In today’s competitive construction landscape, running a successful business requires more than quality craftsmanship and meeting deadlines. Construction businesses need to track KPIs in 2025 – but which ones?
At Level Accounting & Advisory, we’ve helped hundreds of construction businesses transform their financial performance through precise measurement and analysis. This guide outlines the critical KPIs your construction business should be monitoring to maximize profitability and operational efficiency in 2025.
Why KPIs Matter More Than Ever for Construction in 2025
The construction industry faces unique challenges this year: fluctuating material costs, labor shortages, and increased competition. Tracking the right KPIs gives you early warning signs of potential issues and highlights opportunities for growth that might otherwise go unnoticed.
Construction companies that regularly monitor their KPIs experience 23% higher profit margins on average than those who don’t, according to recent industry research. Understanding which KPIs construction businesses need to track in 2025 can be the difference between struggling and thriving in today’s competitive market.
Financial KPIs Every Construction Business Needs to Track in 2025
1. Gross Profit Margin
What it is: Revenue minus direct costs (materials, labor, subcontractors), expressed as a percentage of revenue.
Target: Industry benchmarks suggest healthy construction businesses should maintain at least a 20-25% gross profit margin.
Why it matters: This KPI reveals whether your projects are priced correctly and if your direct costs are under control.
Example: A residential builder increased their gross profit margin from 18% to 27% by tracking this KPI monthly and adjusting their estimating process accordingly, resulting in $245,000 of additional profit on the same revenue.
2. Net Profit Margin
What it is: Total revenue minus all expenses (direct costs and overhead), expressed as a percentage.
Target: Aim for 8-12% in most construction sectors.
Why it matters: This bottom-line metric shows what you’re actually keeping after all expenses are paid.
Example: By tracking net profit margin by project type, one of our commercial contractor clients discovered their tenant improvement projects were significantly more profitable (11.3% net margin) than their ground-up construction projects (6.2% net margin), leading them to shift their business development focus.
3. Current Ratio
What it is: Current assets divided by current liabilities.
Target: A healthy construction business should maintain a current ratio of at least 1.5.
Why it matters: This shows your ability to pay short-term obligations and is critical for bonding capacity.
Example: A specialty contractor improved their current ratio from 1.1 to 2.0 over 8 months by implementing better invoicing practices and maintaining stricter payment terms, which enabled them to secure a $4.2 million project that required higher bonding capacity.
4. Days Sales Outstanding (DSO)
What it is: The average number of days it takes to collect payment after a sale is made.
Target: In construction, aim for 45-60 days or less.
Why it matters: Long collection periods strain cash flow and increase financing costs.
Example: By implementing milestone billing and improving their collections process, an electrical contractor reduced their DSO from 72 days to 48 days, freeing up $380,000 in cash flow.
5. Overhead Rate
What it is: Total overhead expenses divided by direct labor costs, expressed as a percentage.
Target: Most successful construction companies keep this under 25-30%.
Why it matters: This shows how efficiently you’re running your back-office operations.
Example: After analyzing their overhead rate, a mid-sized general contractor identified unnecessary administrative expenses totaling $127,000 annually, which they redirected toward hiring estimators that generated $1.8 million in new business.
Operational KPIs Construction Businesses Need to Track in 2025
6. Estimate-to-Completion Variance
What it is: The difference between estimated project costs and actual costs.
Target: Industry leaders maintain variance under 5%.
Why it matters: This measures estimating accuracy and project management effectiveness.
Example: A framing contractor who began tracking this KPI discovered they were consistently underestimating labor hours by 12%, allowing them to adjust their bidding process and increase their win rate while maintaining profitability.
7. Labor Efficiency
What it is: Actual labor hours compared to estimated labor hours.
Target: Aim for 90% or higher.
Why it matters: Labor typically represents 30-50% of project costs, making efficiency critical.
Example: By implementing daily labor tracking, one of our clients identified that certain types of installations were taking 22% longer than estimated, enabling them to adjust both their scheduling and pricing.
8. Equipment Utilization Rate
What it is: Percentage of time that owned equipment is being used productively.
Target: Most profitable construction companies aim for 75-85% utilization.
Why it matters: Underutilized equipment represents tied-up capital that could be deployed elsewhere.
Example: After tracking equipment utilization, a civil contractor discovered their compact excavator was only utilized 42% of the time, prompting them to sell it and rent as needed, freeing up $87,000 in capital.
