How to Set Salon Service Prices Right

Getting your prices wrong will kill your business quicker than anything else I can think of. Join me for my tips on setting great prices. Hello, hello, hello my salon friend, Phil Jackson here, your queen of salons. Coming in your eyes and ears with a dose of pricing wisdom. So, prices. Well, if you want to kill a business slowly, start doing a rubbish job. If you want to kill it really slowly, stop marketing, stop building for the future, you want to kill it quickly, then get the prices wrong. So many of us are competing on price, and to be honest with you, competing on price is a miserable, miserable place to be. Because if you're competing on price, you are continually hunting around for the cheapest cup of coffee or continually shopping around for the cheapest suppliers. And there's only so far that you can cut before your customers start to notice, before it starts to have a negative impact on the perception of your business, before it starts to have a negative impact on the desirability of a visit to your salon. So I think it's far better, and I will continually be encouraging you to charge more and more and more and raise your prices until you're getting nosebleeds from the sheer height of what you are charging. And I know I'm going to get some slack for that. I always get some negative feedback anytime I try and encourage people to raise their prices. But honestly, particularly at the moment in times of uncertainty, I think a bit of a bit of altitude between you and the cheapos is a good place to be. Because I've been predicting for a lot of years now, a polarization in the salon and beauty industry. What do I mean by that? What I mean is that I think you either need to be spit and sawdust, no appointment necessary, grab a seat, we'll be with you as quick as we can. Or you need to be offering a proper client journey with professional consultation, a complete client experience. The thing is now that polarization is accelerating. The last two or three years, I think that middle ground is a very dangerous place to be. It's very crowded. It's not hugely profitable. And I don't think it's where clients want to spend their money either. The problem is there's so much that they can do at home now. There are so many treatments they can carry out themselves on their skin, on their bodies. There's so much they can do themselves now. You've only got to go onto YouTube to see how many tutorials there are on doing your own hair services, for example.

So why would anybody come to the salon in the first place? Well, they've got to come for an experience. It's got to be a fun place to be. I've got to enjoy my time that I spend in your salon business. Otherwise, what's the point? I had this conversation with one of my coaching clients last week. We were talking about Christmas and how Christmas Eve used to be a real buzz in the salon. It used to be that everybody was coming in for those last minute treatments, those last minute quick touch up treatments or quickly get your roots done or quickly get a blow dry before we closed the salon for a few days over Christmas. And there was a real atmosphere. And it's when the people were coming in perhaps a little bit merry. It's when people were bringing in gifts for their stylists and therapists, when we turned the music up a little bit. Sometimes we used to wear fancy dress and all those good things. And my client was saying that those things are gone. That atmosphere just isn't there anymore. The Christmas bump, which we talked about in a previous episode, just didn't materialise last year. So what she was saying was, well, what's the point? Perhaps we don't open or perhaps we just assume that it's going to be quiet. And my argument was, no, we double down. It's not going to be people coming in for a last minute blow dry, last minute hair up. Hers was a hair salon, by the way, but translate if you're beauty or aesthetics. It's got to be because it's a great place to be on Christmas Eve. I want to kick my festive season off by seeing some of my favourite people in one of my favourite places at the end of the year. Anyway, back to pricing, Uncle Phil. Give us some tips. What do we need to do to set great prices? Well, firstly, I'm going to tell you what I don't want you to do. I don't want you to get to this bloody awful stage, this granular stage of cost exercise. I don't want you to get to the stage where you're pricing up a service and you're literally going down to the last couple of millilitres of oil or serum, or you're going right down to the last couple of cotton pads that you're going to be using on a service. That's a really gloomy place to price your services. It means that any increase in any of your manufacturers throws your pricing out until you get a chance to review them next. And to be honest with you, particularly if you've got a team, it doesn't work because you might say that we're going to use, I don't know, 30 mils of hair colour to touch up somebody's regrowth. It doesn't mean that your team member is going to be doing that. They could very well be using 35 mils and suddenly your pricing equation goes out of the window. So when you're pricing in costs, and of course we need to make sure that we're covering our costs, make sure that reflects what you're actually spending in the salon over a period of time, ideally the last three to six months.

Less than that, things can be a little bit hit and miss. But when we get to three to six months, we're starting to get a really clear picture of actually what we're spending. That's what we price in when we're setting our prices, not what we should be using. But of course, we're not just looking to cover our costs when we set our prices. The other thing that I see people failing to do with their pricing equation is to price in profit. Now, I see lots of people, but basically every salon coach out there has some kind of pricing calculator or pricing course. I have, lots and lots of others have, and I'm sure there's merit in all of them. But I do see an awful lot where they're saying, OK, we're going to price in a profit margin. We're going to add on 15% or 20% for your profits. And I think that's a mistake because if the turnover goes down, that smaller number, take 15% or 20% of it, it's not going to be hitting what we need it to do. It's not going to be enough for us to reinvest in the business or grow the team or for us to hit the targets of what we need to take out of the business. So I want you to price in an amount. I want you to figure out how much profit you want to generate over a year or a six month or a quarter and price that in to your pricing equation as a solid number, not a percentage of your turnover. That means that we're going to cover our costs, generate a profit, but also that we know that that profit is going to be enough for the things that we want to do with our salon businesses. The other thing I want you to price in at the same time is your admin time. Lots of people are assuming they're doing their pricing calculator. And I see this an awful lot with solopreneurs, people that are operating on their own. They say, oh, I've got 40 hours that I want to work a week. So I'm doing 40 hours of service. So that's how I'll set my prices up. No, you want to start pricing in your admin time. And if you've got a small business, I usually say up to about a quarter of a million a year, you should really be looking at about half a day's worth of admin per week. Price it in. So if you're willing to work 40 hours a week, do your pricing, assuming you're going to be available for 36 of those hours for service, not all 40. That way, we could actually maybe get some of that admin work done during the day, rather than taking our laptops home and balancing it on our knees and trying to do admin while we're catching up with Netflix and pretending we're present with our partners too. Let's price that admin in. Let's make it part of your working day. I want you to have a real think about what you want your salon to be.

