What is a KPI? KPI stands for Key Performance Indicators. These are measurements of how your business is performing. Though we’ll be focusing on financial KPIs in this post, there are many others that would be useful to music schools, which I hope to cover in future posts. However, KPIs don’t have to be financial related; in fact, KPIs act similar to goals in that they can help measure something you want to achieve. For example, you could come up with a KPI to see how well your students are progressing, how well they perform in competitions, or how much they are practicing. But let’s keep it to the financials for now and give you an idea of what KPIs might be helpful in that regard.
Monthly Recurring Revenue (MRR): This KPI may seem simple on the surface, but there are some nuances I’d like to point out. I would avoid including one-off sales like selling sheet music or small gigs. Those all can help your bottom line, but MRR should be looking at the standard “guaranteed revenue.” I work with a music school who charges up front for a year. This is an awesome and efficient way to bill, but if you don’t annualize these payments, you can be missing how much you are really earning per month and then have peaks and valleys in perceived revenue. By calculating MRR correctly, you can know what your budget needs to be each month and determine if you can achieve goals like buying a studio space, etc.
Class and Lesson Profitability: This KPI looks at how much you are earning per lesson taught minus expenses. Are you teaching a group lesson? Group lessons are generally more profitable because a single person can teach multiple people. Maybe having two teachers in the room makes you realize you’re charging too little for a group lesson. Or maybe you come to find you should be charging more for a 1:1 lesson. Taking a deep dive into this KPI can help you make some adjustments that either free up your time to make more revenue or make your time with each student much more valuable.
Student Retention Rate: Student retention rate is calculated with the following formula:
I would encourage any school to do this based on the teacher and not just on the school in general; although, both can be useful. It can help pinpoint struggling teachers or ones that are not connecting to students as well. It can also show you how many students you need to attract to maintain maximum capacity. Of course, unforeseen circumstances (like the pandemic a few years ago) can happen where large numbers of students quit, but generally speaking, using the student retention rate for a prior year gives you a rough estimate of how many students you would need to find during a given year.
These are three basic KPIs that would be helpful for any music school, and I am excited to share more with you in the future. If you learned something useful from this post, please follow my socials for more tips and tricks for music schools!
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