If we don't track our backlog, I want to lay off a crew every winter. This is the difference between us not laying off a crew or laying off a crew because we have seasonal sales leads. If we want our revenue to be non-seasonal, we need to build backlog. Backlog is what allows us to smooth the seasonality into a non-seasonal revenue business. The guys get it. They've also seen the way we used to do things. We laid off the crew every January, February. Some guy right after Christmas is laid off, didn't see it coming, and is pissed off and never comes back, and we just spent eight months training with him.

It has started to shift, but it shifted when I changed compensation. Money matters. The big accountability KPI we care about is labor rate, revenue divided by payroll through hours. The way we've set that KPI up is all of the crew leads and our sales team, their quarterly bonuses are based on our company-wide labor rate. Not crew specific, not salesperson specific, company wide. Partially because we have so much flex between our crews. I want the crew leaders to feel like they're working together as opposed to driving their own results, which creates headaches. Now I report these out every week to the leadership team, with a little MD&A: hey, labor rate last week was 136, we're above our target of 115. That's because that job went well, that crew leader did well. Or that week we're only at 95 because that job was underbid. There's a little bit of personal accountability mixed in, but I'm trying to make that a team KPI.

Q: Any KPI you stopped tracking?

A: This is a funky one. I look at it, I don't care that much about it: closing rate. One of the things I've learned is if I over engineer or over focus my sales team on closing rate, their natural instinct is to do easier sales. That's not what I want them to do. We gave $147,000 of bids last week with another 15K of options. Clients accepted 65K of bids. That's well below our 15% target. But I know last week one of our sales guys did a big commercial bid that we probably aren't going to win, but he threw 35K. I don't want him to not bid because he's managing a closing rate. Closing rate is one of those where it's a planning tool, not a really good accountability tool. Over a long-term time period it tells you prices are off if it's gone up too high, but it's not something I want to manage week to week.

Now as I start to build a business that I intend to be enduring over a long time period, you start to move toward mission and vision KPIs. Is your team bought into your culture? Is our safety culture there? Those KPIs start to become true team-based. I did the Gallup Q12 for the first time a few weeks ago with our team because 50% of our cost is labor. We don't really have inventory, it's mainly a labor business. Almost none of this will matter if we can't retain good people, and I have no good KPI for employees. That's the next big one, how do you measure the culture.

Q: How do you figure out what to track?

A: One, you start talking to other business owners that are doing this well in your industry. Our seller would always ask the question to a scheduler: when are we booking out? He was telling himself, hey, if I sold a job today in April, when is this client going to get booked? He wasn't tracking it, but he knew in his gut that if in April I'm booking a job for late May, good. If in April we're booking a job for early May, we have a problem. You can start to see what are these questions you ask internally, and how do you turn what feels like a qualitative question into a quantitative metric.

Then go talk to people. One of the amazing things in owning a local service business is you go 60 miles away and that person's not a competitor. They're more than happy to share their playbook with you. I have on my advisory board a guy who runs a tree company in Chicago that's three times our size. That's how you can figure these things out. I pay him by buying him dinner when I'm in Chicago. Building out that network is a big part of this.

On convincing a blue collar team of KPIs: just because it's a blue collar team doesn't mean they're not really smart. It just means somebody hasn't shown them why this matters. As soon as you explain why it matters, the team gets it. If the team doesn't get it, it means either it doesn't matter or you can improve on explaining it. That's a failing of the manager if they're not getting through to the team. I hear the complaint, my team just doesn't care about this, they just want to go out and do the job. Yes, they only care about doing their job, but if they understand how this impacts their ability to do their job, they do care. My sales team is not on commission, not a single salesperson is on commission, and they are checking their weekly sales numbers and they text me if they're like, hey man, feel slow, do you know what's going on? There's no reason for them to do that. They have literally no compensation tied to that. It's because they care, and they understand how this ties to their overall performance and company performance.

When you're buying, this is the ideal thing to focus on in your due diligence: what are the true revenue drivers? What are the true cost drivers? When I worked in PE, this is how we did interviews. I would give a college kid, hey, you have to buy a hotel, what metrics do you want to know about? Do you want to know average daily rate? Do you want to know the rooms? That's how you build your model for the business. That's a core part of due diligence. You might not have the data to fill it in, but you can start to figure out what do I need to believe.

Even though we didn't have the data for labor rate or backlog, when I modeled Bloom before I bought the business, I said, okay, I know they've got this many crews and this many guys, and they've worked this many days a year, therefore the labor rate must be something like this to get to what they do. You can back into a lot of these to get an idea. Then you say, if this is what the labor rate needs to be, I can call a bunch of people and say, does this sound reasonable? Am I in the right ballpark? If they say no way, something's way off. That's a diligence point. You can engineer these KPIs in hindsight with diligence.

Thank you everyone.