Your Primer on Percentages
For your business to be financially healthy, there are a few firm percentages to target. Understanding these numbers—and working to close any gaps—will put your studio on solid financial footing.
If you’re not reaching these percentages yet, ask yourself: What needs to change about my business model? Then get to work on those answers!
Target percentage #1
Rent (or mortgage) to revenue: < 35%
If your rent or mortgage is higher than 35% of your revenue, it’s time to take a look at your lease or financing. If you cannot make changes to your location, then focus on increasing revenue with new enrollment campaigns, client referrals, new programs, or a bump in tuition prices.
Target percentage #2
Labor to revenue: < 30%
Keeping your payroll expenses under 30% means you are in a safe zone and have room to grow your profits. Will a higher number destroy your chances of financial success? No, but it’s important to analyze what’s causing the higher percentage and determine if it is sustainable over the long-term.
Target percentage #3
Profit margin: > 15%
This is the percentage of net income your studio earns. The first place to start to increase this percentage is by setting a budget—and sticking to it. Control your expenses and increase your revenue to see profit margins expand.
Target percentage #4
Enrollment utilization: > 75%
This percentage refers to how full your classes are. If, on average, your classes are more than three-quarters full, then your utilization is optimal! A lower percentage indicates that you might be offering too many sections of a certain program, and it’s time to combine or reimagine those classes.