In today's episode, Caroline continues the KPI series and hits the topic of revenue growth.
Revenue growth rate serves as a key indicator of the overall success and trajectory of your dance studio. It reflects the effectiveness of your business strategies, customer retention, customer satisfaction, and market demand for what you have to offer.
Revenue growth rate measures the month over month increase in your revenue. It is one of the most important startup KPIs! RGR provides you with a solid indicator of whether you’re growing and how quickly.
To calculate RGR: start by subtraction the first month revenue from the second month revenue. Then divide the result of that by the first month revenue, and multiply by 100.
Example: If you have 1,000 in revenue your first month, and 3,500 the second, then your growth rate is going to be 250%. 3,500 - 1,000 divided by 1,000 x 100 = 250%.
Why you want to track:
Financial Health. RGR indicates the financial health of your studio.
Business Growth. RGR shows how much you are growing, and where.
Profitability. While revenue growth doesn’t directly measure profitability, it is a key driver. Increasing your revenue leads you to higher profits. (If your revenue is managed efficiently and your expenses aren't rising disproportionately.)
Investors or shareholders. This step has to do with whether or not you ever think of selling. In this case, replace investors/shareholders with potential buyers. RGR demonstrates the potential for return on investment. It will instill confidence in an investor or a buyer about the viability or success of your business.
Resource Allocation. RGR will help you make informed decisions about where to allocate resources. What areas are driving growth? When you know, you’ll be able to allocate resources there. RGR leads you towards data driven decisions!
Benchmarking. Monitoring revenue growth allows you to benchmark your performance against yourself and/or a competitor. RGR will provide you insight into if your studio is gaining or losing market share. It will help you identify areas where you need to improve in order to remain competitive.
Long-Term Planning. If you see consistent revenue growth, that is essential for long term planning and strategic decision making. It enables your studio to forecast future income. When you can do that, you can set achievable goals and you can implement strategies to achieve them!
Identify Trends. If there’s a change in your growth rate, and it's not a direct symptom of something happening in your studio, if you are tracking RGR, you’ll have the ability to pivot or shift to prevent a loss. In today’s economy, you may be seeing that nothing has changed on your end, but less students are enrolling due to lack of affordability. In this case, you can start to make adjustments in your budget.
We encourage you to choose three KPI’s we’ve spoken about these last two episodes and start monitoring them! Don’t get too deep in the weeds. Just start simple.