What Are Key Performance Indicators and How Can They Make a Real Difference to Your Salon Business?

Salon Key Performance Indicator Image

A lot is said about KPI’s these days. They are important to every business in every industry. However, I have noticed that they have become a bit of a “buzz word” that people like to throw around . . . “Yeah, I’ve got my KPI’s under control!” People seem to have lost sight of the real point of them? I wanted to set the record straight and take us back to basics to rediscover exactly what KPI’s are and how to use them to maximum effect in your Salon Business.

Back to School

As I was writing this article about KPI’s I was reminded of the various subjects we studied at school. Naturally as I am using these words to communicate with you I thought about English and writing all those essays that seemed like some form of torture at the time. In putting together the free resource at the end of this article (scroll to the bottom to get it) and in explaining some of the tips and advice, I had to use some basic Maths. What surprised me though, was how Geography and Sports also got in there!

Maps

When I think of Geography I tend to think of maps, places and locations. Maps help you to find your way and get to where you want to be. However, if you don’t know where you are now, then you could have the best map in the world, you would still be lost.

What you need is some type of marker, a stake in the ground that tells you where you are, where your business is, right now. This Indicator is going to help you measure your business Performance as it is right now. We will call this your Performance Indicator.

What exactly should your Performance Indicator measure?

Well this is where most people fall down. You need to identify something easily measurable that you can record quickly and track over time.

You could chose to measure:-

How many hours you spend in your salon each week

How many times your phone rings each day

How many clients each day visit your salon for a treatment or service

Would you agree that the number of clients visiting your salon every day is a much more important indicator of performance than the number of hours you spend at work or the number of times your phone rings? This higher importance makes this measurement a “Key” Performance Indicator.

That is really all a Key Performance Indicator is. It’s a measure of an aspect of your business, that with focussed attention can positively affect your overall performance.

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Depending on where you are in your salon business journey, whether you are just opening a salon, have been open for 1 year or 20 years, will have an effect on what KPI’s are the most appropriate for you to focus on. This happens to be the most difficult part, knowing what to measure, when to measure it and what to focus your attention on now.

5 Tips to Help You

That is where I hope I can help! The exact KPI’s to measure and focus on are unique to you and your business, there is no magic formula. Below are 5 Top Tips to help you identify and measure the KPI’s that are most important to your business right now.

1. Keep Things Simple

Measure and record a maximum of 7 KPI’s to start with. Focus on improving just 2 of these at a time. Set yourself a goal to reach for these 2 KPI’s and make sure your team know all about it. Once you reach one of your goals, focus on improving another one of your KPI’s. Keep tracking all 7 to make sure you don’t start to drift backwards on goals you have already reached.

2. First Things First

Make sure you are measuring things in the right order. I often find salon and spa managers measuring how many hours each of their treatment rooms are occupied for, when they have fewer therapists working than they have treatment rooms. It would be far more useful to measure how many hours each therapist spends earning money. Then to take on additional therapists to fill all the rooms you have available. Only when your therapists are busy earning all the time and filling all your rooms should you worry about your room occupancy levels.

3. Have a Procedure

Create a simple way of recording your basic KPI information on a daily basis. Doing this daily will not take a great deal of time and should quickly become part of your daily routine. Whether you record the information in a notebook or straight in to a spreadsheet, doing this every day will ensure the task never becomes daunting. At the end of the week or month total these figures up and enter them in to a spreadsheet so you can compare then with your previous performance. (See below for a fantastic resource to help you get started with this) If you are just opening a salon for the first time, start doing this from day one and it will just become a habit, you won’t even notice you are doing it.

4. Software Will Save You Time

You may already have some form of management software in place. If so your work here should become far easier. Find the reports that give you the basic information you want to measure. You will probably need to use a few reports to produce all the KPI’s you are tracking, but it will save you having to record the information manually  on a daily basis. If you don’t already have software in place and you are thinking of buying some software, make sure it can measure, track and report on the KPI’s that are important to you now.

5. Small Things Can Have a BIG Effect

Sometimes just a small improvement to your daily indicators can lead to huge gains over time. Say a popular treatment in your salon is the classic Back, Neck and Shoulder Massage. It lasts 30 minutes, costs around £34 and you average about 5 or 6 of these treatments a day. If you do just one more of these treatments every couple of days this will be a 10% increase in the number you perform each month. This alone generates an additional £6,528 per year in takings. If at the same time you increase your price by just £1 to make the treatment £35, you would increase your annual takings by £8,640. Not bad!

The above tips should get you well on your way to correctly identifying, measuring and improving your KPI’s to make a real difference to your business.

Still need a bit more guidance?

No problem. To get you started I have prepared a simple spreadsheet with some classic KPI’s. Just download the spreadsheet, enter your own monthly figures and it will work out your KPI’s for you. Click here to downloadthe worksheet. Feel free to add to the spreadsheet or change the KPI’s to be measured to suit your needs.

Just remember though, it is not enough to simply record this information, the point is to put effort in to improving your selected 2 KPI’s. I said at the beginning of this article that among the school subjects I was reminded of, one of them was Sports. In school Sports lessons we didn’t play football blindfolded, we know where the goal was and where to aim the ball so you could score and your team could win. By identifying your KPI’s and using the spreadsheet to track your improvements,  you will be able to reach your goal and watch your business win.

Image: Sal Falko

Note: Parts of the above article were also featured on the Wahanda Business Blog
 

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