Why Traditional Salon Pricing is Hurting Your Business

I had a conversation with a colleague the other day. He had spent the last 20 years in the salon industry as a stylist and salon owner. He started using SalonScale to track his back bar product usage. Part-time he is a solo stylist who runs a hair salon out of home. He discovered that his current salon pricing wasn't helping his bottom line.

He had a regular client of 10 years come to visit. He quickly came to the discovery that he had been losing $8 on color alone, every time she sat in his chair. 

You might say to yourself, “It’s just $8”. 

But that $8 is money that didn’t go into his business. It didn’t pay him. And it didn’t help him contribute to his family. 

What he quickly discovered is that the traditional salon pricing model was not just out of date, but it was not benefiting his business. It was actually hurting his business.

But how was it hurting his business? Well, there were a few reasons:

1. His salon service pricing was causing him to lose money
2. His back bar management costs were unknown
3. His pricing wasn't covering his salon's operating costs

Let’s do the Math 

His client is someone he had in his chair for the last 10 years too. 

Let’s say our friend sees his client 4 times a year. In that year, he loses $320 on just one client. 

Say you have 10 root touch-up clients a month, that's $3200 a month. Or $38,400 for the year.

Imagine the loss from the rest of his clients! Especially the ones who are more than a root touch-up. The loss on the services that don’t just take you an hour but take you maybe 3 hours? And take in 10x the amount of product as a single process? Not to mention the loss of having multiple stylists in your salon too.

No More Excuses with Salon Pricing

Yes, we have to take inflation into account. But we HAVE TO take Inflation into account for the future too!! On average inflation is a 2-3% increase. This year it has been 8% in the US and 6.8% in Canada. It doesn't plan to be slowing down either.

The industry has changed so much in the last 5 years. From social media to the desire to have those lived-in looks, the vivids, the extension services, and the major color corrections. 

If you continue to price as you always have without adjusting for the time and the products being used. You won't be making money. Variable services deserve to have variable pricing.

We are using so much color. And with prices going up. It is necessary for you to adjust.

It's about more than just ensuring your hair color is covered, but also supplies like treatments, foils, gloves, extensions...oh, and your time too!!

When salon apps exist to remove the guesswork from your salon pricing, why would you continue to just hope that your pricing covers everything? You MUST make it a priority to not get left behind. Plus, the apps help you to profit from your services in real-time.

Know Your Operating Costs

What struck me the most was when he said, “At least she tipped me, because I wasn’t even breaking even”

When you're running a salon business - independently or a team. You need to know the operating costs of your business. So that you can actually turn a profit, not to mention breakeven. On average 25% of salon break even, 2-5% turn a profit, and the rest well they're in the red. A successful salon makes a profit.

It's more than just setting your prices to be fixed one-size-fits-all. Rather clients pay for what products are used and the time taken. Truly it is fair salon pricing.

So often you see people in the industry leaving something they love after 3 years because the pay just isn't it. But You shouldn't have to rely on your tips just to make it by. No one should have to.

Utilizing technology to amplify your salon pricing strategy so that you make a profit on every appointment. It is worth the investment.

Summary 

There is so much power in having data and insight into your back bar. Technology exists to make your life easier. When your salon pricing can be accurately covering your time and your products used so that you actually profit, why not?