Why pricing is so important
Your prices are one of the most important factors for your salon’s profitability. Yet many salon owners set their prices by feel or simply copy the rates of competitors. This often leads to prices that are too low and margins that are too thin.
A well-thought-out pricing strategy ensures you cover your costs, make a healthy profit and remain competitive at the same time. It is about the balance between what your clients are willing to pay and what you need to run a sustainable business.
Prices also say something about your positioning. A salon that positions itself as premium should reflect that in its prices. A cheaper salon attracts a different type of client. The art is to make your prices match your brand identity and target audience.
Calculating costs as a basis
The first step in pricing is accurately mapping your costs. Many salon owners underestimate their actual costs, unknowingly operating at a loss on certain services.
Distinguish between direct costs (products you use per treatment) and indirect costs (rent, energy, insurance, software, marketing). Add your desired hourly rate, including holiday pay and social contributions as if you were employed.
- Product costs per treatment (shampoo, colour, styling)
- Rental costs per hour of workspace
- Energy and overhead costs
- Salary costs or your own desired hourly rate
- Marketing costs per client
- Depreciation on equipment and fit-out
- Software costs and other subscriptions
Market analysis and competition
Besides your own costs you need to look at the market. Research what comparable salons in your area charge for the same services. This gives you a frame of reference, but it does not mean you should charge the same prices.
If your salon offers more — better products, more experience, a more luxurious experience — you can justify higher prices. But do clearly communicate why your salon offers that added value. Clients are willing to pay more if they understand what they get in return.
Don’t be afraid to be more expensive than the competition. A race to the bottom on price is a dangerous strategy. Better to have fewer clients who pay well than a full diary with clients who don’t generate enough revenue.
Analysing prices with salon software
Salon software gives you data to evaluate and adjust your prices. With MyWest you see exactly how much revenue each service generates, how long treatments take and what the average spend per client is.
Use this data to identify your most and least profitable services. Perhaps you’ll discover that a popular treatment actually generates too little revenue due to the time investment, or that a less-requested service actually has a high margin.
Review your prices at least twice a year. Costs rise — from products to energy — and your prices need to rise with them. Communicate price increases to your clients in a timely and transparent manner. Most clients understand that prices occasionally go up, especially when quality remains consistently high.