cover slide welcome to abc benchmarking. our mission at aveda is to care for the world we live in,...
TRANSCRIPT
Cover slide
Welcome to ABC Benchmarking
OUR MISSION AT AVEDA IS TO CARE FOR THE WORLD WE LIVE IN, FROM THE PRODUCTS WE MAKE TO THE WAYS IN WHICH WE GIVE BACK TO SOCIETY. AT AVEDA, WE STRIVE TO SET AN EXAMPLE FOR ENVIRONMENTAL LEADERSHIP AND RESPONSIBILITY, NOT JUST IN THE WORLD OF BEAUTY, BUT AROUND THE WORLD.
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Wellness
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1. Name and position
2. Salon name and location
3. Hopes and expectations
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Day 1 Learning Objectives• Calculate key benchmarks that
support salon growth and profitability• Measure your salon results and
determine the best opportunities for growth
• Make fact-based decisions that support business success
• Create an execution plan to assess your business
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Team Competition
1. Back in your seats on time
2. Correct trivia answers
3. “Ah-ha!” momentIn groups, determine your team name
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Trivia
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Charts Activity• What do these charts represent?• What do the numbers on the charts have in
common?• Why are these numbers important?• How do these numbers relate to your
business?
Why would we want to compare ourselves against a set of standards?
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Varying Viewpoints
Activity
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Benchmark:
Measure or standard of excellence to which other results can be compared
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Benchmarking:
The action of analyzing or
measuring the benchmarks
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• Based on top-performing salons• Serve as checkpoints to discover
opportunities for growth; also tell us the areas in which we are already performing well and achieving success
• Measure sales and expenses
Aveda Benchmarks
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Purpose of Aveda Benchmarks1. Provide direction in growing your salon.2. Measure your salon growth against industry
standards.3. Set achievable goals.4. Make fact-based decisions rather than emotional
ones.5. Streamline efforts in key areas that will yield the
greatest results.6. GOAL: To achieve a 10% or greater profit.
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Aveda Benchmarking System Sales Benchmarks:
1.RPCT: Retail per Client Ticket/Transaction
2.SPST: Service per Service Ticket/Transaction
3.% Color Transactions4.Existing Guest Retention5.New Guest Retention6.Staff Retention7.Productivity8.% of Service Guests Purchasing Product9.% of Service Guests Pre-Booked
Expense Benchmarks:
10.Service Provider Payroll11.Professional Product Cost12.Sales Support Payroll13.Rent14.Advertising & Promotion
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“The beginning of wisdomis the definition of terms.”
—Aristotle
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Profitability Factors to Achieve 10% Profit or Greater
1. Implement the Aveda Benchmarking System as a key management tool.
2. Use profit and loss statements (P&Ls) to understand the variances between the benchmarks.
3. Implement processes and systems to increase key benchmarks.
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Trivia
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RPCT: Retail per Client Ticket/Transaction
What is it? How much retail product is being sold on average to all guests
Why is it important?• It builds guest retention.• It fills the guest needs.•It is a revenue-producer—higher margin than a service sale.
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RPCT Benchmarks: $10—non-concept salon$13.50—concept salon$16.50—lifestyle salon
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Calculating RPCT
Total Retail Sales ÷ Total # Transactions
Example:$27,920 Total Retail Sales ÷ 1,804 Total # Transactions =
RPCT: $15.4713
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SPST: Service per Service Ticket/Transaction
% Color Transactions
Service Benchmarks
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SPST: Service per Service Ticket/Transaction
What is it? How much service revenue is being produced on average for each guest receiving services or how much the average service guest is spending on services per visit
Why is it important?•It tells us how well we are selling services to our guests. •It indicates the amount of cross-selling and add-on services the salon is doing.
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SPST Benchmark:
Growing every year
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Calculating SPST
Total Service Sales ÷ Total # Service Transactions
Example: $69,366 Total Service Sales ÷
1,295 Total Service Transactions = SPST: $53.56
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% Color TransactionsWhat is it?The % of hair service transactions that have a color service as part of
the transaction
Why is it important?• Hair color guests are the most loyal to a salon; once they find a
color/colorist they like, they are not likely to change.• Hair color guests generally frequent the salon more often than other
types of service guests.• Hair color is typically the highest service ticket in the salon, which
increases service sales.• The more color a salon is doing, generally the higher the SPST and
guest retention.15
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50% of total hair transactions should include
a hair color service
% Color Transactions Benchmark:
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Calculating % Color Transactions
Total # Color Transactions ÷ Total # Hair Service Transactions
Example: 35 Total Color Transactions ÷
125 Total Hair Service Transactions =Color Transactions: 28%
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Existing Guest Retention
What is it?
