People walk through your doors every day. But exactly how many? And how many walked in yesterday compared to today, last month, or even last year? And the bigger question remains, what does this all mean in terms of your earnings, revenue, profit, taxes, etc.?
What we’re talking about is the process of tracking financial Key Performance Indicators, or KPIs. The fundamental truth of tracking financial success is that it overlaps with your payment revenue. Continue reading below for a handful of important KPIs to track, as well as how to track them so you can always be certain you have the best strategies for growth and success.
We’re starting here because payment declines have a major effect on your efficiency, member retention, and overall revenue. In fact, 1 in 3 declines results in a member termination. There are a number of reasons for a payment decline, but the majority of them are avoidable and without the need for an uncomfortable conversation with members.
What’s more, tracking declines can actually help you get ahead of the curve. Getting in the habit of reporting on payment declines will make it easier to track credit card expiration dates, so you can reach out to members before any decline occurs.
Revenue Per Member
Annual Revenue ÷ Number of Members
This is a staple KPI in the industry, as it helps draw a complete picture of each member’s value for your overall revenue. But keep in mind is that this is a basic metric that doesn’t provide a ton of detail on where members are coming from, how they found you, how often they use the facility, or where they spend their money (membership dues, café, classes, packages, etc.).
Member Retention Rate
(End Count – New Members) ÷ Start Count
In knowing the value of each member, it is now easy to see the importance of member retention. Member retention is typically calculated annually and helps set membership goals for the upcoming year. This can also be calculated quarterly.
This metric gives a clear picture of member churn. You can also dig deeper within cancelled members to find important trends. Maybe those cancelled members were primarily attending classes and the schedule shifted, or perhaps those members expressed interest in PT when they signed up, but never attended a session. Knowing this information will help in creating sound marketing strategies to avoid member churn in the future.
(Revenue-Cost) ÷ Revenue
Anyone selling anything needs to have quick access to their profit margin numbers. This is calculated as a percent of revenue, the percent you have left after applying expenses to running a successful organization or club.
The next step in having knowledge of your profit margins is to find the right questions to dig a little deeper. Everyone wants a higher profit margin, so what can be eliminated to have less overhead? Or, what are changes that can create overall efficiency and save time? Knowing your current profit margin helps create a baseline, and parse out reasonable goals for the future.
Earnings Before Interest, Taxes, Depreciation, and Amortization
Probably one of the least tracked financial KPIs in the industry, EBITDA is a valuable, but lesser-known concept. It’s important to understand and know your EBITDA even outside of tax season because it provides a clear window into revenue health and operational efficiency. It gives visibility to profit, as well as assets, operational costs, and services produced and sold. Furthermore, EBITDA provides a quick snapshot in cash flow, which is invaluable for your operations.
Partner with a Team of Experts
Financial KPIs are all around important for operations. They help set goals that allow you to continue growing. Your team likely has a financial reporting system in place, but be sure to consider these metrics noted above that might not be on your radar. Achieve your goals with simple a payments process and continuous cash flow. To learn more about how Gains can help you achieve your goals, connect with a specialist today.