The 3 KPIs Every Fitness Studio Should Be Measuring

Studios

The 3 KPIs Every Fitness Studio Should Be Measuring

All businesses in all industries have Key Performance Indicators (KPIs) that measure the success of a company. Fitness studios are no different.

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What is different, is that many (if not most) fitness studio owners come to the business from the fitness side first – and the business side second. With a wide variety of KPIs to choose from (see chart from the AFS 2015 Operations & Financial Benchmarking Research Report) and no way you can measure them all, which will help you the most?

KPI Chart for Studios

*Source: Association of Fitness Studios 2015 Operations & Financial Benchmarking Research Report

A case could be made for all of these KPIs and, honestly, you can’t go wrong with any of them, but if it were my studio, I’d pick:

1. Revenue per Client/Member

Revenue per Client (RPC) is the most-often measured KPI in the studio sector of the fitness industry for several good reasons:

  • RPC gives you a clear picture of a key measurement. Assuming your expenses are under control and fairly stagnant, if you know your RPC, you will easily and quickly determine how many clients/members you need to be profitable. This means you can then design a marketing strategy and appropriate tactics with specific, quantifiable objectives.
  • RPC is a simple calculation (divide annual revenue by number of clients). Many (if not most) studio owners are not trained in financial management. Sure we have accountants and bookkeepers we pay to do these tasks. Fine. Let them calculate and track RPC – as long as it gets tracked and reported to you on a regular (no less than monthly) basis.

2. Client Retention Rate

If things are going well in your studio, Client Retention Rate (CRR) will be a good-news calculation. However, if your CRR is running below industry norms (or more importantly – below what you need for your business) it’s time to take a hard look at your operations. CRR, simply, is the percentage of your clients that you retain year to year. Here’s why CRR is so important:

  • The clarity and ease of tracking that RPC provides translates into a certain degree of peace of mind, knowing you have a “handle” on your business. When RPC dips below your comfort level for profitability, it’s an early red flag to look a little deeper.
  • A low CRR (anything below 60 percent based on national figures) means that more clients are leaving than you want. The immediate and obvious question is, “Why?” The equally immediate and obvious answer is “because the member experience is not perceived to be worth the financial and/or time investment.” In other words, the value proposition you’re offering is not working for them.
  • The key step to improving a low CRR is to find out where you’re missing value. Dig deeper. Are certain classes no longer quite as popular as they once were? Did popular trainers leave your business? Have your classes become stale? Did a newer, fresher, more exciting studio open nearby? Exit interviews can help. So can mystery shoppers (shopping your studio along with the nearby competitor(s).
  • Like Revenue per Client, CRR is an easy calculation. Take the number of clients you have on a given date (let’s say 300) and count the number of those same clients you have exactly one year later (let’s say 220). Divide current clients from that group (220) by the original number (300) and that percentage (in this case, 73.3 percent) is your Retention Rate.

The 3 KPIs Every Studio Should Be Measuring

3. Revenue per Square Foot

While Revenue per Square Foot (RPSF) is last on the list above, it can be an amazingly helpful data point because it measures how much money you’re generating from the space you’re occupying. Here’s why:

  • Your space is your space and unless you’re about to bankroll a studio expansion, it’s all you have to work with. You’ve designed your studio based on a certain square footage and you’ve projected your revenue and expense based on what you can fit into that space. As someone once asked, “How’s that working for you now?”
  • RPSF will tell you if you need to re-evaluate what you offer and the physical layout of how you offer it. Do you have unused or under-utilized space? If so, figure out what you can do with it. Sometimes RPSF forces you to take a hard look at your operation – and that’s usually a good thing.
  • RPSF can often lead to a re-energizing of your business. Moving things around, adding a beverage bar, or introducing complementary new classes can stimulate activity and spending by your clients. Remember, if they’re in your studio for a class and they leave your studio without spending on anything else, you’ve missed a great opportunity.
  • RPSF is an easy calculation (divide annual revenue by your facility’s square footage). If your studio generates $400,000 annually and you occupy 4,000 square feet, your RPSF is $100). For comparison, the average studio generates an RPSF of roughly $70.

Conclusion

There’s an old saying that “the best piece of fitness equipment is the one you use.” Similarly, the best KPIs to track are the ones you use.

The important notion is tracking the data so you can make informed decisions.

Author Information

Chuck Leve
Chuck Leve's picture

Chuck Leve is a 40-year veteran of the fitness industry and proven successful developer of fitness industry associations. Currently he serves as the Executive Vice President of Business Development for the Association of Fitness Studios (AFS). He's been involved in the creation and development of some of the most successful trade associations in the history of the fitness industry. For more information on AFS, visit afsfitness.com.

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