In the ever-evolving landscape of the beauty industry in the GCC, the pursuit of growth stands as a fundamental objective for salons of all sizes. As salons strive to thrive in our very competitive market, the ability to measure, monitor, and understand the intricacies of growth is of vital importance.
Knowing the ‘why’ it is important to measure growth, the ‘how’ to actually do it and exploring and understanding the metrics to measure by, are tools that will help you build a successful, adaptable, and sustainable enterprise.
As a professional beauty business consultancy, VRBC is well-placed to understand and share the tools, strategies, and insights that will help you quantify your success but also plan for the future. Here follows our recommendation for the tools that you can leverage to assess and propel your growth – it is time to unlock the full potential of your business!
Why is it necessary to measure?
If you don’t measure and monitor a few key metrics in your salon, you won’t know when you are heading for a problem or when you possibly have untapped potential, or even if you are excelling and need to look at alternative means of growth.
When you focus on measuring performance you will soon see the tangible benefits that extend from financial health and operational efficiency and you will better be able to discern your competitive advantage and how you can leverage that into your business.
Benefits of performance measurement include:
- Being able to make informed decisions about resource allocation, investments, and operational improvements.
- Ensuring that your efforts are in line with the overall strategic objectives.
- Understanding what is working well and what needs improvement, and then implementing targeted interventions to enhance overall efficiency and effectiveness.
- Cost savings and better resource allocation.
- Providing a clear framework for evaluating individual and team contributions, which can help build a collaborative work culture.
- Understanding how well you are meeting customer expectations and identifying areas for improvement in products or services.
- Identifying areas where your salon is exceling and areas where it may lag behind, facilitating the adoption of best practices.
- Recognising the need to implement proactive measures to mitigate risks and prevent larger problems from arising.
- Being able to assess the overall financial health of your business. This information is crucial for stakeholders, including investors, creditors, and management, to make informed decisions.
- By analyzing results, making adjustments, and monitoring the impact of changes, you can adapt and evolve in response to market dynamics and changing customer needs.
So what should you measure?
The specific metrics you use to measure performance in your business will depend on your goals and the nature of your operations. However, there are several common categories of metrics that businesses often use to assess performance.
- Financial Metrics
These metrics include looking at your revenue – total income generated by the business; your profit margins – what is your nett profit as a percentage of revenue; and lastly your return on Investment (ROI) – the ratio of nett profit to the cost of investment. Equally important is the % Cost of Goods Sold (COGS) – When it comes to retail, UAE market suppliers provide retail margins between 35 – 40%, therefore, COGS should not be more than 60%.
These calculations will give you a very good understanding of the financial health of your salon.
- Client Retention Metrics
Clients are the lifeblood of your business. Knowing whether they are happy is paramount. There are many ways in which you can keep an eye on how you are faring in this space, and they all involve keeping your finger on the pulse of what customers want.
For example, you can call non-returning clients and find out why they didn’t come back. If the client says they had a bad experience, apologise and offer them a free service. If one of your high performing employees leaves, reach out to her clients and tell them she has left and that you will miss them and maybe offer them free services for the next three visits to entice them to stay. In addition you can offer clients discounts or rewards for bringing their receipts back within in a certain time frame
Once you understand where you are there are many ways to improve your scores in this area.
- Employee Performance Metrics
Being in tune with your staff is key and all salon owners should consider measuring the following:
- Employee Productivity – measuring individual or team output relative to input.
- Employee Satisfaction – completing surveys or assessments to gauge employee morale.
- Turnover Rate – looking at the percentage of employees who leave the organization within a given period.
Other metrics to consider include:
- % Cost of Services – The industry average range of % Cost of Service is 10 – 12%, on average 11%. It could be higher if the service prices are lower compared to the prices of other market players and the products used are top brands.
- Rent % – this should not be higher than 10% of your revenue
- Salaries & Benefits % – this should not be higher than 35% of your revenue
- Sales per SQ foot- should not be lower than AED 2,000 per sqft
- Retail Sales % – worldwide benchmark is 30%. For the GCC if you reach 15% that’s great – for prime mall locations it should be 30%.
Should you complete your calculations and find that you are unhappy with the performance of your business, there are many factors that can contribute. Whether it be poor administration, poor inventory management or lack of teamwork, there are many ways to fix the issues and get back on the right track.
At VRBC, this is what we do and we are well placed to help you assess your performance and help you improve on it.
Contact us on email@example.com to find out more.