While every business is slightly different, there are a few key measurements that give insight into the trends and performance of your business. We’ll go through them now and provide equations when needed.
1. Revenue (R): which is the sum of all money taken in. This number is often looked at in a gross monthly revenue capacity because it’s helpful to compare this number month to month to spot trends and make projections.
2. Expenses (E): this is your total outflow per month, including the cost of labor.
3. Revenue streams (Rs): it’s often informative to look at the different places you’re bringing in revenue. Some normal revenue streams include your memberships on autopay, your retail that has been sold and drop-in classes or other private training sessions.
4. Net profit (P): to see what your actual profit is after paying your expenses, you’ll want to calculate your net profit. Net profit = gross revenue - all expenses (including retail inventory costs P= R - E)
5. Gross margin per revenue stream (Ms): your gross margin is going to tell you what percent of your income you retain. By looking at this by revenue stream, you are able to see which stream generates the highest profit margin for you.
Profit margin = (revenue from stream- expenses for stream) / total revenue for stream.
Ms = [(Rs – Es)/Rs] x 100 expressed as a percent (the higher the % the more profit you retain per revenue stream).
Example: your monthly revenue from retail sales is $1000 and your retail expenses total $700. Your margin on retail is: [($1000 – $700)/$1000] x 100 = 30%.