How to Raise Prices at Your Salon

By Stacey Soble | 10/06/2009 5:05:00 PM

 

If you find yourself stretched to accommodate clients or just don't have enough hours in the day--it may be time to raise your prices. Lauren Gartland, founder of the business coaching company Inspiring Champions, helps thousands of beauty professionals each year create a work/life balance. "Raising your service prices, setting boundaries and saying no are absolute musts for the advancement of your professional career, as well as your life," she says. 


Lauren Gartland

Gartland routinely offers salon professionals guidelines about when to raise prices, how much to raise them, how often and how to tell their clientele. You might be surprised by what happens when prices are raised the correct way:

Raising Prices with No Fear
You should consider raising prices when the demand is greater than the supply. When you are consistently booked 85 percent or more of the time over a two to three month period is the time to raise prices. Or, if you have not raised them in 12 to 18 months, then it also is time. Gartland notes, "The cost of living goes up every year, your operating costs go up and so should your salary."

To figure out what your average time really spent working is, Gartland illustrates how to figure out your Potential Hours of Productivity, or PHP. Write down in columns the days you work with hours underneath, minus your lunch or break time. If you work nine hours a day, five days a week, with a one-hour break for lunch, then you work 40 hours. For stylists who are booked solid, your first action to take is not to accept any new clients who only want haircuts. Start to think about forming your business around the ideal client—one who wants higher priced services, such as hair color, hair extensions or other specialty services. This will ultimately allow you to work smarter and increase your profits while working fewer hours.

Once you figure your PHP, then figure your RHP, Real Hours of Productivity. These are the hours you actually worked. Keep track of your daily PHP and RHP. To find your daily average, simply divide your Real Hours by your Potential Hours. For example, if your real hours for a day were 5.5 hours and your potential was 8 hours, then your average would be 69 percent, which is 5.5 divided by 8. After calculating your average each day, do it again at the end of the week. For example, if your real hours for a week were 27 hours and your potential was 42, then your average would be 27 divided by 42, which is 64 percent.

"Keep track of your numbers consistently over a period of two months," instructs Gartland. "If your average is 85 percent or higher, then it is time to raise your prices, as your demand has exceeded your supply." Industry reports say that 75 percent of all professionals only spend 33 percent of their time actually working on clients. That is a lot of wasted time that could be used by either rearranging your schedule, filling empty slots or simply having more time off!

When to Make the Price Hike
Now that you've decided to raise your prices, think about how much you should raise them and how often? "Do not drastically raise your prices at one time," Gartland cautions. "Start with a 10 percent adjustment. This will instantly increase your profits, but it won't affect your clients' service tickets too severely. However, keep tracking your average hours booked and keep an eye on your percentages. If you again reach an 85 percent booking rate in two to three months, then raise prices again. You can raise them a few times a year if your client demand continues to exceed your supply." 

You should expect to lose about 10 percent of your clients. The upside? "You need to lose them!" Gartland says. "Even though you are losing clients, you will be earning more while working less. You also want to replace those clients with your ideal clients, those with the higher service tickets." It's important to have someone to refer those clients to; ideally a new or junior hairstylist at your salon.

How to Tell Your Clients
The next step to consider is how to tell your clients. Always tell them ahead of time, so an increase won't be an unexpected surprise. Gartland instructs, "Consider what your typical client cycle is. If you see clients every six weeks, then post an announcement six weeks before you raise your prices. It's important that your guests see it at least once before the increase is effective." You can place a sign on your station, send an email to your client list or mail out an announcement letter. Word your announcement professionally and positively. 

Always open with a thank you for their business and acknowledgement of your appreciation. State the exact date and details of the price increase. If you are changing your salon offerings or adding new services, be sure to include a short but powerful description of them. Consider offering a value-added service, discount or special gift. You could offer a complimentary deep conditioning treatment or a free product with service. Of course, if you have pre-sold a package for hair services you will need to honor the price the package reflects.

Almost always, an unexpected result happens when stylists raise their prices. "We assume that people are going to ask why?" notes Gartland. "Typically, they do not say anything. They actually expect prices to be raised. Some clients will even say, 'Well it's about time!'" Remember that you do not need to go into detail when explaining your price increase. Don't talk about the cost of living, your increased distributor costs or your children's college tuition. If the worse case scenario happens and you do lose a few clients, remember that your goal is to fill your book with ideal clients. You will still be making more money while balancing your time better.

"Don't be attached to what your clients choose to do. It is not personal. It is business and you are treating your career as a business and not as a hobby! Decide to make an investment in your business and your life," concludes Gartland.

Note: This feature was written by Jenny Hogan, media director at Marketing Solutions, a full-service marketing, advertising and PR agency specializing in the professional beauty business. 




 

 

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ABOUT THE AUTHOR: Stacey Soble

Stacey Soble Stacey Soble, Editor in Chief of Salon Today

Stacey has been involved in the conversation of salon business for 14 years—as a reporter, a consultant and as the Editor in Chief of SALON TODAY.

Read Stacey Soble's Blogs You can e-mail Stacey at ssobley@vancepublishing.com.

 


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