How to Use Key Performance Indicators for Salon Owners
As a salon and spa owner, tracking and analyzing KPIs (Key Performance Indicators) can allow you to make data-driven decisions that strengthen the resilience of your business against economic downturns. Tracking them allows you to take a proactive approach, to adapt quickly and maintain profitability, even through challenges.
If you're unsure what to track or how, a good place to start is with your financial reports; a great one being your Income Statement. Here's how:
Utilize your P&L to determine:
Total Revenue: The income statement shows total revenue, which can be broken down by service types to identify which services generate the most income, providing you with the opportunity to make decisions on where to allocate funds or trim expenses.
Cost of Goods Sold (COGS): This helps in understanding the direct costs associated with delivering services and selling products, crucial for calculating gross profit margin.
Gross Profit Margin: Calculate by subtracting COGS from total revenue and dividing by total revenue. This KPI indicates the profitability of services and products, again, providing you with data that you can use to determine where to invest.
Operating Expenses: Track expenses such as rent, utilities, and salaries to monitor operational efficiency and trim expenses when able.
Staying on top of your numbers, running accurate reports, and tracking data through KPIs can help you prepare for and withstand economic challenges that could otherwise adversly affect your business.