Increasing salon prices and improving your relationship with profit

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. Hello, my salon friend. How on earth are you? My goodness, you're looking good today. Phil Jackson, Queen of Salons, coming in your ears once again with more inspiration and maybe a pinch of education for my gorgeous salon owners. I hope February has treated you well. Here we are marching towards the end of February. 21st of February, this episode's going out. And I have to say, I'm getting really excited about this year. Yes, we've got some challenges and yes, we've got some tricky economic stuff to deal with, but my goodness, you guys are stepping up. I'm so proud of the way that you're handling the increased uncertainty, or rather the continued uncertainty. Let's face it, it's been three or four years of absolute nonsense for most of us. And I'm just so thrilled with how you're dealing with it. And I've got salon owner friends who are not only coping, not only scraping by, but surviving, thriving, and with big ambitious goals for the rest of this year too. And it warms the cockles of my heart, my dear, to know that you're pushing forward in these uncertain times. But we need to make sure that we're doing that on our firm footing, of course. And as we head into spring, oh my goodness, my favourite time of year, spring, I have to say. I love the colours of spring. I love the growth. I love, as soon as I start seeing the first daffodils in my garden, I know that we've made it through bloody winter and we're going to be here in a glorious summer soon. And I have to say, I work very early, so I start work at half five in the morning. And I walk down to build your salon towers, to build your salon HQ. And the birds are singing at 5.30 in the morning now, which is lovely. Still a bit dark, but they're starting to get ready to make nests and make babies all over the place. They'll all be shagging furiously very soon, I'm sure. Anyway, as we head into spring, we've got to make sure that we've got our businesses on a sound financial footing. And lots of salon owners here in the UK will be thinking about their year-end as well, because tax year-end for us is at the beginning of April. So I'm talking again about pricing today, and I make no apologies for that at all, because to be honest with you, getting paid properly is the most fundamental part of your business. And yes, we can say that customers are more important, and of course, a business is nothing without customers.

But if you're serving those customers in a way which means that you're not actually turning a profit and meeting the goals of your business, it doesn't matter how many customers you have. You're always going to be frustrated, you're always going to be struggling, you're always going to be wishing that you were in a different place money-wise. Or people will say that marketing is the most important. We need to make sure that we can get those precious bums on seats. But again, if you're marketing services which are unprofitable, for example, actually you'd be better off paying for your customers to go elsewhere. And I've actually had this situation with a coaching client. I used to do, as part of a new coaching client package, I used to do a full financial review. And I don't do it anymore, because to be honest with you, it's a little dull. And I don't really think it's the best use of my time as a coach to be doing a financial review for you. But it used to be the case, and I did this financial review for one of my lovely salon owner friends, and found that for one of her services, it was actually more profitable for her to pay another salon to carry out that service. It was better for her financially for them to not come in and take up that time in the beauty room at all. So it's really important that we understand exactly what our prices need to be. But today, we're not talking about setting our prices, I'm talking about increasing our prices. Because this is something that we need to do across the entire industry. And this isn't just a UK thing, it's not a European thing, it's actually a worldwide phenomena. Standards in hair salon and beauty salon education are starting to rise. Salon owners are taking their businesses much more seriously, and certainly taking their protocols and procedures a lot more seriously. Our costs are increasing, and it's forcing what should have been happening anyway. And what should have been happening, of course, is that we should be charging as the amazing professionals that we were always meant to be. But it's forcing our hands in that direction. That also is combining with a market adjustment. Now, market adjustments are always going to be uncomfortable. A market adjustment is when, to be honest with you, we call it an adjustment, but essentially, some people need to go out of business. Because in most jurisdictions, there are too many salon businesses. And what that's meaning is that it's harder and harder for each of them to turn a decent profit. Even with decent pricing in place, it's hard to remain at a certain level of utilisation that means we're actually making money. So, to be honest with you, the market adjustment that needs to happen is lots of those businesses need to go bust. And here in the UK, I would estimate there's about 20% too many salon businesses in the marketplace.

