Key Performance Indicators—Why they are so crucial to your Business! by Peter Conroy, REX Chair Adelaide, Australia You have heard the old adage: "Any road will take you there, if you don't know where you're going." And "What gets measured, gets done." We cannot hide from the fact that numerical information gives us a picture of the state of our business. In fact, as Jim Collins states in his book Good to Great, the statistics give us the 'brutal facts' of our business. Lets look at the Fitness Industry You can measure what you choose, but usually it is a good idea to talk to your accountant, business coach if you have one, and especially others in your industry so as you can compare organization to your peers. Most industries have benchmark standards. Benefits of Tracking KPIs Justin Tamsit from Active Management states: A major benefit of KPIs is they allow for successful people management in your club. KPIs allow you to be objective about staff performance. You may already do this by tracking class numbers. If they drop below a certain number you may change the instructor. Instructors are 'kind of' trained to understand that poor numbers could mean losing a class. KPIs remove personal issues for discussion with staff. A 'brutal' but factual statement is that statistics don't lie. This means that when looking at Team appraisals, you can justify decisions on Team members based upon facts rather than perception, gut feel or observations. An individual's KPIs reduce the subjectivity and allow you to look at performance based on results. An exciting aspect of KPIs is that they allow you to compare performances between individuals and club—just as we compare footballers or cricketers. For example, clubs within chains or clubs that meet on a regular basis can compare performance levels and results. The proviso is that each club tracks the same KPI's and they are gained by the same formula. The Australian Fitness Roundtable have been tracking KPI in their clubs for nearly 10 years and using their figures and those from the US Fitness Roundtable they have been able to set benchmark KPIs. They compare results and find this a huge value because if one club has a much better KPI, then the fellow members can find out what they are doing to make such good numbers! They then use the information in their clubs to help increase profitability and improve specific aspects of the club operation. Club KPI's These KPIs look at the financial status of the club. To complete many of these you need access to a profit and loss statement—if you want really accurate KPI's. Some high priority KPIs for judging club performance: Membership Income: Total Revenue—this figure tells you how much the ongoing viability of your club relies on the sale or renewal of memberships. A goal would be 70%, which simply takes the pressure off sales, and makes you work harder on building other profit centres or income producers in the club. Attrition or Retention Rate—this is the number of members who drop out or stay with their membership. There are many ways to establish this figure and each method has its own advantages and disadvantages, as different aspects of growth and attrition are included or not. To keep it simple: once you take the cancelled members from the new members of the month, did you grow? If you did you will have positive retention and if you didn't you will have attrition and this becomes an area where work is needed. Wages: Revenue—this figure compares your total wage bill, including on-costs, to your total revenue. Ideally, this figure is around 38% but from my observations in the industry this is difficult to achieve. I think 43% is more realistic but this figure can be affected by whether you do personal training in house or not. For example, if your PT is in house and split 50:50, your KPI may be negatively affected. Revenue per metre—You divide your total revenue by the size of the club and this tells you how much income you make per metre. There is no ideal or benchmark figure, but it had better be greater than your rent or you are in trouble. Revenue per member—I love this figure because it tells me what each member is worth. A good indication on how much you need to spend to get a member or keep a member. You simply divide total revenue by the number of members. Visits/week/member—This KPI tells you if all your members are using the club. The higher the figure will mean the greater retention but the more use of your club and therefore wear and tear on the facility and equipment. In fact the results of a recent BFIA study shows that if we increase member usage from 1 visit per week to 2 visits in their first 4 weeks, we could increase our retention by up to 40%! Other KPI'S you can monitor Number of members Number of group fitness participants Direct Debit income Direct Debits as % of gross income Net income Number of personal training sessions per week Personal training as % of gross income Other income streams as % of gross income Number of enquiries Number of tours Number of Sales to enquiries % Tours to enquiries % Sale to tours % Take note. Knowing your own figures and the industry benchmarks are only part of the equation. It is what you do with this information that counts. In other words what systems and training do you implement to bring yourself into line with where you want to be? This is where the fun starts. It is hard work and makes you look long and hard at your business. If you are one of those still working in your business and not on it, then you may find this an impossible task. However, should you make the decision to embark down this path the rewards are well worth it. "I have personally increased my net profit by 30% in my first year of using KPI's. Not only that, but the understanding of where my business could improve and where I was going wrong was very quickly identified."