Keeping Score In Your Business
How to Keep Score In Your Business
Are you keeping score in your business? Do you know if you’re winning? Is your business performing exactly where it needs to for you to reach your yearly and long term goals?
Most businesses have no idea. They look at their revenue or sales each month to see where they end up and either consider it a success or try to change things to add more money to their business.
It’s all reactive and there’s no indication of actual success.
For example, you could be doing $65,000 a month in a business and think you’re doing great. Until you realize that you have $65,001 in expenses and your bank account is running low.
One of the first things we teach our coaching clients is to track the important numbers that will tell them what they need to know. We’ll call them metrics from here on out.
At the very least, these 8 metrics will tell you if you need to explore things a bit further.
Your 4 Sales and Marketing Pillars
Sales and marketing activities are what drive your business. Without clients, you don’t have cash coming into the business and without cash there is no business.
That’s why 50% of the metrics you’re looking at monthly, and hopefully weekly, are based around sales and marketing. These 4 metrics are the pillars of your sales and marketing activities. In the traditional sense they are the sales pipeline for your business.
These metrics include:
- Front End Offer Clients
- New Clients
- Retention Rate
Your leads are new prospects for your business. They are interested or have indicated interest in your business.
Knowing how many leads you get each week will help you know what you could expect to add in terms of new clients. Over time you’ll see a pattern and know the percentage of leads that move to the next step and then eventually become new clients.
Front End Offer Clients
Front End Offer Clients (FEO Clients) are those that have started your trial, jump start, test drive or challenge. An FEO is a low barrier to entry offer that doesn’t require as much commitment as your Core Offer. It doesn’t have to be free and there is no magical time frame that will make it effective.
Having an FEO in your business will allow you to have more people experience what you have to offer and try it out. If you provide a great experience, a good number will turn into long-term clients.
Don’t think that having an FEO means you’ll attract “tire kickers” and “deal seekers”. If you market to those people or your marketing speaks to those people, that’s what you’ll get.
Therefore, if you want a higher-end client or want to eliminate those people, market differently and position your FEO so that it won’t attract those people. If you have a free trial as your FEO don’t complain about some of them not being able to afford your regular training.
The FEO you use should align with your Core Offer, Ideal Client and marketing message. Don’t assume everyone that does your FEO will join your Core Offer either. Some won’t and that’s okay.
New Clients are those that join your Core Offer. Your Core Offer is the program that you’re building your business around such as Personal Training, Group Training, Semi Private Training, etc.
You can certainly have more than one Core Offer, but you should have established one before adding another. It’s also possible to have two types of training programs with one being the Core Offer and the other a complimentary offer.
One example is offering group training as your Core Offer and then adding in 1-1 Personal Training to your offers to add some revenue to your business in slower times of the day or for high-end clients.
If you want to grow your business you need to be adding more clients than you lose each month. And while it’s never fun to think about losing clients it happens to the best trainers.
Tracking your retention rate helps you see if there is a problem with clients leaving your programs. . Too many trainers and fitness pros focus on adding new clients and selling more to their current clients and forget to focus on keeping their current clients.
Retention Rate is the percentage of clients from the previous month who continue on with you this month. To get this number you take your previous month’s total clients minus your previous month’s clients lost and divide by the previous month’s total clients.
No one wants to admit a retention issue and it’s not the easiest thing to address when you think you have a great service, but it’s critical to your business growth and health.
A 100% retention rate is considered a healthy business.
Your 4 Key Performance Indicators
Key Performance Indicators or KPIs are metrics that will tell you how well your business is performing. Just like the 4 Sales and Marketing Pillars, these metrics will help you evaluate the success of your business.
Your KPIs include:
- Operating Margin
- Autopay to Expense Ratio
- Core Offer Conversion Rate
- Core Offer Growth Rate
To get these you’ll need to have some basic numbers available to you.
Gross Revenue is the sales you generated in your business monthly. It’s the money coming into your business before any expenses.
Autopay is your monthly EFT or recurring revenue that you expect in your business. This includes all clients on an agreement or contract and excludes any one time sales (Challenges or FEOs) or package (10 sessions for example) sales.
Expenses are the money you have going out. They include your bills, rent, utilities, professional fees, payroll and even your salary.
Here’s How You Can Use These Numbers to Get Valuable Information…
Using these foundation numbers and 4 Sales and Marketing Pillars you can start to really look at the success of your business, including if you’re at risk!