9. Work-in-Progress (WIP) Ratio
What it is: The comparison of percentage of project completion to percentage of billing completed.
Target: As close to 1.0 as possible, indicating billing is aligned with project progress.
Why it matters: This prevents overbilling or underbilling, which can create cash flow problems or contractual issues.
Example: A commercial contractor who began monitoring their WIP ratio discovered they were consistently underbilling by approximately 15% on projects, leading to $215,000 in accelerated billings once corrected.
10. Bid-to-Win Ratio
What it is: The percentage of submitted bids that result in awarded contracts.
Target: Industry average is 15-25%, but top performers achieve 30-40%.
Why it matters: This measures the effectiveness of your estimating and business development efforts.
Example: By analyzing their bid-to-win ratio by project type and size, a mechanical contractor realized they won 36% of bids under $250,000 but only 8% of larger projects, allowing them to refocus their estimating resources on more profitable opportunities.
Safety and Risk KPIs for 2025
11. Experience Modification Rate (EMR)
What it is: A number used by insurance companies to gauge past cost of injuries and future chance of risk.
Target: Industry leaders maintain an EMR under 0.8.
Why it matters: Lower EMR reduces insurance premiums and improves competitive position for certain projects.
Example: Through focused safety initiatives, a mid-sized contractor reduced their EMR from 1.2 to 0.75 over three years, saving $134,000 annually in insurance premiums and qualifying them for projects they previously couldn’t bid on.
12. Recordable Incident Rate (RIR)
What it is: Number of OSHA recordable incidents per 100 full-time workers.
Target: Best-in-class construction companies maintain an RIR below 1.0.
Why it matters: Lower incident rates improve productivity, reduce costs, and boost company reputation.
Example: By implementing a comprehensive safety program and tracking this KPI, a roofing contractor reduced their RIR from 4.2 to 0.8 within 18 months, resulting in a 22% reduction in insurance costs and significantly improved employee retention.
Technology Adoption KPIs for 2025
13. Software Utilization Rate
What it is: Percentage of employees actively using construction management software as intended.
Target: Leading construction companies aim for 85%+ utilization.
Why it matters: Low utilization means you’re not getting the full ROI from your technology investments.
Example: After measuring software utilization, one contractor discovered only 62% of field supervisors were using their project management platform, leading to a focused training initiative that improved documentation and reduced rework by 17%.
14. BIM Implementation Efficiency
What it is: Percentage of projects using Building Information Modeling and the resulting impact on RFIs and change orders.
Target: For applicable projects, aim for a 30%+ reduction in RFIs through BIM implementation.
Why it matters: Effective BIM utilization reduces errors, improves coordination, and increases client satisfaction.
Example: A commercial contractor who tracked this KPI found that BIM-enabled projects experienced 42% fewer RFIs and 28% fewer change orders, significantly improving project profitability.
How Level Accounting & Advisory Can Help You Track Construction KPIs
Implementing effective KPI tracking requires the right systems and expertise. At Level Accounting & Advisory, we specialize in helping construction businesses establish meaningful KPI dashboards that drive profitability. Our services include:
- Setting up customized KPI tracking systems tailored to your construction business
- Providing regular financial reporting with KPI analysis
- Offering strategic advice based on KPI trends
- Integrating your accounting, payroll, and project management systems for accurate data
- Implementing tax strategies based on financial performance indicators
Our construction clients who implement comprehensive KPI tracking typically see a 15-20% improvement in profitability within the first year. As experts in the construction industry, we understand exactly which KPIs construction businesses need to track in 2025 to maximize their success.
Take Action: Start Tracking These KPIs Construction Businesses Need to Track in 2025
The most successful construction businesses in 2025 will be those that make data-driven decisions. By tracking these essential KPIs, you’ll gain critical insights that allow you to:
- Identify problems before they affect your bottom line
- Allocate resources more effectively
- Make more accurate bids and estimates
- Improve cash flow management
- Reduce costs while maintaining quality
Ready to transform your construction business through strategic KPI tracking? Contact Level Accounting & Advisory today for a consultation on implementing these essential metrics in your operation.
Our team of construction industry financial experts will help you build a KPI dashboard that gives you clear visibility into your business performance and actionable insights for growth in 2025 and beyond.
