John Harms on Understanding the Math

 “John, like many of my fellow working hairstylists and salon owner friends, I am very creative, yet somewhat challenged with numbers. Having said that, I know understanding the math of a salon is critically important to being successful. What is your advice for me…and the 90% of salon owners who feel the same?"

When it comes to understanding the math as a salon or spa owner, the most important numbers you need to know are those that contribute to your growth. Tracking the performance of your business and team members can be time consuming and daunting at first, but also allows you to effectively track long-term progress. Once you understand where your team stands when compared to competitors and industry averages, you can set attainable goals for your business.
These goals should be set around growth indicators and not revenue numbers. This ensures that your business has the proper structure in place to succeed long term. These growth indicators are simple, yet fundamentally important for your business: 

  • New Clients Per Month. Monitoring referral types will help your business decide what marketing efforts are working. As a result, you can strategically invest in the proper outlets to attract and engage with potential clients. 
  • New Guest Retention. The industry average for new guest retention is 35%, but ideally, you should be aiming for a retention rate of 50% or higher. Once a new client comes through your door, you can increase the possibility for retention by monitoring who your new clients are, and giving them an amazing first experience. Offering promotions for pre-booking appointments can also help turn first-time guests into returning clients.
  • Repeat Client Retention. It is equally important to reward your loyal clients. The industry average for repeat retention is around 75%. Consider offering a loyalty program, which can help you achieve an increase in your bottom line and overall growth.
  • Average Ticket. The average amount of money spent by each guest. This can be increased by maximizing up-sell opportunities, cross-selling services, and having conversations about add-ons or retail. 
  • Frequency of Visit (FOV). Frequency of visit refers to the amount of times each client comes to your business. Pre-booking appointments and offering online booking will increase the ease of booking appointments for busy clients. Keep in mind that frequency of visit is specific to each department. For example, your nail department may have a larger frequency of visit than your massage department. 
  • Productivity. How hard is your staff working? How hard is it to get appointments with your stylists? Ideally, you will want to your productivity to fall between 75 and 80%.

Your goal as a business owner is to create the right dynamic where all of these growth indicators are working at an optimum level. If you feel that you aren’t as confident at numbers as you are when it comes to being behind the chair, powerful software like Millennium can help you keep track of all of your growth indicators. For Millennium clients, we created the MA200 report, which acts as a business report card. The MA200 report in Millennium provides an analysis of the areas that require attention and improvement in your business.
Another great educational tool we have in Millennium is our What If feature. I know that for many business owners, interpreting growth indicators and developing a successful strategy for long-term success is challenging. What If allows you to assess, measure, and project the performance of your service providers by analyzing growth indicators. For example, What If will calculate the amount of revenue that your business will generate if your FOV increases by 1, 5, 10 and so on. These types of projected analyses will help to provide an action plan for the improvements required to meet and exceed your goals and motivate your team– without you having to do any serious number crunching.
You don’t need to be a math genius in order to successfully run your business. Knowing the ins and outs of your growth indicators and making use of business tools will allow you to track, analyze, and achieve tangible goals, while continuing to focus on the faces and relationships that make up your business.
For more information on understanding growth indicators, setting goals, and tracking employee progress, download Millennium’s guide and weekly goal tracker to help you on your journey to success.


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John Harms
Millennium Systems Internationa, Founder and CEO

About: John Harms, Founder & CEO of Millennium Systems International, creator of Millennium Software, has been designing industry leading salon scheduling software and educating the beauty & wellness industry since 1987. Today Millennium is utilized in thousands of businesses in over 38 countries and operating with approximately 150+ employees worldwide.  Millennium currently runs its corporate headquarters out of New Jersey and its international office is based in the U.K.