Taneesa Williamson Suzie Hoitink reveals the numbers you need to know.
It’s concerning that one of the initial questions many of my clients pose after a business review is, “Am I on the right track?” Essentially, they’re inquiring about the business’s performance. Not a good start – you should know what shape your business is in.
During the discovery phase, I request clients’ financials, which is typically straightforward. However, when I ask for specific reports, they often admit either not knowing how to access the information or confess that it’s their first time delving into it.
In my earlier days at Clear Complexions clinics, I was a ‘financial ostrich’, avoiding any confrontation with my own financial and business illiteracy by immersing myself in treatment rooms. I focused solely on driving revenue.
But revenue is vanity and profit is sanity.
Only when I learnt what numbers to look at and what they were telling me, did I really understand how to inject myself into the business to drive those numbers up. That’s when magic started to happen.
The Financials
It’s an obvious statement, but your financial reports are a vital synopsis of your business’s viability, yet curiously many business owners only look at their Profit and Loss statement (income statement) at year-end, rather than monthly.
You don’t want to reach the end of the year and say, “Alright, this is what we made,” without knowing how or what to do next year for improvement, so monthly analysis of your Balance Sheet and P&Ls will provide invaluable insight into trends, both positive and negative, allowing you the opportunity to act.
However, while your financials tell you what happened in your business, they fall short in explaining why, or more crucially, what steps to take.
Fortunately, there are metrics that tell you what is happening within your business and precisely what you should be doing. And it’s all at your fingertips in your practice right now.
The Metrics
Your business has pivotal levers or drivers that, when adjusted, have a profound impact on productivity and profitability. These levers are represented by metrics, which are typically reported by most proficient CRM systems.
Metrics enable the establishment of Key Performance Indicators (KPIs), the fundamental goalposts you set for yourself and your team to drive individual performance towards the business’s goals.
While key metrics vary by industry, the more precise they are, the more valuable they become. Broad metrics, applicable to nearly any business, include sales revenue and net profit margin. However, here are four critical metrics that empower your business to reach its true potential:
Productivity per hour: What’s the average earnings per team member per hour?
The vitality of your clinic hinges on your team’s ability to be at full capacity (utilisation) and maximise earnings during those hours (productivity).
Although client demand and cancellations inevitably affect utilisation, gauging each staff member’s hourly earnings against your expectations (the KPI) indicates whether action is required.
Average revenue per visit: How much does each client spend, on average, with each staff member?
Maximising client value is paramount, especially given the considerable cost of acquiring a client in the first place. Identify which staff excel at client maximisation and who might benefit from some training to improve. Establish revenue per visit KPIs (adjusted for qualifications and experience) and monitor your team on a daily, weekly, and monthly basis.
This allows you to pinpoint any skill or will issues with specific staff members. Take it a step further by examining how they generate revenue: which treatments they offer and the distribution between treatments and skincare. From there, implement strategies to enhance performance, which could include training in treatments and/or skincare, mentoring, or even incentives.
Rebooking: What percentage of clients rebook with each staff member?
My aim with our six clinics was for every client to establish a habit of visiting us every two weeks. Ambitious, but achievable. The key was focusing on each staff member’s rebooking rate, once I had the treatment planning system (The prescriptive Cycle) in place.
Engaged staff not only perform the scheduled treatment but also ensure the client knows precisely which treatment comes next and why, and then book it.
If the rebooking rate is low for a particular staff member, again, ask whether this is a skill or motivation issue and address it promptly. The most profitable client is the one you already have, so bring them back as frequently as possible.
Skincare % of revenue: How much revenue from skincare sales does each staff member generate?
This may seem straightforward, but I often see owners measuring skincare sales without a clear understanding of what constitutes success.
Every bit of profit margin from skincare goes straight to your bottom line – no additional staff, equipment, or extended hours required. Ideally, your retail revenue should account for 20-40% of your overall revenue.
Most clinics fall within the range of 5-9%, representing hundreds of thousands of dollars in untapped potential. Set KPIs and implement strategies to enhance their ability to sell skincare. Then watch your profitability soar!
I often hear Doctors and Nurses say, ‘I’m not a businessperson, I’m a clinician’. That’s an ostrich statement if ever I heard one. If you own a business, you are a businessman or woman.
What can be monitored and measured can be managed, enabling adaptability and growth in your business. If interpreting your business intelligence and establishing KPIs isn’t your forte, don’t put your head in the sand; get some help.
This article originally appeared in SPA+CLINIC 95.
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