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Is Your Service Pricing Holding You Back from Profitability?
Are you making a profit on each of your salon and spa services, or are there some that are costing you? Coach Jen LeBlanc shows you how to calculate your break-even point.
by Jen LeBlanc, 124 Coaching and Consulting
October 10, 2024
124GO Coaching
3 min to read
As salon and spa owners, most of us went into business because we love this industry, and we love all things beauty. Most of us were successful hairdressers or estheticians that ended up opening a salon or spa and have acquired needed business and leadership skills along the way.
For years actual business education has been very hard to come by, so we found ourselves creating service menus based upon what our neighbors charged and what we “thought” sounded like a fair price. The problem with that methodology is that every company is truly different, and although demographics should play a part in menu pricing, figuring out your profitability metrics and your break-even point should be where you start.
Most salons and spas that we coach are shocked when we introduce a pricing calculator and show them how many of the services, they provide are actually costing them money. Imagine what profitability could look like if your services were appropriately priced - based upon what your company needs to make per hour, per chair, per station.
So where do you start?
Take all monthly expenses EXCEPT retail costs
Divide that by the average number of hours sold per month (take a 3-month average, 6 is better)
This equals the amount you need per hour to break even
Divide that by the inverse of your profit margin. (For example: if you want a 15% profit margin, divide the number above by .85).
This equals what you need per hour including profit.
As you complete these calculations, keep this in mind. The first step in managing your finances will often start with managing your expenses. Is your spending in line with industry benchmarks? Is there some room for savings? Or as my mom used to say, do you have "champagne tastes on a beer budget"?
Yet correct pricing is an integral part of the equation to your business success, you can only cut expenses so much. Don't let fear keep you from making the decisions and the actions we need to take.
About the Author: Jen LeBlanc is a 15-year salon industry veteran who serves as the Operations Officer at both Salon Rootz and Endz Salon Studios, located in Medina, Ohio. Salon Rootz is an 11-time SALON TODAY 200 honoree and a 10-time STAMP honoree. Jen has a passion as well as an infectious drive, to help the salon industry with innovations for growth and profitability. Using her background in marketing, e-commerce, SEO, web creation, graphic design, and her heart for the salon industry - Jen looks to elevate others. Jen is also a lifelong learner, a pursuit that has led her to join the 124Go Coaching and Consulting team. With 124Go, Jen has a greater opportunity to inspire and create strategies that will help you, your team, and your company achieve new milestones. Together, we get growing!
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