The % of new guests who return to the salon for services within 90 days of their last appointment
Why is it important?• It tells us whether or not guests like the services they are
receiving.• Happy guests are more likely to return to the salon and tell
others about their experience, which can generate new guests.
• It is easier and less expensive to keep an existing guest than to recruit a new one.
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Existing Guest Retention
Benchmark:
70% of existing guests returning
within 90 days
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Calculating Existing Guest Retention
# Existing Service Guests Returning Within 90 Days ÷
Total # Existing Guests Serviced
Example: 819 Existing Service Guests Returning Within 90 Days ÷
1,310 Total Existing Guests Serviced =Existing Guest Retention: 62.5%
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New Guest Retention
What is it?
The % of new guests who return to the salon for services within 90 days of their first appointment
Why is it important?
It tells us about the quality of service we are providing. Happy guests are more likely to return.
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New Guest Retention Benchmark:
50% of new guests returning within
90 days
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Calculating New Guest Retention
# New Service Guests Returning Within 90 Days ÷ Total # New Guests Serviced
Example: 8 New Service Guests
Returning Within 90 Days ÷40 New Guests Serviced =New Guest Retention: 20%
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Staff Retention
What is it?
The % of the staff who stay working at your business year after year
Why is it important?•Staff retention affects guests retention—guests are loyal to their service providers.
•There is a direct correlation between high staff turnover and low guest retention.
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Staff Retention Benchmark:
70% of staff stay year after year
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Calculating Staff Retention
# Staff Members This Year ÷ # Staff Members Last Year
Example: 9 Staff Members This Year ÷ 14 Staff Members Last Year =
Staff Retention: 64.2%
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Productivity
What is it?How productive (busy) your service providers are
Why is it important?•We want to maximize the time service providers are working with guests to increase revenue.
•Without consistent productivity from each service provider, a salon will have a difficult time being profitable.
•A busy stylist is a happy stylist!
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Productivity Benchmark:
Staff are booked 85% of their scheduled work hours
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Calculating Productivity
Total # Hours Booked with Guests ÷Total # Hours Scheduled to Work
Example: 24 Hours Booked with Guests ÷ 40 Hours Scheduled to Work =
Productivity: 60%
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Calculating Additional Hours to Achieve Hours Booked Goal
Example:85% x 40 Hours
Scheduled to Work =Hours Booked Goal: 34
Step 1:85% x Total # Hours
Scheduled to Work = Hours Booked Goal
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Step 2:Hours Booked Goal –
# Hours Currently Booked = Additional # Hours to Achieve
Hours Booked Goal
Example:34 Hours Booked Goal –
24 Hours Currently Booked =Additional Hours to Achieve Hours
Booked Goal: 10
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How does productivity affect revenue?
• Alexa’s current weekly revenue = $1,850• Alexa booked with guests = 24 hours• $1,850 current weekly revenue ÷ 24 hours booked with
guests = $77.08 Alexa’s current hourly revenue• $77.08 current hourly revenue x 10 more hours to achieve
hours booked goal = $770.80 increase in weekly revenue• $1,850 current weekly revenue + $770.80 potential weekly
revenue increase = $2,620.80 potential weekly revenue• Alexa’s potential weekly revenue if 85% productive: $2,620.80
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% of Service Guests Purchasing Product
What is it?
The % of service guests who are purchasing retail product
Why is it important?•It shows whether you lost retail sales opportunity.•Retail sales build retention and revenue.
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% of Service Guests Purchasing Product Benchmark:
40% of service guests purchasing product
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Calculating % of Service Guests Purchasing Product
# Service Transactions With Retail ÷ Total # Service Transactions
Example: 45 Service Transactions With Retail ÷
135 Total Service Transactions = % of Service Guests Purchasing Product: 33%
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% of Service Guests Pre-Booked
What is it?The % of service guests who are pre-booked for their next appointment
Why is it important?When we pre-book appointments, we increase the frequency of guests’ visits, which increases productivity and produces more revenue.
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% of Service Guests Pre-Booked Benchmark:
60% of all service guests are pre-booked for their next appointment
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Calculating % of Service Guests Pre-Booked
# Pre-Booked Appointments ÷Total # Service Transactions
Example: 200 Pre-Booked Appointments ÷ 495 Total Service Transactions =
% of Service Guests Pre-Booked: 40%23
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Lunch
Cover slide
Welcome to ABC Benchmarking
Welcome back!
