Money Matters

How to Raise Your Prices

All you have to sell are your time and your service. Have the confidence to raise your prices, back them with education, and know you’re worth it.

How much do you charge for a full set of acrylics? What about a natural manicure?

Does your pricing structure cover all of your costs and allow you a healthy profit? Is there profit built in to allow you to expand or remodel your salon if necessary? And, beyond that, do your prices accurately reflect the value of your time? Keep in mind the hours and money you’ve devoted for continuing your education to make each service the best it can be for your clients.

If you think it’s time to raise your prices, but fear doing so will drive your clients away, read on to learn the systems the experts use in their pricing strategies and the attitude that translates into business success and peace of mind.

When, How, How Much?

Before you consider when and how to raise your prices, you’ll want to evaluate your current pricing structure to see if you’re covering your costs.

Jerry Gordon, owner of J. Gordon Designs Ltd. In Chicago, offers a formula for determining whether your prices are in the ballpark. “Your minimum service price needs to equal 15 times your cost of supplies,” recommends Gordon. “For example, if you pay $1for supplies for a natural nail manicure, then the minimum you can charge for that service is $15.”

Once you’ve assured that your base prices are on track, and then you can plan a price increase. The simplest system for raising your prices is based on the principle of supply and demand, according to Michael Cole, industry educator and president of Salon Development Corporation in St. Paul, Minn. Use the chart below to understand when to raise y our prices. Your final goal is to raise prices by 20% through several accomplishments: increasing your referrals, total number of clients, and retail dollars spent. [Chart courtesy of Michael Cole, Salon Development Corp.]


WEEKLY GOALS
LEVEL 1 LEVEL 2 LEVEL 3
REPEAT/REQUEST
10 18 29
REFERRALS/WEEK 2-4 3-5 4-5
NEW (SALON)
10 7 3
TOTAL CLIENTS/WEEK
24 30 36+
SERVICE TOTAL
30-35 45-55 55-70
RETAIL DOLLARS/CLIENT
$3 $3.50 $4
TIME 6-9 months 9-12 months 9-12 months
PRICE 20% increase 20% increase 20% increase

 

 “What you’re selling is time, so we suggest that you tie raising your prices to [the number of] repeat clients, request rate, and service bookings,” says Cole (see chart entitled “Pricing for Supply and Demand”).

According to Cole, if you are a full-time, established nail technician, you will want to see a minimum of 36 clients per week with at least 29 of those clients being repeat customers (follow Level 3 on the chart). In addition, you’ll better parking and a safer neighborhood, so clients didn’t mind the increase,” says Griggs.

To make the increase more palatable, Griggs offered her old clients a 10% discount for their first three visits after the increase took effect. On the customer tickets, she wrote the new price (to familiarize them with it), then deducted 10%. By the time they were charged the new, full price, they were used to it.

“We followed the same procedure when we purchased a deluxe pedicure unit,” says Griggs, “ I raised our $25 pedicure price and gave our regular pedicure clients tow $5 coupons. Our pedicurist trained to use the new system so she’s worth more”

“Raising your prices should be tied directly to education,” says Corie Lefkowitz, a nail technician at Mark Frank Salon in Beachwood, Ohio. “Whenever you attend a workshop, I recommend displaying your certificate and raising your prices $5 per set,” says Lefkowitz. “You can charge $65 per set even if the salon downs the street charges $29 if you have the education, the sanitation practices, and the professionalism to back it up.”

Griggs also recommends telling your clients personally the increase at least two visits in advance. (That means your raises must be well-planned.)

“Post a sign, too, but your clients will appreciate your letting them know in person.” She says “When you’re up front about the increase, they won’t object.”

When to Say When

“I’ll only raise prices two times during the year—during the fourth quarter or when I’ve had a cost increase,” says Gordon. “If you raise your clients are captive for the holidays.” Gordon recommends never raising prices in January or any time when it’s particularly difficult to get clients.

Gordon also recommends staggering price increases. For example, during the first week of a planned increase, raise the price of your natural manicures for all your nail technicians. Then, 10 days later, increase the price for wraps or acrylics.

As with everything, there are exceptions to these timing rules. Says Gordon, “If your costs increase, raise your prices immediately no matter what time of year it occurs. If you’re still hesitant to raise your prices, consider this: Your product costs are going up constantly and so are your taxes.”

According to Cole, the only real way to give yourself a raise is to raise your prices; altering your commission percentage won’t do the trick. “A 20% raise in price equals a 20% raise for the nail technician and a 20% gross increase for the salon.” says Cole. On the other hand, Cole adds, a 5% raise in commission equals a 5% reduction in gross salon profit, a process he likes to call “growing broke.” What that means is the more a nail technician’s clientele grows, the more the salon loses proportionately off the bottom line.

“While raising your prices might be difficult at first, in the long run you’ll gain confidence,” says Lefkowitz. “When you’re raising your prices regularly, you know you must offer the best possible service at all times. When you do, you’re worth it”

The Hidden Cost of Doing Business  

There are so many intangible costs of doing business that clients cannot see, but that contribute to the prices you need to put on your service. And, don’t forget, your prices not only need to cover your expenses, they need to provide you with a motivating profit to stay in business and to continue to grow.

  • Have you remembered to factor in these items?
  • Do you provide your employees an incentive to sell retail?
  • Do you purchase your products from a professional-only distributor?
  • Do you go to trade shows regularly? Attend classes?
  • Do you go to trade shows regularly? Attend classes?
  • Do you augment your education with business classes?
  • Do you conduct additional employee training for new hires?
  • Do you pay for employees to compete in nail competitions?
  • Do you subscribe to trade and business publications that keep you ahead of style and business news?
  • Does your fill price include additional charges for broken nails and corrective work?
  • Are your extension prices all close in amount (regardless of the supply cost to you) to discourage a client from choosing a service based solely on price?
  • Do you guarantee your work if the clients keeps up with appointments?

 

The Right Attitude

According to Michael Cole, there are four attitudes to incorporate into your salon that will help everyone feel comfortable about raising prices.

Losing Clients Is Good

“If you don’t have the opportunity to make more money from requests and referrals, you need to lose some of your clientele to free up your time for those who are willing to pay more for it” says Cole. “The most you’ll lose from raising prices is the bottom 10%--those who are not willing to pay you what you are worth.” Cole is quick to add, however, that losing clients is bad if it’s because of poor service.

Referrals Are Important Your goal of four to five new referrals per week will more than make up for the clients you lose. As an added bonus, the new clients are not used to paying your old prices, so they’ll have no problem with your higher prices. “Think, ‘Referrals allow me to raise my prices without feeling any loss,” says Cole. “That’s why you go the extra mile to reward your repeat clients for sending referrals to you.”

Ventilated Clientele Is Healthy

If you’re not turning 10% of your clientele per year, chances are you’re going to get burned out psychologically, according to Cole. “The worst thing you can have is a two- or three-week waiting list because that means you’re giving the same services to the same clients at the same prices every week,” he adds. “It also means that you aren’t growing to your full potential.”

Professional Friendships

But not personal friendships,” says Cole. “To keep prices artificially low because you’re personal friends with your clients is to break the natural law of supply and demand.” That means, Cole says, you are punishing yourself, your business, and your children.

 

Jayne Morehouse, former editor of American Salon, is now president and creative director of Morehouse Communications Inc., a Cleveland-based company specializing in the beauty and health care industries.   

 

Keywords:   service pricing  



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