When you're too cheap

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. Well, hello, hello, hello, dear listeners. So good to be back. Have you missed your Uncle Phil? Phil Jackson here, your Queen of Salons, here to help you build your salon business. My goodness, it's been a very long time, hasn't it? In fact, I reckon it's been a couple of years now, to be honest. And I'm just kind of going through a bit of a midlife crisis, I think, dear listener. Well, I keep saying listeners. Of course, after all this time, there's probably only one of you left. So dear listener, it's wonderful to be back. But yeah, I think I'm going through a bit of a midlife crisis. I think what I've realized is that it's very important to enjoy your business. And one of the things that I always used to enjoy very much was my Build Your Salon podcast. So here I am back coming in your ears. If there's anything you'd like me to cover at all, because it's just you and me here, my dear. Of course, reach out, phil at buildyoursalon.com and let me know if there's a topic that you'd like some help with, any questions that you have about your salon business. I'm here and happy to help. So to today's topic, when you are too cheap. And I suppose really what we ought to do first is establish how we know when our salon is too cheap. And of course, the first place we would look is our bank statement, isn't it? If we're not making the money that we want to, if we're not making the profits we want to, then perhaps our salon is too cheap. What, are you too cheap? Or maybe you're charging exactly what you ought to be, but you're just not busy enough. And that's then not, of course, a pricing question anymore. That's then a marketing question, which is a different beast entirely and a topic for another day, I suspect. So how do we know if you're not busy enough? Let's get that out of the way. And I appreciate that we're meandering a little away from the point. But frankly, listener, it's my show. I should do as a damn well, please. So how do we know if we're not busy enough? Well, you need to jump into your salon software and ask it for a report. And I know salon software loves coming up with new reports. But the bit of information you're looking for is called your utilisation, or sometimes it's called your occupancy. And essentially, it's a measure of how much of your week is taken up with paying customers. So out of the hours that are available across your entire team, or you could break this down per beauty therapist or per stylist if you wanted to,

out of the hours available, how many are actually made making money? And ideally, we want to be looking at about 85% to 90% utilisation. Now, all salon owners want all of their teams working flat out all the time. Slave drivers, awful people, aren't we? Salon owners. But of course, 100% utilisation might sound like a brilliant model. And yes, it's fine for holiday season, those occasional, very, very busy bits of your year. But what you've built then is a business with no elasticity. There's no give in the business. So if team members are starting to get a bit frazzled, and then if somebody's sick, or quits, or has to go on to maternity leave early, or you're running behind, because there's no give in the business, things start to fall apart really quickly. So I think about 85% to 90% is a good target. And if you're running at 85% to 90% and not making good money, then chances are your pricing is out of whack. Incidentally, before we leave utilisation behind, in our rear view mirrors, let me just point out, if your utilisation's below about 70%, you're probably going to be struggling to break even, even with good pricing in place. Of course, that varies hugely by business, but that's my finger in the wind figures for utilisation. So assuming that you are busy enough, assuming that your utilisation is good, and I'm also assuming that you're doing a good job, my dear darlings. If you're doing a rubbish job, I'm afraid Uncle Phil can't help you at all. But we need to look at your pricing then. So if you understand that you're too cheap, what can we do about that? And how have we got ourselves in this pickle in the first place? My Salon Owners Retreat is a unique event where you get to create the agenda. This isn't a retreat of boring presentations in conference rooms without windows. The entire programme is a mix of group coaching, mastermind sessions and one-to-one coaching with me, your favourite Salon coach. There's also time built in for implementation. Yes, you're going to leave the retreat having actually got some important work done on your business with our support. Our spring 2023 retreat is now sold out, but you can be the first to hear about the next Salon Owners Retreat

