KPI's (Key Performance Indicators) for Sustainable Growth

KPI’s (Key Performance Indicators) for sustainable growth

A Key Performance Indicator is a measurable value that demonstrates how effectively a company or an individual is achieving key business objectives. KPIs will help you to define and measure your performance towards your goals. Organizations and individuals use KPIs at multiple levels to evaluate their success at reaching targets. High-level KPIs may focus on the overall performance of a business, while low-level KPIs may focus on individual goals or processes in departments such as sales, marketing or a call center.

All businesses have KPIs, in the beauty industry we measure our performance, by tracking such things as; the number of guests serviced each week, pre-booking percentage, client retention rate, the percentage of clients that receive color, the number of add on services, the revenue generated by take-home sales, etc. Understanding what the KPIs are and how to improve them is the key to increased productivity and income.

New Guest Acquisition

This is all about building your clientele. When you get out of school and begin working, your number one priority will be to get people to come see you for professional services. It is very important to build a base of clients that will visit you regularly.

Frequency of Visit (Visits per Year)

This refers to how often guests visit you…how many times per year. We know that if guests come in more often they will spend more money with us throughout the year. We have more opportunities each time they visit. One of the best ways to make more money as a beauty professional is to get your guests to visit you more often.

Average Ticket

Average ticket is about how much money your guests spend each time they visit you. This refers to the entire ticket, service and take-home dollars. It’s important to know your average ticket, set a goal of what you want your average ticket to be and implement and work systems that will increase your average ticket.

Client Retention

This is all about whether or not the client comes back for another visit and customers come back because of a great experience. With client retention we like to look at two aspects of retention; New (first visit) Client Retention and Existing Client Retention.  First Visit Client Retention is a KPI that tracks the return of New Clients and Existing Client Retention is a KPI that tracks the return of regular (active) clients. This KPI is your customer service score. It tells you how well you are doing at executing an exceptional customer experience.

How these KPIs will impact your business and your growth as a beauty professional.

New Guest Acquisition

This is the number of new clients you see, on average, each month. As a new beauty professional, this is the number one, most important KPI when you begin your career. Your success depends on you building a strong base of loyal customers. This starts with acquiring new guests. And as your business grows, it’s important that you continue to gain new guests because all businesses experience attrition-a loss of clients-so you will need to make up for that loss. You can do that by gaining and retaining new guests.

In the example below we will show you the impact of New Guest Acquisition.

Example: you have a client base of 150 guests, Frequency of Visit is 6 visits per year (every 8.5 weeks) and an Average Ticket of $50. With these KPIs you would generate $45,000 in sales.

150 (active guests)

x

6  (visits per year)

x

$50 (average ticket)

=

$45,000

IF you get 10 new guest per month at the same $50 average ticket you would add an additional $6,000 to your annual sales, which would bring your new annual to $54,000

10 (new guest per month)

x

12 (months in the year)

=

120 (total new guests for the year)

x

$50 (average ticket)

=

$6,000 (additional sales volume)

+

$45,000 (original sales volume)

=

$51,000

Frequency of Visit (Visits per Year)

What do you think is the best way to increase client frequency and get your guests to come in one extra time a year? If you said pre-booking you are correct. Pre-booking is scheduling your guest’s next appointment before they leave you. It is the best and easiest way to get your guests to come in more often. It is one of the best business-building strategies you could adopt to ensure a successful career. We know that if we do not pre-book our guests they will wait longer than they should before they pick up the phone and call for an appointment. By this time, they are already several weeks behind schedule.

In the example below we will show you the impact of Frequency of Visit.

Example: you have a client base of 150 guests, Frequency of Visit is 6 visits per year (every 8.5 weeks) and an Average Ticket of $50. With these KPIs you would generate $45,000 in sales.

150 (active guests)

x

6  (visits per year)

x

$50 (average ticket)

=

$45,000

IF you get your frequency of visit up by 1 – go from 6 visits a year (every 8.5 weeks) to 7 visits a year (every 7.5 weeks), with the same 150 guests and the same $50 average ticket, you would add an additional $7,500 to your annual sales, which would bring your new annual to $52,500

150 (active guests)

x

7  (visits per year)

x

$50 (average ticket)

=

$52,500

OR if you get your frequency of visit up to 8 visits a year (every 6.5 weeks)

150 (active guests)

x

8  (visits per year)

x

$50 (average ticket)

=

$60,000

OR if you get your frequency of visit up to 9 visits a year (every 5.5 weeks)

150 (active guests)

x

9  (visits per year)

x

$50 (average ticket)

=

$67,500

OR if you get your frequency of visit up to 10 visits a year (every 5 weeks)

150 (active guests)

x

10  (visits per year)

x

$50 (average ticket)

=

$75,000

Average Ticket

This represents, on average, how much each guest spends when they visit you. Boosting the average ticket requires that your guests spend more money per visit. There are several ways to increase your average ticket. One of the best ways is to implement a system for add-ons or upgrades.

In the example below we will show you the impact of increasing Average Ticket.

Example: you have a client base of 150 guests, Frequency of Visit of 6 visits per year (every 8.5 weeks) and an Average Ticket of $50. With these KPIs you would generate $45,000 in sales.

150 (active guests)

x

6  (visits per year)

x

$50 (average ticket)

=

$45,000

IF you get your Average Ticket up by $10.00…from $50.00 to $60.00, with the same 150 guests and Frequency of Visit of 6 visits per year (every 8.5 weeks) you would add an additional $9,000 to your annual sales, which would bring your new annual to $54,000

150 (active guests)

x

6  (visits per year)

x

$60 (average ticket)

=

$54,000

OR if you get your Average Ticket gets up to $70.00

150 (active guests)

x

6  (visits per year)

x

$70 (average ticket)

=

$63,000

OR if you get your Average Ticket gets up to $80.00

150 (active guests)

x

6  (visits per year)

x

$80 (average ticket)

=

$72,000

New Guest Retention

Retention is about retaining customers, having the guest come back to you again. Retaining guests is one of the most important components of a successful business. Here we are going to focus on the new guest. New Guest Retention in the industry is at a staggering 35%. That means that out of every 100 new guests you see, only 35 will come back. This is not good because there are costs associated with obtaining new guests, and to lose them results in not only lost revenue, but makes your entire marketing strategy a waste of time.

In the example below we will show you the impact of increasing New Guest Retention.

Example: you have a client base of 150 guests, Frequency of Visit of 6 visits per year (every 8.5 weeks) and an Average Ticket of $50.00. With these KPIs you would generate $45,000 in sales. Now, let’s say you are getting 10 new guest per month and retaining them at at rate of 35% (industry average). Here’s what would happen…

10 (new guest per month)

x

12 (months in the year)

=

120 (total new guests for the year)

x

35% (new guest retention)

=

42 (number of retained guests)

x

6 (visits per year when retained)

=

252

x

$50 (average ticket)

=

$12,600 (additional annual sales volume from 35% new retained guests)

IF you get your New Guest Retention up 50% (retaining half of your new guests), with the same 120 new guests and Frequency of Visit of 6 visits per year (every 8.5 weeks) you would add an additional $18,000 to your annual sales.

10 (new guest per month)

x

12 (months in the year)

=

120 (total new guests for the year)

x

50% (new guest retention)

=

54 (number of retained guests)

x

6 (visits per year when retained)

=

360

x

$50 (average ticket)

=

$18,000 (additional annual sales volume from 50% new retained guests)