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In a recent episode of And So It Flows, Nate Agentis, vice president of plumbing at BDR, discussed why contractors should look beyond revenue when evaluating the health of their businesses.

A third-generation plumber, Agentis grew up in his family's service plumbing company, doing everything from stocking inventory and digging ditches to working as a technician and handling after-hours calls. He eventually earned his master plumbing license and moved into leadership, helping triple the family business over the following 12 years.

That experience taught him that strong sales don't necessarily equal a strong business.

“It’s really a vanity metric if you’re just talking revenue alone,” Agentis said.

A contractor might bring in impressive revenue, but callbacks, inefficient labor, rising overhead and poor job costing can quickly eat into those sales. Instead, Agentis encourages contractors to pay closer attention to metrics such as gross profit, gross margin, cash flow, overhead and technician utilization.

The same principle becomes increasingly important as companies grow. Agentis said contractors can sometimes increase sales faster than they develop the financial controls needed to support that growth, leaving businesses with higher revenue but tighter cash flow.

“Financial control is really where growth gets dangerous and gets risky because we can oftentimes grow at a volume faster than we’re controlling our finances,” he said.

Listen to the full episode of And So It Flows to hear more about gross profit, labor efficiency, managing overhead and why Agentis believes contractors should focus on becoming more efficient before pushing toward their next stage of growth.