Financial and non-financial performance indicators

Financial Performance Indicators

Profit: Considered a primary indicator of a business’s financial health, profit is the financial gain made when revenues exceed costs. In leisure businesses, sources of profit could include entrance fees, membership subscriptions, and ancillary spending, such as food and drink or merchandise.
Revenue: This is generated from the sales of goods and services. A leisure business may increase revenue through strategies such as expanding its customer base or increasing prices.
Costs: Monitoring costs helps a business to identify where efficiencies can be made. These can be variable costs (which change depending upon usage, such as utilities) or fixed costs (which remain static, such as rent).
Return on Investment (ROI): This measures the profitability of a financial investment made in the business. It shows if the money spent on new facilities, equipment or promotional activities has created a net profit.

Non-Financial Performance Indicators

Customer Satisfaction: A key non-financial performance indicator in the leisure industry. High customer satisfaction ratings can indicate good service quality, which can lead to customer loyalty and increased reputation. This can be tracked via feedback forms and review platforms.
Employee Satisfaction: Happy employees are often more productive and loyal, leading to better service for customers and less staff turnover. Employee satisfaction can be tracked through staff surveys or feedback sessions.
Quality of Facilities or Services: These are measures of the value provided to customers. For example, cleanliness, equipment condition, variety of facilities offered, or level of staff service can all be indicators of quality.
Customer Retention Rates: This measures the number of customers who return to the business over a specific period. A high retention rate could indicate customer satisfaction with the service on offer.
Use of Environmental and Sustainable Practices: Highlighting the business’s social responsibility, this non-financial indicator can enhance reputation and appeal to eco-conscious customers. Measures could include the use of sustainable materials, waste management, and energy efficiency measures.

Balancing Financial and Non-Financial Indicators

A successful business should balance financial and non-financial performance indicators. Focusing solely on financial indicators could overlook other important factors, such as customer and employee satisfaction.
Monitoring non-financial performance indicators can often result in financial benefits in the long-run. For example, high customer satisfaction could lead to repeat business and increased revenue, while good employee satisfaction may reduce recruitment and training costs.
Conversely, focusing too much on non-financial indicators could risk financial stability. For example, investing heavily in top-of-the-range facilities may improve customer satisfaction, but if it’s not financially sustainable, it could risk the business’s longevity.
Regular reviews and adjustments should be made to ensure the appropriate balance between financial and non-financial performance indicators. This involves weighing the short-term and long-term benefits and risks associated with different strategies.