Gross revenue is a powerful metric but dangerous if you take it out of context. Without the other metrics you have no context for this metric. A $60,000/month business may be less healthy and successful than a $10,000/month business if it’s bleeding money and not making a profit.
That’s where Operating Margin comes into play. This takes into account your gross revenue and your expenses to determine how much money you’re keeping in your business.
A business that’s bringing in $60,000/month in gross revenue but has a 4% Operating Margin ($57,600 in expenses) only keeps $2,400/month. However, a $10,000/month business that has a 40% Operating Margin ($6,000/mo in expenses) keeps $4,000/month.
Over 12 months the business operating at 4% keeps $28,800 and the business operating at 40% keeps $48,000! The bigger your business gets, the tougher it can be to keep your margins high and it’s easy to lose track of them as you grow.
A healthy Operating Margin will provide your business with the opportunity to take more risks, grow as needed and be more sustainable.
Oh, and in case you were wondering, you should include your own salary in your expenses. Inflating your Operating Margin by not paying yourself is a foolish move and only masks potential issues.
Your Autopay to Expense Ratio is used to determine the stability of your business. Ideally you’ll want your Autopay, or EFT revenue, to exceed your expenses. That means you have enough clients on agreements that you know you can pay all your bills.
The Core Offer Conversion Rate will help you determine the success of your marketing and sales processes over time. Using your Lead and New Client metrics from the 4 Sales and Marketing Pillars you can determine your Core Offer Conversion Rate.
If you’re Core Offer Conversion Rate is low, you need to review your sales process and how you’re getting leads into your FEO. If you have a high Core Offer Conversion Rate but you’re not growing fast enough, then you need to look at your marketing because you may not be getting enough leads.
Finally, you have your Core Offer Growth Rate which tells you how fast, or not so fast, your business is growing. It takes into account new clients, retention and your previous month’s total client count.
This number will tell you if you are adding more clients than you’re losing and if you’re growing fast enough to reach your goals.
How Do I Get These Numbers?
Tracking these metrics can take some time and a bit of effort, especially if you aren’t currently tracking them. But, that is no excuse for not using them.
A simple spreadsheet can help you track your 4 Sales and Marketing Pillars and some of the KPIs. The rest can come from your client management system or a financial report from your bookkeeper or accountant.
Our coaching clients have access to our Campus Dashboard which allows them to simply enter the info needed and it will track and calculate everything needed for them. However, they are still responsible for getting accurate information.
The easier you can make this on yourself the more likely it is that you’re going to actually track it. Just like any habit, you’ll have to put some extra effort into getting this done.
If you set aside 45-60 minutes a week to track your metrics, you’ll start developing the processes and systems needed to make it easy.
That’s a small amount of time to dedicate to ensuring you can run your business and have the information you need to make important decisions.
Unfortunately, a lot of people will read this and never take action on it. They’re the same business owners that will be surprised by a big expense or wonder why they don’t have the cash in the bank to pay taxes when it’s time.
You probably know a few people that have fallen victim to ignoring these metrics and not keeping score. Many are the same ones bragging about making a lot money in their business but behind the scenes things are mess. Eventually it will catch up to them, if it hasn’t already.
I sure wish I would have been more disciplined early in my business with tracking these metrics and had a coach that forced me to track them.
Once I built a team and wasn’t working in the day-to-day operations of my business, these metrics were how I ran the business. I knew each week I could review our dashboard with the team and know if we were doing well or if we needed to make some adjustments.
It’s crazy now to think that anyone, including you, would run their business without them!
Once you’ve started keeping score you can start to make decisions in your business based of them. You’ll start to see patterns and problems will start to show themselves early so you’re not surprised by them later.
You’ll identify areas that you need to improve and you’ll know exactly where you are with your business performance. There are two choices here…
Block off 60 minutes each week for the next month and dedicate time to tracking and reviewing your numbers. If you aren’t tracking your 4 Sales and Marketing Pillars start now. It’s not too late. And if you need help with your KPIs ask your accountant or bookkeeper to help you find these numbers.
You can get some help from Fitness Revolution. You can get access to a Dashboard and system to help you track it and you’ll get a coach to hold you accountable. There will still be work on your part and you may have to ask for some help from your bookkeeper, but it’ll be a lot easier on you.
Not doing one of these two things isn’t an option anymore if you want to run a great business. You simply have to keep score or you’re guaranteed to lose.
Join the #1 Fitness Business Coaching Program for High Performing Businesses
If you’re looking for someone to hold you accountable and that will put you on the fast track to success for your business, the FR Coaching Programs could be a good fit for you!
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