Tracking Operational Data A prerequisite for informed decision-making By Nicolay Kreidler Your operational data is the most reliable tool you will have to make informed business decisions and to grow your business. Most of the data you collect will be financial data. The more raw data you identify and collect, the more comparisons and equations you can create. Reviewing key comparisons and equations will allow you to recognize tendencies, developments and changes as well as permit you to create accurate forecasts and prognosis for your business. You will be able to determine where the strengths and weaknesses of your operation warrant action. Analyzing your operational data this way exceeds by far the standard profit and loss statement you might be receiving at the end of the month from your accountant. On a very basic level you need to know of course how your revenue compares month-to-month, what your profitability is, and how your cost structure is evolving. Typically revenue will follow seasonal ups and downs. And to demonstrate a simple use of keeping track is that knowing how it was over the last few years will allow you to plan in advance for staffing needs, marketing efforts to counteract slow business and avoid disproportionate spending. But there is a lot more juicy information hidden within those numbers, if only it could be extracted... To be able to access this information, data needs to be collected in a way that will allow us to place it into meaningful relationships. These relationships are equations that correlate certain expenses with certain revenues, or certain categories to each other to show us how selected areas of our business are performing and developing. We call the evaluation of those relationships, reports. For example, if you know how many services were performed by an individual provider per month and how many hours they worked it can tell you something about their productivity. If you notice discrepancies between different service providers or a dropping off of productivity with one particular provider, this would trigger looking into the reason why and appropriate corrective action. With key equations in place that you review, on a daily, weekly, monthly or yearly basis, you will receive a plethora of very useful information on performance and development of your operation, the two key factors you need to take action. Whether you are managing the microclimate of your business by knowing which services or products are in demand and/or are profitable or are wanting to expand your business to a second location, having this raw data readily available at the time you need to make a decision, will give you a huge advantage in taking the right steps if not even make it possible. Usually you will use a combination of reports that you request from your accountant (remember your accountant can only give you what you ask for and only supply these reports if you provide the appropriate data) and reports generated by your spa software. Start Now It's never too late to start collecting data. If you have not begun, now's the time! Every dollar earned or spent can be allocated to a certain category that you can determine. Every activity in your business can be counted and documented. Categorize Your Data In order to compare and equate data, it needs to be categorized so you do not end up comparing apples with pears. Finding a balance between the number of categories and the amount of effort it takes to do the data entry is important, but remember it is much harder, and often impossible, to separate data once it has been merged. So rather start out with more categories. You can always merge them later if you need to. There are quite a few technical aids to help us simplify the process of data collection. First of course the spa software itself, then tools such as a bar-code reader, a time clock For example: When collecting inventory data, you could use just one category for all the items you purchase for your operation BUT you could also separate back-bar supplies by service type, retail inventory for retail, promotional inventory etc. allowing for a more precise determination of profitability in the different areas.
Rather than having a category "back bar products" you could have "manicure back bar products" and "hair back bar products" thus allowing you to find out how much money you are actually spending for product per dollar earned in these two different areas. If you are just starting out, select the smallest common denominator until you know which data-sets you can merge without loosing the ability to make an informed decision. Use your Management Software So many spas have spent thousands of dollars on spa management software and yet they only use it for appointment scheduling and checking clients out. Nearly all software programs have an abundance of unused functionality that were paid for ranging from inventory control to reporting systems to marketing functions. Back Up One of the most depressing instances is lost data after a Herculean effort of data entry or years of collecting. Backup refers to making copies of data so that these additional copies may be used to restore the original after a data loss event. These additional copies are typically called "backups." Securing your data in today's world is a must! One day your computer could be infected with a virus or your hard drive could just stop working. That's when you will thank yourself that your computer information has been securely backed up. Remember every data storage system has a shelf life.
PS. Most spa software has an automated back-up process that can be activated. Determine Key Reports You will want to determine which reports are crucial to review on a regular basis. This will not be the same for every operation so it makes sense to sit back and think about what you really need to know.
Most software allows you to pull up pre-designed reports. Here are some examples. Although having these systems automated makes a lot of sense, I suggest doing a few reports by hand using the raw data, just to understand the process. Watch out for report overwhelm. Too many reports will just send you over the top. It is better to identify a few for the daily operation and then pick a certain area for a review each month. Interpretation Find out what the report really expresses, verify the data entry if there are sudden changes. People makes mistakes and allocate data to wrong categories. Observe reports over time. It is important to compare apples with apples. For example: Estheticians will sell considerably more product than massage therapists due to the nature of their work.
Management Reports Here is a selection of reports typically available from a spa software program or easily generated: Rebooking Percentage Retail Sales Analysis Future Appointments Report Package Report Time Analysis Booking Analysis Schedule Analysis Return Visits Analysis Retail Profitability Client Lifetime Value Gift Certificate Redemption Sales by Vendor Sales by Manufacturer Sales by Employee Usage History Package Listing Daily Re-Cap Category Sales Evaluation Gift Card Reporting Sales Listing Promotions Annual Frequency Client-Base Analysis Lost Clients Productivity Retention Multi-year Analysis Commission Report - Why are some providers selling more retail than others? Sales Report - Linking sales and marketing efforts can show you which measures have an effect and which do not Tips Report - I like to use this as a signal for performance Performance report And last but not least:
Be Diligent The value of your data collection is determined by your willingness to be accurate and consistent in the data entry process and hold those doing data entry accountable. Categories once determined are not easily changed without losing their value for comparisons. Remember you are often looking at a time span of a few years for tendencies and developments. Nicolay Kreidler, iSPAD director and owner, invests 20 years of business ownership and executive management into his consulting work. His initiation into the service and hospitality industry began with his professional career through the restaurant business as creator and owner of the largest whole food restaurants in Europe. Those who have been involved in hospitality and spa business fields will testify to the operational and financial similarity of both fields. His transition into the spa world evolved during a personal journey to study healing modalities around the world. An accomplished practitioner of massage, watsu and yoga he teaches a regular intensive retreat in Hawaii.
For more information visit: www.ispad.net You can also reach Nicolay at nicolay@ispad.net
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