At first glance beauty and maths don’t naturally sit side by side on the timetable, in fact one has been labelled fluffy, the other boring, yet neither could be further from the truth. They are actually helpful, necessary and invaluable lessons we should learn together. For the good of our business reputation, self-worth and profit margin. Maybe you just need a refresher on consumer-related calculus? An update on how to cover yourself financially now there’s extra PPE and appointment gaps to add to the equation? Or are you ready for a whole new way of showing your workings to make them work better and harder for you? Some simple sums and a few competitive calculations will ensure a healthier, more profitable business to take through 2020 and beyond…
The price is right
Money can be a touchy subject but it definitely doesn’t pay to be too British about your finances when wanting to go big in the beauty business. “Don’t charge more, charge right,” advises Rebecca Crawforth, owner of Navy Professional (navyprofessional.com). “With the impact of the pandemic we have been asked more than ever about how best to increase prices to cover for the additional PPE required. It’s actually very simple. As professionals we should be actively reviewing prices yearly and be prepared to tweak them to reflect the modern-day salon or mobile set up anyway.” And before you even get to the actual number crunching it’s important to understand the thinking behind the figures. Here’s our key five add it up considerations…
1. Understand pricing
“Pricing is the process of determining what a company will receive in exchange for its products and services,” explains beauty business expert, Liz McKeon (lizmckeon.com). “Pricing factors are manufacturing costs, market place, competition, market condition, brand and quality of product. A well-chosen price list should achieve the financial goals of the business aka profitability; fit the realities of the market, for example, will the clients buy at that price?; and support the businesses market positioning.” So in simple terms, an ‘optimum price’ factors in all your costs and maximises your margins while remaining an attractive option to your clients.
2. Master the market
“Find out how much clients will pay, as well as how much your competitors are charging,” suggests Liz. “Consider matching or beating their pricing. However, never just price match as standard, as you need to be sure all your running costs and overheads, both indirect and direct, are covered.” (More on that later). “Invest time and energy into adequate market research in order to know and understand your market. This will also give you confidence in your pricing strategy,” adds Liz. Consider doing mini customer questionnaires using simple tools like Surveymonkey.co.uk, you could even offer incentives like money off vouchers or samples to encourage them to take part so you know what they think of services and pricing.
3. Know your costs
“Include all costs - every single expenditure it takes to open your doors and keep the show on the road,” says Liz. You will know some – things like kit, insurance, wages, utility bills, business rates and rent, but a good way to ensure you’ve covered absolutely everything is to keep a weekly services diary for a month and note down every single spend. Reflect on this regularly. “Once you have this, add all these costs together and divide by volume of services required to produce a daily and weekly break-even figure,” continues Liz. “If necessary, ask your accountant to assist you. It is critical to know your numbers.”
4. Consider cost plus pricing
“Add a margin or mark-up to your break even point,” says Liz. “This is usually expressed as a percentage of break even. If the price looks too high, trim your costs and reduce your pricing accordingly. Include the value of your time in pricing: your time is valuable and you need to include it when calculating your prices.”
5. Prep your positioning
For financial, not to mention marketing reasons, you have to know where your salon or mobile set up stands in the geographical area in which you work. Keep an eye on this monthly, using social media feeds like Facebook and Instagram, to see what other beauty pros are up to in terms of offers to openings and price lists. “Service positioning is the unique identity of a set up in a competitive market,” confirms Liz. “A valuable position serves client needs and allows you to stand out from the crowd. In a way that in itself has meaning to clients, enabling you to charge more. Clients are not always looking for the lowest prices; they want the best services with the best therapists.” Own what you do, do it to the best of your ability and the pricing and profits will all fall into place.
Show your workings
You’re up to date on the business of prices, costs and profits, now it’s time to get it all down on paper using a couple of simple steps we have devised with the help of Navy Tool’s Rebecca…
Step One: Considerations when your setting your prices
Make a note of ALL of the below…
- Cost of products; this should include everything from cotton wool to wax strips
- Cost of premises; this should include any rent payable, including heating and lighting of the premises
- Cost of your time; this includes the time the treatment takes to complete and journey times if mobile
- Professional Costs; this includes insurance, accountancy fees and marketing markups
- Further training and development; this includes further education and product training costs
Step Two: Understand this service costings example
This example is based on a one-hour gel polish treatment, but can be edited to suit any service from tanning to waxing, cuts to colours and facials to massages…
Step Three: Do it yourself
Here is a blank table for you to use for every one of your services carried out by yourself or anyone, at any level working for you. It is a super simple task to carry out and will give you a better understanding of your business and more importantly your time.
Once you’ve mastered the main maths consider our experts top tips to ensure you keep learning and earning…
Turn lockdown around
“Pricing post lockdown is a major consideration,’ says Liz. “Every challenge brings opportunities. For example, re-opening is an opportunity for a 2020 price increase, especially if this should have been implemented at the start of the year. If your business doesn't require a price increase, then consider including a sur-charge to cover the costs of PPE and the new turnaround time required. Revisit your pricing, meet with your suppliers and accountant to ensure that all your services are profitable, as every single client must now have a positive financial impact on your bottom line.”
Own your service prices
As a professional are you afraid to publish your prices online for all to see? “When someone comments on our pictures asking "How much?", why do we automatically respond, "DM me"?” asks Rebecca. “Why do we find it hard to respond to these questions publicly? Who are we hiding from? My theory is that perhaps we charge our clients all different prices and don’t want to put people off.” However, it is totally normal for beauty, hair and wellbeing professionals to have one price for loyal, long-term clients and other prices for new customers. Maybe now is the time to start owning our prices and sharing them clearly, after all we have calculated them to be the best for our business and our clients, meaning everyone is getting the most value out of the whole system. “My top tip is when posting your examples of your work on social media, add a service list with prices. This will let the customer know exactly how much you are charging while showing them why your time and skills are worth it via the picture. Mainly, this will eliminate any awkwardness regarding money and show confidence,” concludes Rebecca.
Keep clients clued up on changes
Regular and good clients are invaluable to us and we need to keep them on side so how do we tell clients about price increases and avoid the cold shoulder? Rebecca suggests;
- Give them notice
- Don’t jump up too quickly, do it annually
- Ensure you’re clear in your terms of service that increases are likely
- Be clear and don’t feel obliged to have to explain yourself, if your customer values your skill set it will not be an issue
- Give the best customer experience showing you are worth every penny at all times
Words by Carly Hobbs