And those businesses need to merge, combine. Those people need to be self-employed in other people's businesses or take employment. And that trend is starting to happen a little bit. And what that means is that the remaining salons are able to remain busier, more profitable and charge more. So, this market adjustment is a very important part of us getting our prices up. But you don't need to look at the huge economy. What you need to look at is your personal economy. You want to know what's going on in your business and how you can increase your own prices. And as always, my darlings, your Uncle Phil has got your back. And I'm here to help that price increase process go a little bit more smoothly. Apologies if I'm speaking very quickly today. I've got myself a new coffee machine. I've got myself a new Nespresso machine. And I have to say, I'm absolutely addicted. It's got the milk frother. And I am very heavily caffeinated and very excited about this topic, which is, of course, a fatal combination. So, wish me luck. I will see you at the end. So, the first thing to think about when we're increasing our prices is to make sure that your new prices have been properly set. And I'm going to shamelessly plug my own pricing program, which is called Get Paid Properly. It's a cracking bit of work. It's a program I've run for years now. So, it's been polished and refined over about five or six years now. And it not only helps you price your services properly, but it challenges you to improve your relationship with money. And that's where lots of this is coming from, of course, is that we've got a lousy relationship with money, which is putting artificial limits on what we feel we can charge for our services. So, if we can improve that relationship with money, then we can take those limits away. We can take that artificial ceiling away on what we charge. So, once you've been through my program, once you've lined Uncle Phil's pockets with a bit of cash, darlings, and paid back into the bank of Build Your Salon, and once you set your prices and you're certain about it, then we can go about increasing it. So, we've got to understand why we're doing it. So, we've got to recognize that making a profit is vital for the survival and for the growth of your business. And the profit's not optional. Without profit, your business isn't able to grow. You're not able to invest in new opportunities. You're not able to pay yourself properly as the amazing salon owner and salon professional that you were always meant to be. And also, we're not building a buffer. And we need what I call my war fund.

So, I put a percentage of my income aside every single time I get paid into a little vault. And it's my war fund. And to be honest with you, it's my future COVID fund. Because even though I don't believe that COVID will hit our businesses in the same way as it did a few years ago and continues to impact a lot of us, let's face it. But something else is going to come along. That was the big lesson from COVID was that something else will happen at some stage. And we need to have a few coffers. We need to have a little bit of cash in place to help us weather those storms. And the only place that that can come from is profit. So, profit is vital. And in fact, in some jurisdictions, in some types of business, depending on how you've structured your business, you may even have a legal obligation to maximize profits. And there are jurisdictions where you have a legal obligation to create profit for shareholders. And even if you're the only shareholder, you still have an obligation to create profit. So, profit is the lifeblood. And there's that very tired old analogy that turnover is vanity, profit is sanity. And it absolutely is. I would much rather see a business with a lower turnover, but creating a high level of profit, than I would a huge unwieldy business with very tight profit margins. And we have the ability, as long as we focus on the transformation that we're delivering to our customer, we have the ability to create high profit services in the salon industry. This is possible. This is probable. This is happening for the very best of you right now. So, let's reframe that conversation that we're having around profit and understand that profit is a positive thing. It's not only vital, but actually, it's a really good thing. And there's no need to be embarrassed or defensive around profit. We should be proud of your business's financial performance and proud of the profit and the role that it plays in supporting you and your community in your economy. So, we need to shift the conversation around profits. And this is actually something that I keep coming up against in my own business and my own mindset because I am, I know shock horror, but I am British. And being British and of a certain age means that money is not a topic, which I'm particularly comfortable with even these days. And I'm getting better as I've spoken to lots of other people about their businesses. But I come from a generation and a time and place and a family in particular where money was considered a vulgar topic for conversation.

It would be rude to talk about money at the dinner table. In fact, it would be rude to talk to anybody outside the family about money. And even inside the family, it was really kind of frowned upon. And you certainly had to pick your time and place. Perhaps as the ladies were taking their leave in the drawing room, us gents might talk about money while we have our brandy and cigars after dinner in a very downturn kind of way. But it was not a topic for conversation really for anybody apart from your accountant and your banker. So, we need to get away from that. And I think it comes from the equation in people's minds that profit is the same thing as greed and that creating profit is a greedy thing. So, I want you to shift your mindset around that a little bit and understand that the more profit you make, actually the more good you can do. And this actually is where society and certainly society around charity started to break down because we used to have this phrase in old society where noblesse oblige, which basically means that if you come from a certain part of society, it was your obligation to support charity, to support the poorer. And it's only really when that started to break down and people, the noblesse, did not oblige, where they did not look after their tenants in their farms and they did not look after the poorer elements of society and support those that couldn't support themselves. And that was when people started to turn on the aristocracy and the higher echelons of society. So, we need to appreciate that we can do good with our money and the more money we have, the more good we can do. So, once you've turned a profit, once you've got your business to the stage where it's actually creating a high level of profit for you, what you do with that is entirely up to you. So, you can be ethical, you can be socially responsible, you can have a business which has a very positive impact, but also generates large profits too. So, what are my tips for increasing your prices? Let's have a few little takeaways that you can put straight into your salon business. What would getting paid properly mean to you? A better lifestyle? Less financial worry? Being able to be present and improve your relationships with your loved ones? Maybe even a better night's sleep? I know these are scary times, but if you're continually living paycheck to paycheck, if you can't seem to get ahead financially, I feel your frustration, I have seen your pain. It's time to stop winging it. You know your salon business could be doing more. It's time to finally fix your fear of the figures,

