Setting Salon Pricing

Setting Salon Pricing

As hairdressers, we thrive on making people happy. We absolutely live for the opportunity to help others look and feel their very best. It’s why we got into this industry in the first place and why we get up in the morning and head to the salon, spending hours on our feet cutting, coloring, blow-drying, and styling hair to no end. Let’s admit it, we love it!

However, our talent and love for creating beauty are often met with a lack of clear understanding on the business side. As artists, we tend to take things personally and can have a hard time asking for the compensation that we deserve in exchange for our time and effort. In reality, without proper compensation, there is little hope of a business surviving, at least not for long.

Whether you are a new multi-chair salon owner, a solo artist or a booth or salon suite renter, the following suggestions should help get you started with pricing. And if you are an established business owner, it never hurts to do a pricing checkup. With that in mind, here’s what we suggest:

Alive & Breathing

Start by thinking of your business as a living, breathing entity that has to be fed to survive, let alone flourish. In order to feed your always-hungry business, it’s vital to separate your creative or emotional side from the business side. Begin by coming to terms with the fact that everything in your business comes down to increments of time. And since time is money, you need to charge enough for all services to keep the business alive let alone allow it to grow.

Increments of Time

To figure out what you need to be charging, start with a base understanding of the increments of time mentioned above. If for example, a men’s haircut typically takes a half hour of time, there needs to be a value attached to that service. For services such as color or a straightening treatment, the pricing needs to reflect how much time it typically takes to perform that service plus the direct cost of the chemicals.

Base Needs

To figure the hourly billing rate needed to sustain your business, calculate your monthly overhead expenses for your business including rent, business insurance, utilities, towel service, wages, etc., and then divide that amount by the number of operational or manned hair stations in your salon. The total is your per station amount needed just to cover your base overhead.

Divide that number again by the average number of hours a station is manned per month. If each station is manned by one stylist, and that stylist works 40 hours a week, that averages out to 173 hours per month. Divide the per station / per month total by the average billable hours per month (in the example above 173), and then you will be left with a base hourly rate per station.

But Wait!

Now, refigure this hourly rate taking federal, state and local taxes into consideration. Add any commissions for that hour for the average service being performed and then top it off with an additional 20-30 percent for profit. That figure is your starting point for pricing for an hour of service for each station. Anything more is icing on the cake and anything less is costing you. Yes, you read that right; you are paying to have other people take advantage of your services. Basically your rates are causing your business to starve to death.

Reality Check

Not sure if your rates are realistic? Compare them to that of several other equivalent salons in your area. If your prices are lower, consider raising them over time to meet your competition. We don’t suggest doing it all at once as it will send clients into shock. However, if your calculated rates are much higher than others in your area, double check your math, expand the radius for comparable salons and re-run your numbers. If the prices are still too high for your area, or even more so, what your clients will pay, it’s time to find ways to trim expenditures and or make better use of each station.

Getting Help

Naturally we suggest having your CPA help run the numbers for you. It will be well worth the cost of their consultation to help set your salon on the right path.

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