Construction KPIs every owner should track
A dozen numbers covering backlog, job margin, cash, overhead, and safety tell an owner almost everything about the health of a construction company.
The construction KPIs every owner should track fall into five groups: backlog and sales (backlog in months, hit ratio), job profitability (gross margin against estimate, labor hours against budget, change order turnaround), cash (cash on hand, days to collect, over and underbilling), overhead (overhead as a share of revenue against budget), and safety (recordable incident rate and EMR). A dozen numbers, reviewed on a set schedule, tell an owner almost everything about the health of the company.
Each KPI below includes how to calculate it, how often to look, and what it warns you about. Set your targets from your own history; see how to set construction company goals and KPIs for that process.
The core construction KPIs at a glance
| KPI | How to calculate | Review |
|---|---|---|
| Backlog (months) | Remaining revenue on signed contracts ÷ average monthly revenue | Monthly |
| Bid hit ratio | Jobs won ÷ bids submitted, by count or dollars | Monthly, rolling 12 months |
| Gross margin on jobs | (Contract revenue minus job cost) ÷ contract revenue, compared with the estimate | Monthly on active jobs |
| Labor hours against budget | Hours used ÷ (budgeted hours × percent complete) | Weekly |
| Change order turnaround | Days from change identified to change order signed | Monthly |
| Over and underbilling | Billed to date minus earned revenue, from the WIP schedule | Monthly |
| Days to collect receivables | Accounts receivable ÷ revenue for the period × days in the period | Monthly |
| Cash and working capital | Current assets minus current liabilities | Weekly cash, monthly working capital |
| Overhead percent | Overhead costs ÷ revenue, against budget | Monthly |
| Recordable incident rate | Recordable cases × 200,000 ÷ employee hours worked | Monthly or quarterly |
| EMR | Set by your workers' comp rating bureau | Yearly |
Backlog and sales KPIs
Backlog in months
Backlog is signed work not yet performed. Dividing it by average monthly revenue tells you how long the company can run without a new contract. Falling backlog is the earliest warning of a slow period, often several months before revenue drops. See how to manage construction backlog.
Bid hit ratio
Track hit ratio by customer, job type, and estimator. A low ratio with one GC or job type means you are spending estimating time where you rarely win. A very high ratio can mean you are priced too low. The guide on how to calculate a bid hit ratio covers both versions.
Job profitability KPIs
Gross margin against estimate
Compare projected gross margin on each active job with the margin in the estimate. A job that started at 18 percent and now projects 12 percent is fading. Catching fade at 40 percent complete leaves time to write change orders or fix crews. Catching it at closeout leaves nothing. See how to find margin fade on construction projects.
Labor hours against budget
Labor is the cost that moves fastest. Compare hours used with budgeted hours times percent complete, by cost code. A ratio above 1.0 means the crew is running behind the budget. Percent complete has to come from installed quantities, not hours spent.
Change order turnaround
Measure days from when a change is identified to when the change order is signed. Long turnaround means unpaid work piling up and disputes later. Also track the dollar value of pending, unsigned change orders by job.
Cash KPIs
Over and underbilling
From the monthly WIP report: overbilling means you have billed ahead of the work, which feels like cash but is really a liability. Underbilling means you have done work you have not billed, which often signals billing delays or cost overruns. Large swings in either deserve a question.
Days to collect receivables
Divide accounts receivable by revenue for the period and multiply by the number of days in the period. A rising number means cash is stuck. Watch retainage separately, since it can sit for months. See how to speed up construction accounts receivable.
Cash and working capital
Look at cash weekly and working capital monthly. Sureties and banks watch working capital closely when setting bonding and credit limits, so this KPI affects how much work you can take on.
Overhead KPI
Track overhead as a percentage of revenue and against the budget in dollars. If revenue drops and overhead stays flat, the percentage rises and your markup may no longer cover it. See how to calculate construction overhead rate.
Safety KPIs
The Bureau of Labor Statistics computes an injury and illness incidence rate as the number of injuries and illnesses times 200,000, divided by employee hours worked. The 200,000 figure equals 100 employees working 40 hours a week for 50 weeks, which lets companies of different sizes compare rates. Your experience modification rate, or EMR, affects workers' comp premiums and often shows up in GC prequalification. See how to calculate a construction company EMR.
Worked example: one month's KPIs for a $6 million contractor
Say a contractor runs about $500,000 of revenue a month. The figures below are illustrative.
| KPI | This month | What it means |
|---|---|---|
| Backlog | $2,750,000, or 5.5 months | Healthy, but down from 7 months last quarter |
| Hit ratio (12 months) | 22% | Steady |
| Jobs fading more than 3 points | 2 of 9 | PMs to review cost to complete this week |
| Days to collect | 52 days on $860,000 AR | Up from 44, chase two slow GCs |
| Net underbilling | $140,000 | Check whether billings are late or costs are over |
| Incident rate | 2 recordables, 96,000 hours: 4.2 | Above last year, review with safety lead |
The incident rate math: 2 × 200,000 ÷ 96,000 = about 4.2. Days to collect: $860,000 ÷ $500,000 × 30 = about 52. The owner leaves the meeting with three actions: two job reviews, two collection calls, and a safety stand-down. Backlog is not urgent yet, but two straight quarters of decline goes on next month's agenda with the chief estimator, along with a look at which bids are due in the next 60 days and how likely each one is to land.
Mistakes owners make with KPIs
- Watching revenue and the bank balance only. Both lag. By the time they move, the problem is months old.
- Company-wide averages only. One bad job can hide inside a good average. Look at margin job by job.
- Using hours spent as percent complete. It makes every job look on budget until the end.
- Ignoring underbilling. It often hides cost overruns.
- No action after the review. Every red number needs a name and a date.
Templates, terms, and tools
- WIP report template, job cost report template, and construction cash flow template.
- Related: how construction owners should review the numbers each week and how to build construction dashboards owners actually use.
Smart Business Automator shows job costing, WIP, change orders, and receivables in one place, with risk alerts on jobs drifting off budget. See job costing and WIP automation.
Frequently asked questions
What is the most important KPI for a construction company?
There is no single one, but gross margin by job compared with the estimate is the one most owners regret not watching. It shows fade early enough to act.
How is backlog measured in construction?
Add the remaining unearned revenue on all signed contracts. Divide by average monthly revenue to express it in months of work.
What is a good bid hit ratio?
It depends on trade, market, and whether work is hard bid or negotiated. Track your own ratio by customer and job type and watch the trend rather than chasing a single benchmark.
How do you calculate a construction incident rate?
Multiply recordable injuries and illnesses by 200,000 and divide by total employee hours worked. BLS explains that 200,000 equals 100 employees working 40 hours a week for 50 weeks.
How often should construction KPIs be reviewed?
Labor hours and cash weekly, most financial and job margin KPIs monthly, and EMR yearly when your new rating comes out.