take control and charge what you're worth, to step into the shoes of the well-paid professional salonpreneur you were always meant to be. And that's what my Get Paid Properly programme is all about. I'll help you improve your relationship with money, understand the finances in your business and I'll show you what you should be charging to the penny. All of that without overwhelm and without guesswork. For all of the details of Get Paid Properly and to sign up now, head to getpaidproperly.com and with the exclusive discount code PODCAST, you can get an enormous £200 off your investment in the programme as well. Let's work together to make this the year you finally take control of the money in your salon business. So come on Uncle Phil, you've convinced us that we need to increase our profits. You've proven that profit is not only a brilliant thing for the business but can be amazing for the world at large. How on earth do we increase our prices? Well, the first thing that I do when I go into a business is make sure that everybody's paying the same. And you would be surprised, my darlings, if you accompanied me on a salon visit. Even a very high-end salon with high prices, with a particular prestige, falls foul of this. So we go in and I will say, OK, how much does everyone pay? And then we start looking at what's actually going through the till and it doesn't marry up. And we find that even though, let's say the price for a haircut might be $80, your great-auntie Nelly, who comes in and has done for the last 15 years, or, you know, Aunty Maureen, who isn't your auntie at all, but everyone calls her auntie but she's been coming in since day one and terribly loyal, is paying considerably less than that. So it might be, sometimes we don't need to increase our prices at all, we just need to get to the stage where everybody is paying the same. And we have these legacy clients drifting around lots of businesses who have never paid more. And we had it in my own salon as well. We have, so we're a unisex salon. And for a unisex salon we have quite a high percentage of male clients that come in. And this one chap who had, poor lad, I mean, he had, you know, 22 hairs and a referee.

And there wasn't a lot of work to do. There certainly wasn't a lot of styling going on. So he had just a very quick buzz cut, which isn't something that we offer for our other male clients at all. We do a proper barbering service with scissor over comb and all the rest of it. Anyway, to cut a long story medium length, he'd been paying the same price considerably lower than everybody else for years and years and years. So hadn't been subject to any price increases, even though everyone else had been inching their prices up every six months for quite some time. So we had to address that and we didn't address it all in one go. And actually the chap decided that he was going to go elsewhere and find a cheap barber that, you know, just a walk in job, grab a seat. We'll see you when we can instead of paying our higher prices. And that's fine because what that did was free up that appointment space for a more profitable customer. And we have to appreciate that when we're increasing prices, you might lose a few clients and that's got to be OK. You'll always lose less than you think, by the way. And also, please make sure that if they go somewhere else, try paying someone else's prices and see what that involves. Let's make sure that we welcome them with open arms should they decide to come back. So let's first of all, make sure everyone's paying the same. The other thing I want you to think about doing is ditching the discounts. If you're running a discount card or a loyalty card, I seriously want you to look at whether that is delivering the benefits to your business that you anticipated. So we got the bug for loyalty cards here in the UK very first from Tesco. Big supermarket chain over here. And Tesco introduced the club card. And that began a frenzy of loyalty and discount cards in retail here in the UK. And everybody was getting it wrong. Now, how are we getting it wrong? Well, Tesco didn't put the card in place to increase loyalty. That was kind of a byproduct. What Tesco were doing were increasing the level of information they had around individual customers. So essentially what the Tesco club card was there for was to monitor your spend, see how often you were coming in, what particular items you were buying. And in the early days of club cards, let's say you for a couple of months were buying a particular size of nappy, a particular size of diaper. Lo and behold, miraculously, a couple of months later, a voucher would plop on your doorstep with 50 pence off the next size up of diaper. So they were monitoring what you were spending and then targeting their marketing accordingly. So they were swapping the discount for information. And we didn't do that when we introduced loyalty cards into the salon industry. What we did instead was essentially call it a loyalty card, but essentially it was just a discount card.

