If your profit margin is less than 10%, it’s time. Learn how with our straightforward game plan.
There’s no getting around it: You can’t build a thriving salon without knowing how to change your prices.
But the process is a tricky one, requiring planning, people skills, and plenty of math. If you’re considering making a move but don’t quite know how to start, then you’re in the right place. This post is your go-to guide to price adjustments.
How to find the right time
The most obvious sign that you need to change how much you charge? You’re really busy. If your stylists are spending, on average, 85% of their time working on clients, then you’re past due for a pricing hike. But the booking rate isn’t the only benchmark you should consider. Is each stylist getting more than 130 appointments and eight new clients per month? Is the quarterly retention rate over 60%? If you’re hitting these numbers, it’s time to rethink your pricing strategy.
Economic shifts can also be a green light. Some salon owners see the coronavirus as an opportunity for a pricing makeover. While many are slashing fees, that may not be necessary: Consumers have been incredibly kind during this time. Your clients understand that you have endured government shutdowns, you’ve met rigorous sanitation standards, and that in many states, you’re still not allowed to operate at full capacity. So, if you decide to add a few dollars to their haircut, they’ll likely understand.
Finally, other factors aside, consider raising your prices every year because of inflation. Inflation — an increase in the cost of goods — generally goes up in the US by a few percentage points annually. It functions exactly like compound interest, but in reverse. If you don’t adjust your pricing to match, you can easily find your business in a difficult financial position.
How to make it happen
Once you’ve decided it’s time, you need to figure out how big the adjustment will be. If you haven’t already, this starts with calculating the cost of doing business, including your property bills, employee salaries, supplies costs, and so on. Add up all your monthly dues to see how much you need to keep the engine running. Then, compare that number to your revenue. If your profit margin is less than 10%, you should consider raising pricing to close the gap. But that’s just an average, and you can certainly set a higher target based on the confidence you have in your service.
Knowing where you want to be is (less than) half the battle. Implementation is the real challenge.
To guarantee a smooth rollout, you’re going to need to put together a smart communication plan. Write up a doc with all your channels — social, signage, email, etc. — and come up with a clear, concise, and confident message to guide communications on each. Don’t over-explain or apologize. Do thank your clients and staff.
Timing is everything here. The last thing you want to do is surprise customers with a bigger bill than they expected. To avoid sticker shock, experts recommend getting the word out one client cycle before making any changes. That means if you usually see your clients monthly, then your communication blast should go live one month before the changes are made.
Finally, brace yourself for the inevitable consequence of higher prices: losing customers. Small business expert Lauren Gartland explains:
Expect to lose about 10 percent of your clients. The upside? You need to lose them! 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.
Adjusting your pricing can be scary, but it’s completely manageable. Just see where you are, figure out where you want to be, and execute. You 100% got this.
FAQs:
What specific strategies can salon owners implement to minimize the potential loss of clients following a price adjustment?
Salon owners can implement several strategies to mitigate the loss of clients following a price adjustment. One approach is to communicate the reasons behind the adjustment transparently and proactively, emphasizing the value they continue to provide. Additionally, offering loyalty programs, special promotions, or bundled service packages can incentivize clients to stay. Moreover, focusing on enhancing the overall customer experience, such as providing exceptional service, personalized recommendations, and a welcoming atmosphere, can help retain clients despite the price increase.
Are there any additional considerations or best practices for communicating price changes to clients beyond what is mentioned in the article?
Beyond the suggestions provided in the article, salon owners should consider tailoring their communication approach to suit their specific clientele. This may involve conducting customer surveys or feedback sessions to understand client preferences and concerns regarding pricing changes. Moreover, utilizing various communication channels effectively, such as social media, email newsletters, in-salon signage, and direct communication with clients during appointments, can ensure comprehensive coverage and engagement. Additionally, offering flexibility in payment options or installment plans can alleviate immediate financial concerns for some clients.
How can salon owners accurately assess the potential impact of inflation on their pricing strategy, and what steps can they take to adjust prices accordingly over time?
To accurately assess the impact of inflation on their pricing strategy, salon owners should regularly review their cost structure, including expenses such as rent, utilities, employee salaries, and supplies. Conducting a comprehensive cost analysis enables them to determine the extent to which inflation affects their operating expenses and profit margins. Based on this assessment, salon owners can adjust their pricing strategy incrementally to account for inflationary pressures while remaining competitive in the market. Implementing transparent communication with clients regarding the rationale behind price adjustments due to inflation can help maintain trust and understanding. Additionally, monitoring market trends and competitor pricing can provide valuable insights into industry norms and inform pricing decisions over time.