and get the very best early bird pricing by heading to buildyoursalon.com and joining our wait list. I can't wait to see you on Salon Owners Retreat. Don't forget your speedos. We're getting this pickle because, well, largely it's a legacy issue. It's because we started our business not charging enough and then we have year after year of fear over raising our prices and charging more. We have a lack of confidence in our industry and it does not serve us well when it comes to our businesses, does it? So how do I give you some confidence? I don't have a bucket of confidence under my desk in my glamorous office here, but I will give you a couple of hints and tips which might just reframe pricing for you. And the first actually came from a team meeting that I had quite some time ago when I used to be a salon manager rather than a guru. And I always used to run the prices past my team each year and it wasn't a kind of consultation process. They didn't get to set the prices, but it was kind of my sanity check. So they knew what was going on with our prices, but also they would point out if I'd missed something obvious, you know, if it was illogical pricing or I'd overcharged on one thing compared to another. So it was kind of a sanity check for prices. And I was raising the prices as, of course, we should do on a regular basis. And one of my team members said, I think we're starting to get too expensive, Phil. I think we're charging too much and it's going to lose us customers. And I had to point out to this team member, and she was a stylist. She'd been with us for a number of years. In fact, she'd been with us since she was an apprentice. So she'd done her training with us and cut her teeth. And now she was up to stylist. I think she was heading towards senior stylist level. So she'd been with us a fair few years. And what I had to point out to her was two things, really. The first was that she was not my target market. And you are not your target market either. I very much doubt that your target market is overworked, slightly underpaid salon owners. If it is your target market, then we need to reposition that too. And I had to point this out to my team member. I said, my target market is not 25-year-old stylists, to be honest with you. It's professional ladies who have their own businesses who are in their 50s.

So largely, we can ignore your opinions about my prices. And the second thing I had to point out to her, and it may be the same for you too, my dear, was that it had been a very long time since she'd paid for a salon service. In fact, I don't think she'd ever paid for a salon service. Because while she was working for us, she'd never paid for a haircut or colour. And before she'd been working for us, I suspect her mother had been paying for her haircuts and colours. So she didn't actually know what it was like to leave £100 or £200 on a reception desk in exchange for service. She couldn't really relate to what those customer expectations might be. And I suspect that's the same for you. So I wonder when it was last that you had to pay full price for a salon service. And let's not get your hang-ups about money projected onto your target market. The other thing I would say is that unless you're the cheapest in town, people aren't coming to you for your prices anyway. If price was the deciding factor, the cheapest salon in town would be the most successful and the busiest. And again and again, we see that, of course, they're not. They're the ones that are struggling more than any other salons. So if people aren't coming to you for your prices, why are they coming to you? And it's a really worthwhile exercise to, in fact, ask your customers why they come to you. Why do they choose you instead of your competitors? And have those conversations. And I'm not saying put a questionnaire together, though you could do. Just have some informal conversations with some of your best customers. You'll get some beautiful answers. And it might just well give you that little bit of confidence to start charging properly. And of course, we know if you've been in business for more than 10 minutes, my dear, you will know that better prices get you better customers. And we have this in my industry too. In fact, in the coaching industry, there's a little adage that the more they pay, the more they pay attention. And largely what that means is that if you've got cheap coaching clients, they're probably not going to do the work. And I fell into this trap, believe it or not. I was once cheap. And when I first started coaching, I used to charge the princely sum of £25 an hour for my coaching, which is an insanely low amount, I can tell you. And I apologise if I offend you, dear listener, if you were one of my first coaching clients way back then. But I had horrible clients. Oh, my dears, they were terrible. Well, and they weren't doing any of the work. This is the trouble. Because if you're only paying £25 an hour for coaching, you're not going to take it terribly seriously.

