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Benchmarking Your Business

Contact Author William J. Lynott September 2014 issue of Skin Inc. magazine
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Benchmarking Your Business

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Most spa owners have only their own past performance against which to judge how well their business is doing—a very restrictive limitation on critical management input. If the industry standard is unknown, a spa’s performance cannot be compared against it.

Introduced by the Xerox Corporation in 1995, benchmarking has emerged as a valuable operating tool that enables management to compare its own performance against that of others, while establishing a continual quest for improvement. The American Productivity & Quality Center website has a helpful page of benchmarking terms: www.apqc.org.

Benchmarking steps

Following are a several ways for spa owners to start benchmarking.

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Decide on which spas to benchmark against. If available, other spas in your area would make adequate benchmarking partners. Of course, exchanging data with spas in other trading regions would be best. Owners need to exchange statistical data on operating areas that both consider to be important to success.

Analyze key differences between you and your partners. How do the dollar volume and number of employees compare? Are teams constructed and compensated similarly? There should be more similarities than differences.

Keep a close eye on sales per employee. This is one of the most direct measures of productivity and operating efficiency. If a spa doesn’t measure up in this area, the owner needs to find out why. Is it a problem with one individual team member, or is it a weakness in leadership?

Compare key cost ratios. It’s vitally important to know how costs compare against costs for benchmarking partners. Utility bills, payroll ratios and other variable costs are imperative factors in determining how well a spa stacks up against industry norms.

What about customer service levels? Customer service is frequently regarded as a vague performance factor, but often is the determining factor in the overall success of a spa business. Although difficult to measure in some ways, there are several objective measures that can help an owner find out how they stack up against their competitors.

The percentage of clients who return will reveal a lot about the level of customer satisfaction. Other data to maintain records on includes the number of complaints received.

Where can you obtain benchmarking data? Good news for spa owners: A research firm, Industry Insights, Inc., specializes in studies designed to provide precisely the benchmarking data needed to compare one company’s performance in key areas with the average of other participating companies in the same industry.

A permanent benchmarking program will force an owner and the management team out of their comfort zone by confronting them with specific standards for measuring spa performance.

What about disadvantages? One danger in the use of benchmarking data is the possibility that benchmarking partners’ performance could be flawed due to internal problems, which introduces the risk of settling for low standards. This opens the possibility of complacency and the loss of motivation for improvement.

Benchmarking also introduces a range of new information that must be analyzed by management. There is a possibility that the exchange of confidential data with others will result in the compromising of that data, but the use of Industry Insights’ program should eliminate that risk.

Despite its few disadvantages, the growing number and wide diversity of companies using benchmarking stands as testimony to the value of this management tool. Benchmarking provides a means for spas to analytically compare themselves against their competitors—uncovering strengths and weaknesses, and pinpointing where improvement is vital to survival.

William J. Lynott is a veteran freelance writer who specializes in business management, as well as personal and business finance. His work appears regularly in leading trade publications and newspapers, in addition to consumer magazines such as Reader’s Digest, AARP Bulletin and Family Circle. He can be contacted via e-mail at lynott@verizon.net.

 

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