And I'm pretty sure that when you set your salon business up, it wasn't to be the cheapest in town. It wasn't for you to be scratching around with price-sensitive customers. Because let's face it, low prices attract low-quality customers. Price-sensitive customers are the worst. They tend to be the most demanding. They're also the quickest to leave if and when somebody cheaper comes along. And I promise you, it's a race to the bottom. There is always somebody out there who's willing to undercut you by a couple of pounds. We had this in my town. So my salon is based in Newbury in Berkshire. I keep calling it my salon. It's not my salon. But I interfere in it enough that I still feel that it's my salon. I was running it for 20-odd years. But in our town, there was a hair salon that was charging £10 for a dry haircut. Firstly, why anybody would want a dry haircut, I have no idea. £10 is very, very low. Even at the time, and this is going back a fair few years, £10 was very low as well. But they were busy. They were making a decent living. It wasn't the sort of place that my clients went particularly. It wasn't really competition for us. But I was aware of their existence in our town. And they were doing OK. Somebody opened up another salon where you could get a dry haircut for £9.99. One penny difference. And I swear it nearly killed that first salon overnight. For the sake of one penny. But if you're pricing in order to attract people because of your prices, you get price-sensitive customers. And they're going to shop on price above anything else. So please, stop trying to attract people with your prices. In fact, I would try and ignore what your competition is doing. And this is what most salons do. When they open up, pricing is one of the last things they think about. Let's be honest. They find the premises. They figure out the decor. They figure out what services they're going to do. And about three days before they open, they start figuring out what they're going to be charging for their services. Huge mistake. Because what you end up doing is standing on your doorstep. And you look at the clinic down the road. It's very glossy. And they've got full-time reception cover and online bookings. And it looks something very clinical and very high-end. And you think, well, I can't charge what they charge. And then we look at Sweaty Betty at the other end with her clinic where she doesn't clean the windows. And she's got very poor personal standards. And sorry if your name's Betty, by the way. I'm sure you're not sweaty at all. And doesn't do any training, doesn't update her skills at all. And you think, oh, I can definitely charge more than Betty does. And you just pick a number in the middle, forgetting that they've got a different price structure, forgetting that they've got a different clientele that they're trying to attract and a different level of experience and a different experience they're offering their customers.

And you try and let them dictate what you're going to be charging. Big mistake. So try and ignore what other salons are doing. Honestly, most salons, I'm estimating about 70% of salons, either break even or worse. So if you're taking into account other people's pricing, you're letting a business, which may not even be making a profit, dictate what you charge. Huge mistake. My preferred way of pricing is, of course, to get way beyond what a service costs us. I want it to be aspirational pricing, experiential pricing. I would much rather decide on the price and then figure out how we're going to make that a no-brainer for my customer. That's exciting. But that's a marketing question, not a pricing question. And when we're talking about being cheap, and I've said this many, many times on the podcast, but it bears repeating at the end of the day, unless you're the cheapest in town, they're not coming to you for your prices anyway. They're coming because they love you or they love what you do. And I think that means there's a lot more elasticity. There's a lot more flexibility in your pricing than maybe you think. Final little tip, little applicable tip for you, something you can take to the bank. Let's start reviewing our prices at least twice a year, please. Annual price increases aren't going to work anymore. You can't guess what your cost structure is going to look like in 12 months' time. So stop trying. Also, it means that if we're changing our prices twice a year, they don't have to jump by as much, our customers are much less likely to drag us over the coals for an increase of one or two pounds. So I hope that's been useful to you. I hope it's inspired you to make positive changes as far as your pricing is concerned. If it has, reach out. Let me know. Phil at buildyoursalon.com. You know I love hearing from you anyway. I do have a profit cheat sheet. We did three episodes on profitability on the Build Your Salon podcast. They're all on one page with a cheat sheet that you can download. That's at buildyoursalompodcast.com forward slash money. Opt in. I promise you the feedback I've had on it has been really, really good. Lots of people implementing the tips that I share in that cheat sheet. And I would love you to share in their success too. Also reach out if you would like to feature as a guest on a future episode of the Build Your Salon podcast. Just seven short days until I'm coming in your eyes and ears again with another dose of

Wise Owl Wisdom. And until then, take care. Sit down and see what's going on with the queen of salons. Hair, beauty and more successful tips for business owners. All on Build Your Salon.