Your prices are too high – really?
At Salon-help the number one reason we get asked to go and help salons is to make more money, often because the salon owners do not get a good financial reward. In some cases no financial reward at all.
Making “more money” in this case means “increasing sales” which on its own is unlikely to deliver a successful business. However, let’s look at the key thing that dictates the business model.
PRICES :
Ask 90% of Salons why their prices are at that level and they will immediately refer you to a competitor. “My prices are x amount because my competition is y amount”. This factor could have little, or in some cases absolutely no bearing on what your prices could and should be.
Before we look at basic calculations, let’s look at our industry and aspirations. On the whole hairdressing/barbering has low kudos and respect amongst government and public alike. Nobody with 4 A levels is told by their careers teachers to go into hairdressing, partly because it is not a profession (it’s a trade) and partly because it is a poorly paid job. (E.g. In comparison to teaching). Hairdressing/Barbering as a profession is another blog but what you do in your business affects this view. In the long term higher sales lead to higher wages.
You can get a haircut throughout the UK for £5. Indirectly this tells your client that you do not put a high value on your time, your skill and all the dedication that you have put into training. Other professions would simply not do it, and indeed would not be allowed to do it by their governing bodies (we don’t have one) because it would change how we perceived them and effect their profits enormously. This is not to say that if you have a £5 haircut style business you cannot be successful, indeed I know a couple that use this model very successfully, but have super low overheads too.
I’m simply saying, have more confidence and charge for the skills that you have worked hard to gain.
Be aware that increased prices across the industry will positively change people’s perceptions.
Let’s get back to your price: so you probably track against some of your competitors, and being aware of your competitors is a good thing, however, their prices do not set your prices.
There are three ways to increase sales.
1) Get more clients
2) Sell more to your existing clients
3) Sell the same at an increased price
(or my favourite, all three)
Basically, you need to calculate what your overheads are, taking into account everything that goes out of your business.
Examples:
Staff wages, holiday cover, including NI, tax and pensions
Utilities, water, gas. Electric etc.
Professional fees, bookkeeper, accountant
Rent, mortgage, business rates, waste disposal
Training costs
Sundries, tea, coffee, subscriptions, memberships, window cleaner, loo roll, backwash products etc.
Bank charges, visa machine, VAT if applicable.
Property maintenance, repainting, boiler servicing, pat testing
(if you are a colour based salon we will add these at the end)
You also need to calculate what you have invested in the salon set up and work out reclaiming your investment back. This would normally be under 5 years.
And of course what you can expect to be paid too. If it’s the same as working for someone else (or less) is it worth the responsibility of having your own business?
So add all your costs for a Year:
Divide them by 52 – this gives your weekly break-even target.
Divide that by your opening hours – this gives you how much you need to take per working hour.
Divide that by the number of man-hours you have and you can see what each stylist must produce in an hour.
e.g. If that figure is £40 and you are doing haircuts at £12 and taking 30 minutes (total £24) you are making a loss.
Doesn’t matter what the competition is doing you cannot do this!
You can, of course, reduce your costs or increase your speed, or increase your prices!
So the next time you can’t pay yourself or a large bill, spend some time and find out what your breakeven price really is.
* I do understand that there are some variations to calculate, such as staff holidays, busy periods, retailing, maternity cover, colour tubes etc. The more you put into the calculation the more accurate you will be.
If you want salon-help.co.uk to help with this or anything else in your business please drop us a line.
