Pricing is such a popular topic in the beauty industry. It has always been important but now —more than ever — making sure your service prices are on point is key to a successful and profitable business.
I know so many of you are still getting back on your feet after 2020. Some of you were closed for almost eight months in states like California, and some of you had a slow start when you were able to open back up.
That being the case, some of you may be seeing a decrease in sales.
This may be because clients have been pushing out their appointments, possibly because they don’t feel safe coming into a salon quite yet. And maybe some of you have even noticed clients cutting back on those add-on services they were once so quick to jump on.
I often talk about rebuilding your business by looking internally first. What I mean by this is to look into the three key drivers of building any business:
- Frequency of visit (FOV)
- Average ticket
If you are struggling to rebuild your business at this moment, I want you to take a step back and look at the three very important areas listed above.
Which one has taken the biggest hit? Which one can you take a step back and say, Wow I am down ten clients a week, or I am down $10 in my average ticket, and then take action to turn it around? And how do you do that?
Well, this leads me to pricing and price increases.
5 Factors to Perfectly Price Your Services
Pricing your services and increasing the price solves two of the problems listed above: low volume and low average ticket. But how do you know if your pricing is correct? Let’s talk through it.
Pricing is based off of these five things:
- Target profit
If one of these areas is even slightly off, it could cause you to lose thousands of dollars in your business.
To help, I teach stylists and owners to understand their price per minute and their price per hour. This is all based on those same five items listed above.
What NOT to Use to Decide Your Pricing
Here is where some people go wrong: They call Jenny at the salon down the block to see what their prices are. They let Jenny know their prices sound good, and then they use these same prices for their business.
But here’s the problem. Jenny’s expenses may be less than yours. Jenny’s product may cost less than yours and her rent may cost less (lucky, Jenny!).
The opposite could be true, too. It may take her more time to do a color service. So when you look at your price per minute, it should be $1.05 but maybe you are charging 85 cents.
What Does That Look Like In Terms of Sales and Profit?
Let me break it down.
Let’s just say it takes you seventy-five minutes to do a root touch-up. At eighty-five cents per minute, you would charge $64 rounded up. But after you run your numbers and reassess your business — based on my top five pricing areas to focus on — you discover you should be charging $1.05 per minute. This equals $79 rounded up.
That means on every root touch-up you lost $15.
And if you see fifteen root touch-ups a week, you lost $225 per week in revenue. $900 a month and $10,800 a year. This is all starting from just fifteen cents of undercharging.
The Foolproof Way to Check Your Service Prices
I suggest you start to look at your monthly revenue and monthly expenses on your profit and loss statement, and see what you are actually making in profit each month.
If you are a suite owner/renter, your target profit is at least 50%. If you are a commission-based salon owner, your target profit is 20%.
Ask yourself — where did my pricing come from? Was it Jenny down the block? Or was it well thought out and strategic to allow you to make a profit?
I also want you to recall the last time you increased your prices. If it was a year and a half ago or more…it’s time to have an increase based on the cost of inflation alone.
Pricing determines how much you are compensated for your time and your expertise, so please don’t slight yourself in this area. Let’s get you set up to win and stay confident in the way you are building and rebuilding your business.