Pricing Issues

"I guess it’s time to raise prices," says the frustrated salon owner. "Supplies, advertising, insurance, and utilities are steadily increasing. My checkbook balance looks pretty scary most of the time. And I really need to increase my own personal income. But how? Decisions, decisions. Should I post a sign informing clients of price increases or send a letter? Maybe we could inform clients when they call for appointments or just surprise them after their services? How much should the increase be? Will my staff support a price change? They always fear losing clients and go ballistic whenever a client questions any service charge. Oh my God…..This is too much, I think I’ll just skip it."

Sound familiar? As the owner of a small business, I struggled with this topic many times myself. Today, as a consultant and coach to small business owners, I spend many hours developing pricing strategies. It is the essence of our business, hence the cash register and without proper pricing the salon is doomed.

So, what’s proper pricing?

The formula for proper pricing is: Cost of Services + Profit = Price of Service. It is paramount to know the salon's cost to perform each and every service. All salon expenses should be analyzed: rent, advertising, utilities, insurance, stylist's wages, assistants/receptionist/salon coordinator salaries, payroll taxes, accounting, legal & consulting fees, credit card processing & banking fees, hospitality, etc., etc. Pricing is not a number randomly selected; it is based on actual cost of services plus desired profit.

A service should never be priced below the salon cost of performing that service. It is important to realize a profit on every service in order to stay in business.

Pricing is not based on what your clients would prefer to pay or what feels right to employees. Although important considerations, they are not the determining factors. Pricing involves business savvy, market knowledge, service excellence, high self-esteem and strong personal confidence.

Salon owners, many times, work through the decision-making process (the how & when to inform clients) and analyzing the numbers (analyzing costs) only to end up stuck or frozen at the implementation stage.

Quick story to illustrate this point: Three birds are sitting on a fence. If two birds decide to fly away, how many birds are left sitting on the fence? Answer: Three. The birds only made a decision to fly - neither actually flew away.

Implementing price increases requires excellent communication skills, both listening and speaking. Ideas and decisions without action are only noisy distractions that prevent true success of owning a business. There are many aspects to the pricing challenge, and it’s different for every business owner. If you find yourself "sitting on a fence" when you really want to fly, enlist the help of a trained coach. Happy Flying!

Published by The Salon Association in Spring 2000