And we don't need to get a loyalty card in place to get that level of information around our customers. Because particularly in those computerized salons, and if you're not computerized, my God, what are you playing at? It's time to get that in place. But in a computerized salon, we've got access to all of that information anyway, absolutely free. We don't need to be offering a loyalty card in order to access that beautiful, detailed, rich information. So let's stop kidding ourselves that they're driving loyalty. And to be blunt, darling, if I come into your salon for my intimate waxing service, let's say I'm going to get this forest under control once and for all, and you're going to get the hedge trimmers out, and you do a horrible, horrible job. Do you seriously think that having a few points on a loyalty card is going to change a damn thing in my decision to go elsewhere? They don't drive loyalty anyway. It's just a discount card, and you know my feelings about arbitrary discounts. Oh, I ranted a little there. Did you feel that passion starting to build up? I don't know if it was the passion or the Nespresso, but one thing or another has made my pulse race, darlings. Anyway, moving on. How do we make price increases a little easier? I'm going to do a short, sharp hit now. Are you ready to rattle these off? I've got five of them. The first is, let's do it regularly. If you do irregular price increases, you get more earache. To be blunt, if you do regular price increases, first of all, they don't have to be quite as large. And secondly, your customers just get used to that. Whereas if you leave it a year, two years, three years in between price increases, your customers are going to notice. It's going to have to be a bigger price hike, and you're going to get more jip. And I don't like confrontation. To that end, time your increases really, really carefully. And for example, we always have a price increase in September. So we have two a year and the second of the year is in September. That means that the prices are all settled, done and dusted in plenty of time for my busy season as we head into holiday season at the end of November. But it also means that lots of our customers have vouchers to spend in September. Now, why would that be, Phil? Let's have some clarity, please. Well, it's because every August we run our recommend a friend program. And that means lots of people have got vouchers to spend when they come in in September. So September out of the two price increases tends to be my most ambitious. It tends to be the one where I increase the prices more because these people have got vouchers to spend. And because it's important, I get the prices right for the Christmas rush. This is the one where I'm perhaps going to increase the prices by an extra pound or two. That said, reduce the friction.

If you have customers who you know are going to be price sensitive, why not explain to them that you've got a price increase coming up in the next three months. But if they book their appointment now, let's say they book until the end of the year, they can lock in the old price. OK. And it's something that we've done in my salon with those particularly price sensitive people who always like to have a little whinge. Interestingly, they whinge but still come in. They don't change their pattern of behavior. Some people aren't complaining. They just want to be heard. But let's say we've got some of those people that they're kind of a few months behind everyone else with the price increase because we've locked in those prices before they went up. Now, what I will say is that I always explain to them that if they move that appointment or cancel and rebook that appointment, they lose the discount and that will be charged at the new price. Now, actually, between you and I, darlings, let's have a little intimate secret conversation for a second. I can't monitor that. My software isn't powerful enough to know when someone's cancelled and rebooked an appointment at a different price. So it's not something we can actually, unless I'm on reception and remember that this was a legacy price, it's not actually something that I can do anything about. But it discourages people and it makes them feel that they're giving me something in exchange for what's essentially a small discount and a delayed price increase. So we've reduced the friction. We're doing our regular price increases. We've timed those increases properly. But please understand that it's OK to take your time. If you go through your pricing program, if you go through my get paid properly program and realize there's lots of work to do on increases, you don't have to do it all in one go. And this is another reason why regular price increases are a good thing. Let's say we run the figures and you found that one of your beauty services is desperately undercharged. Let's say you've got £20 to add on to your basic facial price, but you feel that there's going to be a lot of resilience there. You feel that's too much of an increase. It's OK to know that you should be charging £20 more. But in the meantime, all we can manage right now is £5. That's OK. It's OK to take your time. As long as you can afford to do it, of course, that's going to bankrupt your business in the meantime. Then we might just have to be brave. And my final point on increasing prices is we don't need to make a massive fuss about it. Example number one, social media. We definitely don't need to be talking about our price increases on social media. Social media should be for the very best news in your business.

It should be for the very best examples of your work. And it should be for the stuff to celebrate. And it should be stuff which is evergreen so that it hangs around for a long time and still makes sense. And price increases don't tick any of those boxes. We don't need to do it. I also don't think you particularly need to email your clients. If you have online bookings, you have even less work to do because as people are booking online, they're going to see the new prices in front of them anyway. So as long as we're at the stage where customers aren't going to be embarrassed. And what do I mean by that? What I mean is if I come into your salon expecting to pay $100 for a service and I bring exactly $115 because I'm going to pay $100 for the service and there's a $15 tip in there. And then I get to reception and I'm embarrassed because you've had a price increase in between that I wasn't aware of. That's the situation we want to avoid. So a small discreet notice on reception saying that our prices increased from the 1st of April is absolutely fine and sometimes all that is necessary. If you insist in online bookings, you maybe don't even need to do that. And certainly keep it away from social media. So I hope that's helped you with a few ideas on how you can increase your prices. If it has helped, of course, reach out. Phil at buildyoursalon.com I would love to wake up tomorrow to my email inbox being stuffed with positive feedback about the Build Your Salon podcast. Share it with your friends. Share this episode with someone who you think might benefit too. And of course, while you're at it, why not take 30 seconds to make my week by leaving me a review and perhaps a few stars. I always think five stars look the best on screen. Just seven short days until I'm coming in your ears again, my darlings. 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.