It didn't matter to them whether they were getting any results or not. And it was only when I actually semi-retired from coaching and then came back to it. I took a break from one-to-one coaching for almost a year, in fact, and then came back and 10x'd my prices. I went up to £250 an hour. And all of a sudden, I was getting clients that were getting results. And it wasn't me that had changed, necessarily. It certainly wasn't what I was teaching. I was still holding people accountable and telling them off for not doing good work. But they were taking it much more seriously. They were doing the homework. They had a bit more skin in the game. So, better prices got me better customers. And I'll bet it's the same for you. I'll bet if you've got clients that just follow you on Facebook because they're waiting for the next discount. And you never see them until you've got a promotion on. And they're not particularly loyal. And they're not taking upsells. And they don't retail. I bet they're the hardest work as well. And anyone who's ever run a promotion in their salon through Groupon, for example, will tell you how tricky those cheaper customers can be. Also, bear in mind that as much as raising your prices could price you out of a potential market, it also prices you into another. Let me explain, my dear. That was a bit cloudy, that explanation, wasn't it? So, let's imagine that you're about to break the $100 mark for charging for a haircut. There are some of your clients who will not pay $100 for a haircut. You're going to price yourself out of their market. But as much as we're doing that, there are also a number of clients in your area who don't believe that you can get a decent haircut for less than $100. So, you price yourself out of one market, but you price yourself in to another. And those customers are also going to be the first to take upsell. They'll be more willing to buy products that you recommend. It's just an easier game to play. And I've been predicting this polarisation of salons for quite some time now. I've been saying that you either need to be cheap and cheerful, no appointment necessary, grab a seat and we'll see you shortly. Or we need to offer a much more rich and enhanced customer experience. And I've always known which side of that coin I want to be. Because competing on price, that race to the bottom, oh my dears, it's a miserable, miserable place to be.

And also, it doesn't work in the longer term. And I know in my town, there was a salon where they used to charge £10 for a haircut. And even back in the 18th century when I was working, that was terribly, terribly low and far lower than what we were charging. And then along came another salon and they literally knocked a penny off and started doing all salon services for £9.99. And all of those clients that have been quite happily paying a tenner just drifted over. For the sake of one penny, they were happy to jump into a different pattern of spend. So, those better customers, they have a better model of loyalty. And don't you deserve some profit? After all these years, don't you deserve a decent wage? And don't your team deserve good wages as well and some decent training? Don't your clients deserve the best products on their hair or on their face? Do they not deserve the nicest cup of coffee while they're sat in reception waiting for their waxing services? Ultimately, what I'm saying, my darlings, is that you can't build a Bentley and charge for a Ford Fiesta. It just doesn't work in the long term. That pricing model doesn't work. And I see so many of you salon owners trying to deliver exceptional standards of service, the very best of everything, and not charging for it. And it just won't work. So, please, let this be your call to arms to get out of that middle ground. And I hear this again and again when I'm doing my coaching strategy calls at the way at the beginning of my journey with salon owners. I always ask them if I was to stack up all of the prices of the salons in your area. Where are you in that stack? Are you the cheapest in town, the most expensive, or somewhere in the middle? And they're always somewhere in the middle. And it's such a dangerous place to be, particularly right now. They say if you teach a man to fish, he can feed himself for life. But let me tell you, darlings, I've been in the situation during my career where sometimes you just want someone to give you the bloody fish. And that's what my new program for 2023, Eight Weeks Bums On Seats, is all about. It's the marketing training that you need to fill up some of the white space in your appointment book and turn you into the salon owner you were always meant to be. Get more bums on seats in early 2023. Head over to buildyoursalon.com and join the waitlist to be the first to hear and get my special early bird pricing. But I do also admit that there are times when you just can't raise your prices.

And they are very specific circumstances, but those circumstances do pop along every now and again. And I remember coaching one lady. She was down on the south coast of England and had a very nice salon, hair and beauty salon. And we did a full financial review, which is something that I don't do terribly often because it's a little dull. But we realised very quickly that she was way too cheap and undercharging on a huge number of services. Unfortunately, though, she just reviewed her prices a couple of weeks before I turned up and didn't feel that she could increase her prices again because she'd had some resistance. She'd had a little bit of earache, my dears. She'd had some jip from some of her customers. And it wasn't a surprise because, of course, she'd left it for years until that review. And I've always said that if you have more frequent price reviews, they don't have to be quite so steep and also you tend to get a bit less resistance. Your customers are used to prices changing a bit more frequently. Anyway, to cut a long story, medium length, we had to come up with some creative ways of charging more without raising the prices that were on her price card. So here's a couple of ways that we went about it that you might well be able to implement yourself. Now, this is not you being let off, raising your prices if they need to be raised, OK? This is not your excuse for not raising your prices. But if you really can't, then your Uncle Phil's got you covered. Here's a couple of suggestions from me. And the first is that we could start to look at deluxe versions of your standard service. So could you offer a deluxe manicure, a deluxe pedicure? Can we do a deluxe facial or even a deluxe cut and finish? What would that include? What products could we tap into? Do we need to increase the timings? OK, I admit that it's going to change the profit model for that price slightly because we're going to increase our product cost. But what it rests on is being consistently offered. And you're going to have to speak to your team about this and make sure they're consistently offering these deluxe or VIP versions. You need to train your team to consistently offer them. And some of your customers will gravitate to that slightly higher offer. And as long as we price that properly, then it can get you off the hook from raising your prices on your price card.

