Top 5 Key Performance Indicators to Grow Your Business
Are you struggling to grow your fitness business in 2021? Depending on your industry, you may be suffering from the effects of the COVID-19 pandemic. Since the beginning of 2020, fitness studio and gym owners have witnessed a sharp drop in client engagement, losing a collective $13.9 billion between March and August last year.
At the same time, some brands offering digital products such as apps and membership products have gained more customers or found themselves facing fiercer competition from new players.
The good news is that the global health and fitness club market will quickly regain its vigor in upcoming years, boasting a predicted compound annual growth rate (CAGR) of 7.21% between 2021 and 2026. Competition is likely to remain fierce, however, so businesses across all segments must work hard to differentiate themselves from competitors.
How do businesses separate themselves from the competition? This is where data comes in.
Nowadays, no growth and marketing strategy plan is complete without a data analysis component. After all, the digital revolution has made valuable data accessible for organizations of all sizes. And it’s immensely profitable. Companies are three times more likely to report significant improvements in decision-making after adopting a data-driven marketing strategy, and 40% of brands are planning to expand their budgets for data-driven marketing in the near future.
Why? Well, data can help you make better business decisions and mitigate the risk of financial losses. With data on your side, you can identify growth opportunities, uncover the latest trends, and learn how to fulfill the needs of your target audience.
Many business owners are reluctant to make significant changes to their brand for fear of disastrous consequences. However, adapting to new trends and a competitive marketing environment is the only way for businesses to thrive.
To start using data effectively, you will need to identify a few key performance indicators (KPIs) that can measure success. If you’re wondering what KPIs to use (and how to use them), we’ve put together a list of top metrics for businesses in the fitness industry to track:
1. Profit margin
This is the most important KPIs as it will help you keep track of your company’s growth. If your profit margin is high, you know you’re doing something right. However, if you are spending more on generating revenue than the amount of revenue you bring in, your business is not working as it should.
If you notice your profit margin narrowing, don’t despair. Look closely at how and where you’re spending your money. Are there any extravagant expenditures you could cut back on? Are you pouring money into ineffective marketing strategies? Which expenditures generate revenue?
Similarly, you must consider whether you’re undercharging for your services. If your pricing model is overly favorable for clients, you may need to gently increase your service charges. Alternatively, your goods and services may be uncompetitive and outdated.
2. Client retention rate (CRR)
Many fitness industry players have traditionally struggled to maintain a loyal customer base. It’s easy to see why–gym rookies are notorious for canceling their memberships after only a month or two.
Client retention rate (CRR) is the percentage of clients a company retains year to year. It is important to keep your CRR as high as possible as obtaining new clients is an expensive and lengthy process. According to recent stats, securing a new client costs nine times as much as retaining an existing one. Boosting your CRR by just 5% could boost profits by up to 25%.
The average fitness studio retention rate is 75.9%, which is much higher than traditional health clubs. If your CRR is below this, you must come up with new retention strategies to help your business grow. Factors to assess include:
- Is the client experience substandard? What could you do to improve it?
- Are certain services becoming less popular? Why? Do you need better and more experienced staff?
- Are you being pushed out by competition? What are similar businesses offering that you aren’t?
If you’re stuck for ideas, it may be worth surveying new and existing customers to gain valuable insights into improving the client experience.
3. Revenue per client (RPC)
This KPI is relatively easy to track, as you can work it out by dividing your annual revenue by your total number of clients. The average revenue per client (RPC) across the fitness industry is $1,000, although this varies across segments. If you’re providing digital fitness services, for example, you can expect a lower RPC and a higher total number of clients than a gym studio.
Working to improve your RPC is a good idea, as it is usually more cost-effective than attracting more clients. Questions to consider when strategizing include:
- Can you expand your current offerings beyond existing classes or subscription services?
- What complementary services would enhance the client experience?
Again, surveying your existing client base could be an effective way to improve your offerings and maximize profits.
4. Leads and conversions
Scoring leads and conversions is the ultimate aim of the marketing game. Leads refer to people interested in your goods and services, while conversions refer to those who engage with your business by making a purchase or subscribing to your services.
You can calculate the conversion rate by dividing your total number of new clients by your total number of leads within a given timeframe. Multiplying this figure by 100 will give you the percentage of leads that result in conversions.
The higher your conversion rate, the more effective your marketing tactics. If you have many leads but only a few paying customers, you may need to come up with innovative ways to fuel sales. Possible approaches include:
- Cut out industry jargon. Fitness newbies want to feel safe and supported when signing up for new services. Avoid exclusionary language they may not understand.
- Boost trust in your brand by creating easy communications channels, engaging with followers on social media, enhancing the user experience (UX) of your website, and avoiding aggressive advertising.
- Streamline the conversion process. If your sign-up process is long and confusing, you may inadvertently be discouraging sales. Make your sign-up forms as intuitive as possible.
If you’re struggling to drive conversions, it may be worth conducting competitor analysis to ascertain what other businesses in your industry are getting right.
5. Average daily attendance (ADA)
This simple KPI tells you how well-attended your fitness classes are. The average daily attendance (ADA) may differ across sessions, and it helps you reorganize and streamline your services. If your dance classes attract many attendees while your yoga sessions struggle to gain traction, for example, you may wish to expand your dance classes and reduce your yoga offering.
It’s not always necessary to give up on classes with a low ADA. You may need to consider whether you have hired the best instructors or whether you could entice interest with special offers. Offers could include free promo items, a bring-a-friend initiative, or reduced-price classes.
The bottom line: KPIs are king
As you can see, tracking KPIs is vital for reviewing the financial health of your business. If you want to see growth, measure, measure, and measure again. Of course, tracking alone is unlikely to get you very far. Once you have collected and analyzed your data, you must implement strategies for change. Sounds scary? Don’t worry–adapting and changing will reap significant rewards.
Tracking KPIs is easy with WellnessLiving
Looking for an easy way to track and analyze KPIs? Look no further than WellnessLiving’s advanced reporting feature, which allows you to track a wide range of vital metrics, including payroll, projected revenue, sales, class attendance, client retention rates, and much more.
Book a free, no-obligation demo today to see what we can do for your business.