Now is the time to do more of what’s working
1. Examine Staff Compensation
If you’re seeing red, the first place you need to go is your Cost of Goods (COG) to review your service staff compensation. Consider this: to see some profit, total service staff payroll, including wages, incentives, benefits, insurance and taxes may ideally need to be 35-40% of gross revenue, in order to profit. As you strive to meet that %, consider that total average payout per service, whether you are paying hourly, fee for service, commission, or a combination, should ideally not exceed 25-30% of the service price, minus costs.
2. Streamline your Service Menu
Your service menu can leak a lot of profits and an oversized menu will cause numerous complications. First, know which services are your highest % contributors to total service revenue. Next, analyze your gross margins on each service and rank them; then analyze your hourly service prices on each service and rank them (service price divided by length of service multiplied by 60 minutes). Ideally your highest % contributors to total service revenue will also be your tops in both gross margin and hourly service price…but often this is not the case!
3. Rank and cull your Retail
Know your top 20-30 sellers and what their individual unit dollar value and % contribution to total retail revenue is. So, analyze which products you sell the most of; rank them to determine where they sit with unit dollar value; and finally, know what their % contribution is to total retail revenue. Once again, the three should line up in as many instances as possible.
4. Handle Staff according to Statistical Reports
Know where your staff sit by monitoring every key metric you know of, such as their sales per hour ; producitivy %; and request and retention rates. Study these figures to ascertain who your top performers are and that you are rewarding them with compensation based on their ranking.
5. Analyze Marketing & Customer Service Initiatives
Study your online and offline initiatives to determine which ones are paying off and which ones you should dump. Do a cost analysis on every promotion that you run to determine worthiness; and rank your clients with Recency; Frequency; and Monetary value (RFM) to determine your VIPs.
Once you know who and what are contributing the most to your bottom line, you begin to do more of what’s working, and less of what isn’t.