What Are Your Salon’s Key Performance Indicators?

23 July 2021

Salon businesses use key performance indicators to measure long term performance. They are an excellent way for salon owners to track how changes in salon policy have effected how the business is growing. This article will explain what key performance indicators are and how to use them.

Salon owner monitors their KPI's.

‘Key Performance Indicators’ or KPI’s are used by salon businesses to gauge the company’s overall performance. These KPI’s are compared against a series of long-term goals and the growth rates of other similar salons in order to measure how quickly the business is progressing. When your salon business begins using new methods in your marketing plan or the interior design is revamped, you should be able to see a difference in the number of sales you have.

Your salon software can facilitate you monitoring your KPI’s by viewing salon and team dashboards. Your salon software can also be used to collect client review, increase home care sales, analyse your care factor, client retention, re-booking percentages and so much more.

Small changes over time, such as an increase in new clients attracted by your salon website, or a higher client retention rate due to the salon creating a set client journey, may not be noticeable on a day to day basis. It is only when we look at data retroactively that changes in your KPI’s become clear.

Here is some measurable data that can be considered key performance indicators for a salon business:

  • Salon revenue growth – Your revenue growth is the increase, or decrease in the amount of money made by the business within the period that you are measuring. Tracking the revenue growth by comparing the number of sales gained each month can be very satisfying.
  • Number of clients – Bringing in new clients using a ‘bring a friend’ referral scheme will likely gain you more business, but many may only visit once. Watching to see if the amount of return customers increase is a key indicator that you are doing something right and can be extremely satisfying to see.
  • Profit margin – Your profit margin is similar to revenue growth, but takes into account not just sales, but the amount of the revenue your business spends on outgoing expenses. These expenses, such as salon rent, materials such as hair dye and the salary of your staff can cut into your profits quite a bit. Keeping track of how much you are actually earning, after these cuts is important to measure how the business is doing.
  • Client rebooking rate – Once they have had their treatment how often are clients rebooking and what is the frequency of the bookings? Make sure to encourage your team to rebook their clients as soon as their appointment has finished.
  • Treatments – Which treatments are popular with your clients? A great way to find new inspiration is by looking at services offered by other salons that have done well and adapting them to suit your own clients.
  • Customer satisfaction – Sending messages asking for a quick rating out of five to clients through SMS after their appointment can give you a great way to track customer satisfaction using concrete data. Knowing whether changes you have introduced have increased customer satisfaction is crucial to the continued success of your salon.

Generally, these key performance indicators are used as a way of understanding how the entire salon is progressing as a whole. However, using your salon software, you can also monitor the results of your individual salon stylists in order to check on how they are progressing. Each stylist will have a series of key performance indicators such as number of clients, rebook rate and average bill which you can discuss in one-on-one meetings every few months. Setting goals for performance for your stylists and providing targets for your employees to aim for can be a great way to motivate them.

Of course, stylists will all have weeks that are good and others where their key performance indicators drop. This is often through no fault of their own, but if there is a serious downward trend, having a 121 about any issues they are having and what the potential reasons could be for the drop would not go amiss.

Three to Thrive

While keeping track of your key performance indicators are important to ensure you can monitor your progress, if you try to monitor too many variables it can become difficult for you to keep following what is going on with each of them. Making sure you choose only three key performance indicators to focus on will ensure your team do not become too overwhelmed.

For instance, you can monitor each stylists/therapists three key performance indicators such as number of clients, rebook rate and average service bill, average retail bill and client retention. Other areas such as marketing will have other rates to monitor such as, online booking rate, number of visitors to the website and likes on social media can give you a clear picture about how your online marketing efforts are being received.

What are your profit drivers?

There are only three ways to increase your salon business, bringing in more customers, encouraging clients to spend more and booking them in for appointments more often.  Just one more visit to the salon per year for each client can increase the revenue of your salon by 10%.

Small changes, such as ensuring your stylists know to offer to rebook a client immediately after their treatment ends can increase your revenue drastically. If the customer is unsure of when they are free for an appointment, offering a card with the salon website details and phone number will give them a reminder to book in later in the day. Using your KPI’s to monitor how your separate treatments are doing in comparison to other aspects of the business is a great way to calculate your main profit drivers.

Retail

Many salons have retail products. However, generally speaking retail sales in salons are quite low, with more product being used in customer treatments than being recommended or sold to clients for hair maintenance. This is mostly because your stylists are specialised in hair-cut and dye and are occupied while your client is in the salon, with most clients leaving immediately after paying and rebooking. It is rare for a client to visit a salon to purchase hair products when they could visit a shop.

A fantastic way for salons to drive up retail sales is to describe each product they use on the customer’s hair while it is being washed cut and styled and what each product is for. Letting clients know that you have thought about the condition of their hair and how to maintain it will give customers a clear reason to buy your salons products. Offering samples of more expensive products for your clients to try at home is another great way to get them hooked so you can make a regular retail sale.

In addition to the above, you can also drive product sales through your software system using a product recommendation system. This system allows your team to add product recommendation to their clients record card, the client can then receive an SMS or email with the recommended products for them to purchase directly from your online website.

Another way to increase the profits gained by retail in your salon is to monitor your salon stock levels. Using this data, you can find out what has been selling well and which products are gathering dust. Rotate which products you are offering to clients to see what is most popular and use the data collected to streamline which hair products you offer to clients.

If you are interested in using SalonIQ’s salon software to support your business, please contact us here. Our business consultants will be happy to help you import your current data, set up your salon software and will guide you on how to use the system in order to streamline your digital marketing and performance monitoring. 

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