If we can't change your prices, can we maybe look at changing your timings? Because, of course, the prices are only too cheap compared to the amount of time that a service takes. And I had this in a nail salon that I was working with, which was operating at capacity. It was 100% booked up all day, every day, but not making enough money to achieve the salon goals and certainly not enough to reward the salon owner. So we – and I will warn you now, if you've got a team, there's going to be some resistance. They're not going to want to drop the service timings. But we did. We did it anyway. And the deal that we came up with was that we would drop the service timings. We would try it for three months. And if at the end of three months everyone was running behind and the customers weren't happy, then we would do something about it. And, of course, by the end of three months, everybody had adjusted to the new timings. So the business was suddenly a lot more profitable. So even five minutes shaved off a service can make a big difference to your profitability over time. The other thing I would look at is discontinuing some of those very low-profit services. And that can be a little – I always meet some resistance with that as well, some reluctance from salon owners to get rid of things like those quick brow shapes. And we had to do a lot of this as we started to re-emerge from the lockdowns, over the COVID lockdowns, because all of the salons had to build in an amount of clean-down time. So if you had somebody in for something like a brow shape, we had to book out 10 to 15 minutes for the beauty room to be cleaned down, ready for the next customer, so they wouldn't be riddled with COVID by the time they left the salon. And all of a sudden, that 10-minute brow shape where we were charging £10 was just completely untenable because it was taking such a huge amount of appointment space. And if you don't want to discontinue those low-profit services, what you could do is discontinue them as standalones. So yes, of course, you can have a brow shape, but only if you're having some more facial waxing or only if you're having a facial service or only if you're in having another service, which means we don't have that clean-down time to price into the brow shape. So those little low-profit services, either discontinue them or don't let people book them on their own.

And then finally, what we can do is, if we can't discontinue a service and we can't raise the price, can we instead look at who is carrying out those services? And this is much easier if we have tiered pricing in our salons. And I've been banging that drum for quite some years now, haven't I, darlings? But if we really need to make room for more profitable clients with our top team members, then perhaps we can start pushing some of those less profitable services down the price card a bit. So yes, people can come in for that brow shape, but not with your senior therapist. They can only come in with the more junior therapists. And even though we're not really doing much around the pricing, what we're doing is making room in your senior therapist column for high-profit services. So a few little tips from your Uncle Phil there on how to work around pricing if we don't feel that we can raise our prices. But if you're going to raise your prices, and of course I encourage you to on a regular basis, not annually. I would do every six months these days. And the other thing I would say is be brave. There's an old expression, if you're going to be hanged for a sheep, you may as well be hanged for the whole flock. So I think it's much easier to raise prices. And then if you feel like you've gone too far, we can always promote our way through that with some clever discounting or some decent promotions over the next few months. But that's a lot better than raising your prices by a couple of dollars and then realising it should have been five. And also, to be honest, what's the alternative? Years of subsidising your own business. Years of earning less than your team or even maybe not even making minimum wage. That slow decline, ultimate failure. I don't want to be gloomy, especially not this time of year, pop it. But that's the alternative to charging properly, isn't it? So do be brave and start to appreciate not just the value of the services that you carry out, but the value of the way that you enhance people's lives. Because what we do makes a huge difference to people's days and ultimately to how they feel about themselves. And that's got to be valuable, hasn't it? So I hope that's been useful to you. If it has, dear listener, please reach out. Phil at buildyoursalon.com I'd love to hear your thoughts on this topic. And if it's been at all useful, then also leave me a five-star review. Because frankly, at my age, that's the biggest thrill I'm going to get this week. Until my next episode, which I promise will not be two years away. In fact, you've only got to wait seven tiny days. And until then, my darling, take care. Sit down and see what's going on with the queen of salons.

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