9 important KPIs for Spa and Salon franchises
While some spa and salon franchises recognize the need to measure key performance indicators (KPIs), many rely more on intuition than analyzing numbers. And while it takes soft skills to create a welcoming atmosphere, happy customers, and happy employees, understanding the numbers that drive your business will help your spa or salon find – and keep – its place in the market.
Think of a KPI as a map: it provides a destination point, a path, and a giant “You are here!” Â»Sticker that shows where you are now. KPIs are valuable tools that show you a definite path to success, so embrace them! Start with this list of the best KPIs for spas and salons.
1) Cost per lead (CPL)
CPL = Cost of the marketing program / Total number of prospects
What gets measured gets better, so every marketing effort needs to be tracked. This metric will help you understand how much you are spending on leads and whether you should keep investing. For example, if your Google Ads cost $ 25 per lead, but your Facebook Ads aren’t generating leads, you need to reconsider how much time, money, and energy you invest in Facebook. Remember that a prospect must meet two requirements:
- They allow you to contact them for follow-up
- They actively seek service
It’s a good idea to set aside a small portion of your budget (around 10%) for experimental initiatives to ensure that your marketing mix is ââthe right one for your spa or salon, your target market, and your geographic area.
2) Average salary rate (ATR)
ATR = Total number of treatment hours sold / Total number of treatment hours available
You might think your salon or spa is successful just because it’s busy, but that isn’t necessarily true. When looking at this metric, one thing to be aware of is that some treatments take longer than others. So a two-hour treatment that costs $ 180 is less effective than a one-hour treatment that costs $ 100.
3) Productivity or occupancy of the spa
Spa productivity = total number of treatment hours sold / total number of treatment hours available
Rent or mortgage costs are often the biggest expenses associated with a spa or salon. With that in mind, understanding treatment room usage is an important indicator of your space’s productivity.
4) Catch rate: retail
Capture Rate = Total Retail Customers / Total Spa Customers
Revenues for spas and salons come from two sources: service and retail sales. According to Winn Claybaugh, co-founder of Paul Mitchell Schools, âPer square foot, the footage spent on the sale of products [like shampoo and hair gel] is more profitable than the images devoted to the service.
5) Net Promoter Score (NPS)
NPS =% Promoters -% Detractors
NPS is a measure of customer loyalty that rates customers as promoters, detractors or neutrals based on their response to the following question: “How likely is it that you would recommend us to a friend or member of your family ? Â»Customers rate their response on a 10-point scale. A score of 9 to 10 indicates a promoter, 7 to 8 is neutral, and 0 to 6 is a detractor.
Providing a great experience will not only keep your guests coming back, it will also encourage them to tell others about your business and build new business through referrals. Technically a measure of loyalty, the NPS is a fantastic way to measure this on a quarterly basis.
6) Rehearse the guests
Repeat guest rate = total number of repeat guests / total number of guests
Repeat customers generate a higher return on every dollar spent to bring them in. Moreover, practical experience shows that repeat customers tend to spend more on subsequent visits.
7) Retention of employees
Retention rate = Total number of employees who left for a period / Total employees at the end of that period
Clients are more likely to develop a connection with their stylist or therapist than with the brand itself. If you have an employee leaving, you risk their customers moving with them. For this reason alone (although there are plenty of others), you want to make sure your team members are happy.
GOPPATH = Total spa gross operating profit (GOP) / total number of treatment hours available
Gross Operating Profit per Available Processing Hour (GOPPATH) is a strong performance indicator, as it measures your ability to generate revenue, control expenses, and utilize your hours.
Earnings before interest, taxes, depreciation and amortization (EBITDA) is a measure of the operational efficiency of a spa or salon. It is a way to assess a business without having to take into account financing decisions, accounting decisions or tax environments. EBITDA shows how well your business is in generating cash, so your business is valued as multiples of this metric. To calculate the necessary adjustments for EBITDA, see this QuickBooks article.
Metrics are a beautiful thing
The best way to help your franchisees achieve their goals is to measure performance along the way. Learn more about FranConnect’s core performance tools that can help you track the most important KPIs and make a positive difference in your spa or salon business.
This article first appeared on the FranConnect website in September and is used here with permission. For more information, visit their website.