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Trivia
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Service Provider Payroll Benchmark:
No greater than 45% of the total service sales revenue*
* This is gross payroll and does not include taxes or benefits.
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Calculating Service Provider Payroll
Total Service Payroll ÷Total Service Sales
Example: $32,602 Service Payroll ÷
$69,366 Total Service Sales =Service Provider Payroll: 47%
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Action plan:• Bring in new hires at a lower
salary/rate.• Assess hourly employees’ schedules,
and cut hours if possible.• Increase productivity of hourly
employees.
Service Provider Payroll Too High?
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Professional Product Cost/BackbarBenchmark:
No greater than 6% of total service sales revenue
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Calculating Professional Product Cost/Backbar
Total Backbar Cost ÷Total Service Sales
Example: $4,441 Total Backbar Cost ÷
$69,366 Total Service Sales =Professional Product Cost/Backbar: 6.4%
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Action plan:• Teach a usage class to show your team
how to use less.• Create a budget and share with the team.
Limit what they are allowed to order and tell them that they must keep within the budget. Coach to the budget if you run out of needed professional items.
Professional Product Cost/Backbar Too High?
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Sales Support Payroll
Benchmark:
No greater than 8% of total sales revenue
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Calculating Sales Support Payroll
Total Sales Support Payroll ÷ Total Sales
Example:$8,561 Sales Support Payroll /
$97,286 Total Sales =Sales Support Payroll: 8.8%
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Action plan:• Increase total sales revenue.• Assess hourly employees’
schedules and cut hours if possible.
Sales Support Payroll Too High?
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Rent Benchmark:
No greater than 6% of total sales
revenue*
* Exception: If location is in a high- traffic/retail location, a rent benchmark
of up to 10% is acceptable.
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Calculating Rent
Total Rent ÷ Total Sales
Example:$6,200 Total Rent ÷
$97,286 Total Sales =Rent: 6.4%
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Rent Too High?
Action plan:• Increase total sales revenue.• Try to re-negotiate your lease, but
may not be likely.
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Advertising & Promotion Benchmark:
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No greater than 2.5% of total sales revenue
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Calculating Advertising & Promotion
Total A&P ÷ Total Sales
Example:$1,892 Total A&P ÷
$97,286 Total Sales =A&P: 1.9%
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Advertising & PromotionToo High?
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Action plan:• Increase total sales revenue.• Evaluate your A&P’s return on
investment (ROI) and assess whether it’s worth it.
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Expense Benchmarks Teachback Activity
Expense Benchmarks
Service Provider Payroll
Professional Product
Cost/Backbar
Sales Support Payroll
RentAdvertising &
Promotion
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Trivia
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2Profit & Loss Activity
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SalesExpenses
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Calculating Profit $ vs. Profit %
$ Sales – $ Expenses = $ Profit
Profit ÷ Sales
= Profit%30
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Calculating Profit $ and Profit %
Profit $: $95,000 Sales –
$86,400 Expenses =Profit $: $8,600
Profit %:$8,600 Profit $ ÷ $95,000 Sales =
Profit %: 9%
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Calculating Profit $ and Profit %
Profit $: $500,000 Sales –
$475.000 Expenses =Profit $: $25,000
Profit %:$25,000 Profit $ ÷ $500,000 Sales =
Profit %: 5%
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N.O.P. - NET OPERATING PROFIT
Net operating profit (NOP) after interest and taxation is the money that is left to either share with the salon owner
or reinvest in the business.34
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Calculating Net Operating Profit (NOP)
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Gross Profit – Fixed Expenses = Net Operating Profit (NOP)
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Calculating Net Operating Profit (NOP)
Gross Profit: $97,286 Sales –
$59,583.59 Variable Expenses =Gross Profit: $37,702.41
Net Operating Profit (NOP):$ 37,702.41 Gross Profit –
$30,304.91 Variable Expenses =Net Operating Profit (NOP): $7,397.50
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Day 1 Learning Objectives• Calculate key benchmarks that
support salon growth and profitability• Measure your salon results and
determine the best opportunities for growth
• Make fact-based decisions that support business success
• Create an execution plan to assess your business
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Execution Checklist
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Cover slide
Welcome to ABC Benchmarking
See you tomorrow!