Summer is approaching and gyms everywhere are packed with those trying to prepare to show off their hard work. If you are in the health and fitness industry, according to research, you have two important things on your mind: the success of your clients and the contribution you are making to your community. But you cannot help your members OR your community if you are not properly tracking the health of your business.
Just like your members need to measure repetitions and step on the scale in order to succeed, you as a business owner need to measure the health of your business on a regular basis as well. Below are some recommendations on 9 Important KPIs for health and fitness franchises.
1. Cost Per Lead (CPL)
If you are going to only measure one metric in your marketing programs, cost/lead is the one most worth the effort. It helps you understand how much you are spending on leads, and if the methods that you are using are effective. For example, if you are getting $25/lead off of Google, and $100/lead off of your print advertising, you will want to reconsider that print ad buy in the future.
CPL=Cost of Marketing Program/Total Number of Leads
Note when calculating, a lead has two aspects:
- They are actively searching for the service
- They provide a way for you to contact them for follow up
Ensuring you have the above, creates a fair measure for your sales team later down the line. It is a good idea to dedicate about 10% of your budget to experimental initiatives to make sure your marketing mix continues to be the right one.
2. Conversion Rate
Conversion rate helps you understand your gym’s ability to turn leads into members. Typically seen as a sales metric, it shows how your sales team is doing with the leads provided by marketing.
Conversion Rate=Total New Members/Total Number of Leads
If this metric is weak, it may be an indicator that your facility is not up to par – you may want to look at renovations or a refresh of equipment.
3. Active Members
This is a basic but necessary metric that will outline your success on the most elemental level. Measuring the growth and decline of members compared to the previous year is a fantastic way to track where you are in terms of the big picture. It is calculated below:
Growth Rate = (Present-Past)/Past
If your absolute member count is low compared to benchmarks, and your growth rate isn’t high, then you need to focus on increasing your member base through marketing efforts or by reducing churn.
4. Revenue Per Client (RPC)
This commonly-used KPI provides a sense of clarity in terms of where you are in your business.
RPC = Annual Revenue/Total Number of Clients
If this is low, look for upsell opportunities such as personal training, niche classes, or supplements.
5. Revenue Per Square Foot (RPSF)
With the rent or mortgage costs associated with the space typically being the biggest cost associated with the industry, it is healthy to look at this often-neglected metric. In a multiple-location environment, this metric tells you what spaces are working, and what ones are not working for you. Also – if your RPSF is very low, you may want to consider a smaller space unless you intend to grow rapidly.
RPSF=Annual Revenue/Total Square Footage of Facility
6. Utilization Rate
Utilization Rate is an amazing metric in this industry because it measures how much you are actually using your resources. If you offer personal training, for example, how much is the trainer actively engaged in the process of training? If you are renting a room for 8 working hours a day, and only using it for 4, then there is an opportunity to add more classes.
Utilization Rate=Total Hours Used/Total Hours Available
7. Net Promoter Score (NPS)
Member satisfaction is both a customer service measure and a marketing measure. Why? Increasingly, brand is a verb, and you want to make sure that the experience that people receive at your gym is one that leaves them satisfied. Technically a loyalty measure, the Net Promoter Score (NPS) is a fantastic way to measure this on a quarterly basis.
This measure compares your biggest fans (promoters) compared to your biggest critics (detractors). Learn more about Net Promoter here.
NPS= % Promoters-% Detractors
Your NPS can help you in your marketing efforts, by asking promoters to leave reviews, or recommend to their friends and family, and it can help prevent churn.
8. Retention Rate
Retention rates are something that the fitness industry has struggled with for a long time, and the churn of members is a common conversation topic at franchise conventions. In general, having a strong retention rate means that you are keeping your brand promise. You can measure this over the course of a month, quarter or year.
Retention Rate: Existing Clients at End of Period/Existing Clients at Beginning of Period
If this is low, it is a good idea to do a root cause analysis on why people are leaving. Having a “leaky bucket” of customers means that you have to spend more on marketing upfront.
9. Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)
EBITDA is a measure of a gym’s operational effectiveness. It is a way to evaluate effectiveness without having to factor in financing decisions, accounting decisions, or tax environments. Although difficult to say or even fully comprehend for gym owners who have come up through the health and fitness operations side, it is a key indicator.
To calculate the adjustments needed for EBITDA, please see this article from Quickbooks.
EBITDA shows how good your business is at generating cash thus your business is valued as multiples of this metric.
Just like your clients, it is important for you to measure the right things. With these 9 metrics in place, your business will be set up for success.
Looking for more KPIs for your franchise? Look at our post on How to Use KPIs as a Tool for Franchise Business Planning.