Key performance indicators (KPIs) are important for any type of business, but they’re what enables the hair and beauty industry to truly thrive.
Without clear goals, targets and indicators of business performance, it’s difficult to know where your business stands, and how to achieve the growth and profitability you desire.
But what makes KPIs so important for salons, spas and clinics, what KPIs are used in our industry, and how can we set them for our own businesses?
We turned to the experts to find out.
We asked hair and beauty business coaches, Malcom Gibbons, Salon Business Coach, and Estelle Carroll, ZING Coach, for their expert advice on using KPIs and their top tips for setting them.
Why are KPIs and targets important for salons, spas and clinics?
Malcolm said: “Simply put: what gets focused on gets done! Businesses are made up of lots of different parts, and part of a successful business is knowing the details of how it’s performing. We do that by measuring our performance against predefined targets and KPIs. These are usually set in important areas and can take the form of numbers or achievements of an event or task,” he explained.
“Targets and KPIs are also important beacons for the team to aim towards, and can stretch a salon’s results well past the average.”
Estelle added: “Often I hear salon owners say they don’t really know how much it costs to run their business or how much money they’re making. Often the salon is run by emotion. For example: ‘It felt like a great week because we were really busy and all the girls were happy.’ But those who track the numbers know: you can be flat out and going nowhere.
“Knowing your numbers doesn’t make you Ebenezer Scrooge. In fact, that’s completely wrong. As a salon owner you have a responsibility to your team to ensure the business is profitable. If the business isn’t profitable, some, and maybe all, could lose their jobs. So you care more about your team members when you keep an eye on the numbers.
“It’s in everyone’s best interests to set KPIs and ensure your entire team is working towards them so your business is profitable and growing.”
What KPIs/targets are best for salons, spas and clinics?
Malcolm recommends the following targets for hair and beauty businesses:
Client Satisfaction
Aim for ratings from clients surveyed scoring higher than an 8 out of 10.
Revenue
Total dollars: target a specific dollar figure for the team to achieve.
Growth
Percentage increase over last month, or over the same time period last year.
Client retention
It’s important that while you’re working hard to attract clients your team are retaining them with great work and service.
Client rebooking
Getting a commitment from the client for a further visit will ensure future business for the salon, thus securing future revenue for the business and appointments for the team member.
Retail sales
Set targets and work with the team to understand the importance of retail in the overall client experience and help them achieve results with well thought out marketing and incentives.
To learn about each of these KPIs in more detail, read: The best KPIs for growing your salon, spa or clinic.
Tips for setting business KPIs
Now that you know why KPIs are important for salons, spas and clinics, and which are best for the hair and beauty industry, you’re probably wondering how to set them.
When choosing the best KPIs and targets for your business, Malcolm advises to keep business targets simple and not to focus on too many at once.
“Base your business targets on past performance and with a reasonable increase to cause stretch,” he explained.
“Team targets should be all inclusive, taking every operator into account. Remember to set realistic targets for your team and expect that as a team they will be able to achieve more than if operating as an individual. Work hard on team cohesiveness and unity – this will stand them in good stead for achievement.”
Estelle has provided her top tips for setting KPIs, which will help to get you started:
1. Start by knowing your break even point
What does it cost for your salon, spa or clinic to open each week? If your operating expenses are $7,000 a week and you’re making $6,500, you’re not growing and you are eating into your savings.
2. Assess your break even point
Once you know what that number is, look at where the money is being spent. Do you have too much stock sitting on the shelf? Too many on the team? Are you paying for things twice and you didn’t realise until you looked at your bank account? When was the last time you asked your energy provider for a better price? Are you paying yourself? Think about where your money is and isn’t going.
3. Set your goal
Your break even is your base starting point from which to set your business goals. Remember the goal isn’t just to break even, it’s to make a profit. So set ambitious, yet attainable, goals and decide on which KPIs will help you to achieve them best.
To find out more, read: How to set targets for your salon, spa or clinic.
Tips for setting team KPIs and targets
We can’t expect our team to be driven for growth in the salon without something for them to work towards. But we also can’t be dipping into our bottom line. So where do you start?
Estelle advises to look at how your business and team is performing and the revenue goal you want to reach, then set targets for your team that will enable you to reach your revenue goal.
To determine the targets for each team member, first work out the gap between what your team members are currently bringing in and what their target would need to be.
“Let’s say the gap is $1,000 a week. This would become a KPI for your team member. Work with your team on brainstorming solutions for bridging the gap so that they believe their target is attainable,” Estelle explained.
“When you break it down you can show your team member that an extra $1,000 per week might be $30 a client – which could be a product, a treatment or an extra service. Then it doesn’t seem so overwhelming.”
Here’s an example:
Team Member Sally:
- Clients: 30
- Average client bill: $83.33
- Sales: $2,500 Target: $3,500
- Gap: $1,000
Future Sally:
- Clients: 30 (same amount)
- Average client bill: $116.66
- Sales: $3,500 (Target reached)
Estelle said it’s important to upskill and educate your team on upselling techniques to help them reach their targets.
“You’ll need to work on consultation skills, product knowledge, rebooking scripts and service delivery – it’s a ‘do together’ process,” she explained.
“It would be easy peasy if you just set a goal and that was it— the team just made their targets. But in reality it doesn’t work like that for most. They need support with the goal, gap awareness and to understand how to bridge that gap.”
Use bonus structures and incentives for targets
Estelle said offering a bonus structure or incentives for team targets will help to inspire your team to achieve their KPIs and reach their full potential.
“I’ve seen a variety of bonus structures in salons and my favourites are the ones that reward consistency. You might start out with a target and pay out a bonus, but if that target only gets reached once in a blue moon you will be dipping into your bottom line.
“Consider growing them up to a profit share based on consistency. For example, if they make their target three weeks in a row they get a great bonus. This ensures the bonus payments are rewarding growth and consistency, and will enable you to sustain the bonus scheme.
“Otherwise you’ll set the goals, pay out the targets, then have to stop doing it because you realise you’re actually losing money. It takes time to work out the right formula for your salon team. My advice is to start off small so you have room to grow.”
For more tips on team targets, read: How to introduce targets to your team for rapid growth.
Use salon software to track and report on KPIs
Setting KPIs and targets for your team won’t have the desired outcomes unless you have an accurate and dependable way of tracking and measuring progress consistently. That’s where salon software becomes essential.
The best software will have in-built customisable targets that you can set up easily, monitor the progress of at a glance, and report on with the click of a button.
If you’re not already a Kitomba customer and you’d like to find out how Kitomba Salon and Spa Software can help your business to become more successful, book your free demo.
Are you ready to set your KPIs?
Now that you know why KPIs are so important for hair and beauty businesses, and expert tips for setting them, it’s time to set your KPIs, get your team on-board, stay on track and watch your business grow!
For a more detailed breakdown of the different types of KPIs used in the hair and beauty industry, check out our blog: The best KPIs for growing your salon, spa or clinic. It includes all the best metrics for growing your business, specific to the hair and beauty industry.
Then, read How to set targets for your salon, spa or clinic, and How to introduce targets to your team for rapid growth.
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