As part of a recent webinar series, MyStudio founder Tu Le has provided tips and guidance on how to grow your yoga business or fitness studio. In the second entry in this three-part series, Le focused on tracking key performance indicators (KPIs) using location management software.
To recap, we’ll take a closer look at which KPIs are necessary for business expansion. We’ll also reveal how to grow your fitness business by leveraging these KPIs and implementing multi-location studio management software.
Are You Ready for Another Location?
As you might imagine, running multi-location businesses requires a tremendous amount of planning, organization, and resources. To determine whether it's time to expand, you should ask yourself four questions:
- Is your business model profitable?
- Is your business model profitable without you on-site?
- Does the demographic call for another location?
- Is the opportunity worth it?
If your business model is profitable but wouldn't be if you were off-site, you’re not ready to expand. Your business should be able to sustain itself without you directly managing the day-to-day operations. If it isn’t, table your expansion aspirations until you’ve addressed this issue.
Once you’ve verified that your business model is profitable without your direct daily oversight, you’ll need to determine whether there’s sufficient demand for another location.
If you operate in a relatively small municipality, it may not be able to support a second location. But if you’re located in a sprawling metropolitan area, there are probably plenty of suitable locations for another facility.
Finally, you need to consider whether pursuing an expansion opportunity is worth it, both personally and financially.
If you don’t have the resources necessary to delegate many of the responsibilities associated with opening another location, it may be best to wait. From a financial perspective, you’ll want to make sure you can support a secondary location until it becomes profitable.
What Are KPIs and Why Do They Matter?
Before we discuss how to grow your fitness business by tracking KPIs, it's important to know what KPIs are and why they matter.
KPI is short for “key performance indicator.” Put simply, KPIs are metrics that can help you better understand how your company is doing in a certain area.
For instance, one KPI that you’re already tracking is total monthly sales.
On its own, total monthly sales volume doesn’t reveal much about your company’s overall health. However, using a combination of KPIs will enable you to assess your company’s growth and performance.
For example, you should be tracking monthly sales, total revenue, and operating expenses. Monitoring all these KPIs in conjunction with one another will provide meaningful insights into your profitability and cash flow.
KPIs You Can’t Afford to Ignore
Let’s turn our attention to a few KPIs that will help you decide whether your business is ready to expand. Some of the KPIs you need to be watching include the following:
Target Gross Sales Per Square Foot
This KPI reveals how effectively you’re using your current space. You're probably ready to expand if you’re hitting or exceeding your per-square-foot gross sales goal.
When looking for a location for your next studio, you can use this metric as a guide for how much space you need. It will be difficult to find a space that’s identical in size to your current location. Generally, however, it’s okay to lease a location that’s slightly smaller or larger than your primary studio.
Target Gross Sales Per Rent Dollar
This KPI tells you how profitable your business can be with regard to rent costs. Monitoring this KPI will help you understand how much rent you can afford at the new location.
If you’re a savvy negotiator, you may be able to get a few months of free rent, especially if the facility owner believes your business will draw a lot of foot traffic.
Target Gross Sales Per Payroll Dollar
The target gross sales per payroll dollar should include your own salary or hourly wage and those of all your staff members. This metric demonstrates how effective you are at using your human resources. It also enables you to better manage your payroll.
You can use this KPI to estimate the salary-related expenses you’ll incur during your expansion.
Cash Burn Rate
While all of these KPIs matter, the cash burn rate is perhaps the most important.
Cash burn rate is the speed at which your new location eats away at your cash reserves. The burn starts as soon as you begin purchasing supplies for your second location or sign a lease agreement. It’s typically expressed in terms of money spent each month.
For example, imagine you open a second location and your monthly rent is $3,000. You also incur $1,500 in miscellaneous operating and overhead expenses. In this scenario, your cash burn rate would be $4,500 per month.
If you know your cash burn rate and have a clear idea of how long your new location will take to become profitable, you can predict how much cash you need in reserve before launching another studio.
Using KPIs to Grow Your Business Model
You can closely monitor your company’s performance by tracking KPIs with MyStudio’s software for multi-location businesses. More importantly, you can see what you’re doing right and where you need to improve.
A comprehensive location management software not only facilitates KPI tracking but also provides you with tools to streamline your business operations. You can enhance the customer experience, monitor your progress, and pave the way for future growth.
Try MyStudio’s Premier Membership Management Software Today
Now that you know how to grow your yoga business or fitness studio by tracking KPIs, it’s time to start monitoring critical metrics like cash burn rate. To do so effectively, you’ll need to adopt dynamic location management software like MyStudio.
MyStudio’s multi-location studio management software provides a robust suite of tools, including attendance monitoring, task management, and marketing accounting tools you can use to sign up new clients.
Additionally, our membership management software features easy-to-use reporting tools designed to provide you with real-time insights about your business.
Don’t waste your time with membership software programs that aren’t purpose-built for the fitness industry. Schedule a call with MyStudio today to learn more about our business management and attendance software.