Price with purpose
“77% of small businesses fail because they didn’t price things properly or account for all the necessary factors when determining their prices.” KEAP
This is why I am diving into one of the most crucial aspects of running a successful salon—pricing your services. Setting the right prices can make a huge difference in your profitability and overall success, so let's talk about how to do it effectively and confidently with my 5 factors of pricing salon services.
Factor 1: Time
Time is money, and for hair stylists, it's a precious commodity. The first thing we consider is how long it takes you to complete a service. Yes, processing time is included.
Are you working efficiently?
Are you using products like Calura Gloss and CaluraTEN to aid in your efficiency BTC?
Do you HAVE to double book to make the amount of money and profit you want?
Figure out the timing of each service.
Factor 2: Product
The AMOUNT of product you use plays a significant role in your pricing structure. DID you know that new growth coverage and blow out services are typically the MOST under charged service in your industry? Touch ups typically should not have a LOWER price per minute than a haircut. WHY? Colour services take more time and cost more in product. (this is not to say a haircut PPM cannot be higher than a touch up especially when you are a haircut specialist or niche focused)
ACTION STEP:
Calculate your product cost
EX: Add up all the products you are using per service. Let’s talk about a single service. Determine how much a tube of colour costs you. You then divide that by the number of ounces in the tube. Do this with developer, gloves, foils etc. This will give you an accurate cost of price per service for product.
TIP- Product cost per service should be 15% or less than the price of the service. EX: Service price = $200 x.15= $30 in product cost for that service.
Factor 3: Target Profit
Understanding your target profit is a fundamental step in pricing for success. Target profit for independent artists is at least 50%. For commission salon owners it is 20%. This is crucial for you to understand when pricing services to ensure you make a profit on every service.
Factor 4: Total Business Expenses
To price your services effectively, you must account for all your business expenses. What is it costing you to run your business monthly? Your expenses like utilities, payroll, back bar product, rent, education, just to name a few must be part of the question to ensure accurate pricing.
Factor 5: Hours Worked
Your hours worked BTC are finite; optimizing them is key. Your hours worked will affect your price per minute and price per hour. If you HAVE to work over 40 hours per week just to pay the bills. 9 times out of 10, you are undercharging.
TIP: Time booked PER service is important. We can get your prices right. But we also want to have you work more efficiently so you can increase your PPM/PPH to increase sales and profit. Using efficient placement and patterns by Oligo’s Chief Brand Ambasssador JLadner is crucial. Using 100 foils? No more! And of course using Calura Gloss, which processes in 3-10 minutes when toning, and CaluraTEN which can shave off up to 30 minutes on your processing time will allow you to see more clients and make more money.
BONUS - Market Research
Understanding your local market is essential for setting competitive prices.
Do we want to base prices off other salons? NO.
Should you be aware of what your competitors are charging? YES!
There are a few other factors we take into consideration when pricing services, but this is a great start.