Summer is approaching and gyms everywhere are packed with people willing to show off their hard work. According to research, if you are in the health and fitness industry, you have two important things in mind: the success of your clients and the contribution you make to your community. However, you cannot help your members or your community if you are not properly tracking the health of your business.
Just as your members must measure their frequency and step in the scale to succeed in achieving their fitness goals, as a business owner, you must measure the health of your business on a regular basis. Here are some recommendations for 9 important KPIs for health and fitness franchisees to use in monitoring the health of their business.
1. Cost per Lead (CPL)
If you are only going to measure one metric in your marketing programs, cost per lead is the most worthwhile metric. It helps you understand how much you are spending on potential clients and whether the methods you are using are effective. For example, if you’re paying $25 per customer from Google and $100 per customer from print ads, you’ll need to reconsider purchasing print ads in the future.
CPL = Cost of Marketing Program / Total Number of Leads
Note that when calculating, the customer has two sides:
1) They are actively looking for the service.
2) They provide you with a way to contact them for follow-up.
Making sure you get the above creates a fair measure for your future sales force. To make sure your marketing mix continues to be the right mix, it’s a good idea to allocate about 10% of your budget to pilot initiatives.
2. Conversion rate
Conversion rate helps you understand the gym’s ability to convert leads into members. Usually seen as a sales metric, it shows how your sales team is working with the leads that marketing provides.
Conversion rate = Total new members / Total number of leads
If this metric is poor, it could be an indication that your facility is not up to par and you may want to look at renovations or upgrading equipment.
3. Active members
This is a basic but necessary metric that will determine your success at the most basic level. Measuring member growth and decline compared to the previous year is a great way to keep track of where you are in terms of the big picture. It is calculated as follows:
Growth rate = (present – past) / past
If your absolute member count is low compared to the standards, and your growth rate is not high, you need to focus on increasing your member base through marketing efforts or by decreasing turbulence.
4. Return per customer (RPC)
This commonly used KPI provides a sense of clarity as to where you stand in your business.
RPC = Annual Return / Total Number of Customers
If this KPI is low, look for increased sales opportunities such as personal training, specialized classes, or supplemental sales.
5. Revenue per square foot (RPSF)
Since the rent or mortgage costs associated with space are usually the largest associated with this industry, it’s a good idea to look at this often neglected metric. In a multi-site environment, this metric tells you which spaces are working and which are not working for you. Also, if your RPSF is very low, you may want to consider a smaller space, unless you intend to grow quickly.
RPSF = Annual Return / Total Square Area of Facility
6. Usage rate
Usage rate is a great metric in the industry because it measures how much of your resources are actually being used. If you provide in-person training, for example, how actively involved is the coach in the training process? If you rent a room for 8 working hours a day and use it for only 4 hours, there is a chance to add more quotas.
Usage rate = Total hours used / Total hours available
7. Net Promoter Score (NPS)
Member satisfaction is a measure of customer service and a measure of marketing. why? Increasingly, the brand is an act, and you want to make sure that the experience people receive in your gym makes them feel good. Technically a loyalty metric, the Net Promoter Score (NPS) is a great way to measure this on a quarterly basis. This metric compares your biggest fans (promoters) with your biggest critics (critics). Learn more about Net Promoter here.
NPS = % Promoters – % Detractors
NPS can help you with your marketing efforts by asking promoters to leave reviews or recommend your facility to their friends and family. It can also help prevent a disorder.
8. Retention rate
Retention rates are something that the fitness industry has struggled with for a long time, and member disruption is a common topic of conversation at franchise agreements. Overall, having a strong retention rate means that you are keeping your brand promise. You can measure this over the course of a month, a quarter, or a year.
Retention rate: Existing customers at the end of the period / Existing customers at the beginning of the period
If this number is low, it is a good idea to do a root cause analysis of why people are leaving. Having a “leaky bucket” of customers means that you will have to spend more on marketing up front.
9. EBITDA
EBITDA is a measure of a gym’s operational effectiveness. It is a method of evaluating effectiveness without having to take into account financing decisions, accounting decisions, or tax environments. While it’s hard to say or even fully understand for gym owners who’ve come through on the health and fitness operations side, it’s a key indicator.
To calculate the required adjustments for EBITDA, see this article from Quickbooks.
EBITDA shows how well you work at generating cash. Your work is evaluated as multiples of this scale.
Just like your customers, it is important for you to measure the right things. With these nine key metrics in place, your business will be set up for success.
Looking for more KPIs for your franchise? Watch our post on how to use KPIs as a franchise business planning tool.
This article first appeared on the FranConnect website and is used here with permission. For more information, visit their website.
