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The Salon & Spa “Critical Numbers” Crash Course
December 3, 2018 | By Neil Ducoff | 1 Comment
The Definition: A Critical Number is a number that, when moved in the right direction, has a profound and lasting impact on the company.
For salons and spas, the following Critical Numbers are the five primary growth indicators:
- Productivity Rate: The ratio of service hours available for sale versus service hours sold. The higher your productivity rate, the more efficiently service payroll hours are being utilized.
- Prebook Rate: The percentage of clients that checkout with a future appointment. Salon/spas sell time in the form of service hours. The more time that is sold in advance through prebooking, the easier it is to maintain an optimum productivity rate.
- First-Time Retention Rate: The percentage of first-time clients in one month that return for a second visit within 90 days. It doesn’t matter who the client returns to as long as he or she returns to the company.
- Existing Client Retention Rate: The percentage of clients in one month, that have been to the salon/spa two or more times, that return for another visit within 90 days. It doesn’t matter who the client returns to as long as he or she returns to the company.
- Frequency of Visit: The average number of service visits clients make per year to your salon/spa. Increasing your company’s overall frequency of visit by one visit can truly have a profound impact on revenues.
Depending on where your salon/spa needs measurable improvement, you can add any number or percentage to your Critical Numbers.
- If your service payroll percentage is running too high, add it to the list of Critical Numbers that you’re monitoring.
- If creating Net Profit or cash reserves has been a challenge, add them to your list for monitoring.
Here are my No-Compromise Leadership Critical Number crash course insights:
- It’s about team performance: Too many owners try to drive Critical Numbers one employee at a time. In business, a company’s Critical Numbers are a measurement of your entire team’s ability to perform at higher levels. Yes, you need to coach individual employees to improve. However, it’s when a team truly takes ownership in driving Critical Numbers in the right direction that profound and lasting gains are achieved.
- It’s about information flow: If you think telling one or two employees to get their prebook or client retention rates up is how company breakthroughs are achieved — you’ll be spinning your wheels. There’s a reason that all highly productive companies utilize daily huddles along with other forms of information flow to drive Critical Numbers in the right direction. Information flow at the majority of salons/spas is best described as a trickle. When a salon/spa opens the floodgates of information flow, amazing things happen. The team understands the goal, the daily score and precisely what needs to be done today. If you think employees don’t care, they probably never had a thorough understanding of why and how to move the numbers in the right direction.
- It’s about systems and consistency: I’ll keep beating the systems drum until the message hits home. It is your company’s systems that Critical Numbers are actually measuring. You can’t improve your productivity rate without improving or overhauling the systems that drive it. You can’t improve first-time client retention rates without finely-tuned customer service and skill development systems. The same goes for prebook, payroll management, net profit and other Critical Numbers. Developing and locking in your systems will create consistency. Create consistency for how work is done, and you can better plan and predict the future.
- It’s about leadership accountability: You lead people — You manage systems. If you don’t like the results you’re getting, change or rebuild the system. I know all too well that the people management part of a salon/spa can frustrate the heck out of owners. Likewise, I know how developing and focusing your leadership skills around Strategies’ Four Business Outcomes (Productivity, Profitability, Staff Retention and Customer Loyalty) can turn an average or troubled salon/spa into something truly extraordinary. Leadership accountability is a business discipline that must be embedded into your salon/spa culture. It always flows from the leader, to employees, into the culture, and manifests itself in the Critical Numbers.
- It’s about achieving team wins: When a target Critical Number is achieved, it’s a win for the team. It’s inspiring when I see a Strategies coaching client go from a 43% prebook rate up to 82% in a matter of weeks. It shows the leadership ability to create a prebook system and make it stick. It shows how the team took ownership in driving the company’s prebook rate to a number they never thought possible. Damn, that’s a win worth celebrating. Incredible things happen when a team takes ownership in the company’s Critical Numbers. We see it every day.
Here’s my challenge to you: I bet your salon/spa has one or more Critical Numbers begging for some urgent attention.
Pick one or two and spend the next ninety days focused on those Critical Numbers.
- Build, or rebuild, the systems that drive those Critical Numbers.
- Present your plan to your team. Give them the why, what and how of the plan.
- Give them the, “We’re going to move this Critical Number from xx% to xx% in 90 days. Remember to keep that goal number realistic based on the time frame.
- Coach them on the system until there is absolute clarity on what needs to be done.
- Keep score at daily huddles. Make a cool scoreboard to track progress.
- Inspire. Lead.
Today, this is how you win big at the salon/spa business game.
Categories: Financial Literacy