Putting together your price list

How do you know if you're getting the most out of the prices you're charging? Putting together a list that attracts a wide clientele and generates good business can be a difficult balancing act. It's not simply a case of poaching the prices of your nearest competitor or ensuring your outgoings are covered. There's a science behind price selection, and getting the formula right can work wonders for a salon's profit.Business coach Peter Lunn believes that there are many salons still struggling to achieve optimum pricing. "The majority of owners and managers underprice, basing their lists on the nearest competition and failing to assess their overheads accurately," he says. Peter believes that there are four key issues crucial to achieving a good turnover. "It's about time, experience, cost and market," he explains. "A salon will often devote the same amount of appointment time to a ladies' cut as it does to a gents', although a male cut is much quicker to achieve. This means salons are squandering too much costly time." Business coach David Drew, who has seen many salons make the same mistake, recommends breaking down the cost of appointment time. "Divide your weekly overheads into days, hours and minutes of trading, because time is what the industry sells. Once you have a figure per minute, you know what you need to charge just to cover overheads." Experience is also integral. It makes sense that skilled stylists should charge more for their time, although Peter warns against promoting staff too randomly. "Use stylists who have improved their skills and increased their clientele, regardless of the length of their career or service," he explains. London and Surrey salon owner Sean Hanna agrees that a successful price list should include graded fees. "It's crucial to a salon's profit. Not creating a different pricing structure would be like charging the same for a mini and a top-of-the-range Mercedes. There is no logic in having your most talented stylist charging the same as a junior who doesn't have a similar level of experience. That's a key factor in pricing." In Peter's experience, few salons take the time to break down the exact each cost of sale and the factors that go into it:

• VAT
• Wages allocation
• Stock cost
• Laundry services
• Overheads, such as heating and rent.

He recommends that:

• Wages should not be more than 50% of a salon's service cost
• 10% should be allocated to stock
• 2.5% to laundry
• 37.5% to cover overheads and creating profit.

"A lot of owners and managers don't have a realistic understanding of their overheads or know what their rent is in relation to their turnover," says Peter. "It pays to look more closely at the books. It's just a mathematical equation but one that is well worth learning." The final key to profitable pricing is to assess your market. Sean believes that mimicking the nearest competition is a common pitfall. "The mistake that most salons make is not pricing on the basis of cost or profit but on competitors' rates. If your overheads are higher than your neighbouring salon, you won't make a profit, whereas they will," he explains. It's a sentiment echoed by Peter. "Remember that your competitor might not be appealing to the same market, even if they are only two streets away. Use their charges as a benchmark for key services such as cut and blow-dries, but look at your own overheads and clientele first." Implementing a regular price increase is another hurdle. Peter and David both agree on the key strategies:

• Introduce price rises at 'feel good' times of year such as spring or autumn
• Give clients plenty of warning at least eight weeks before the changes are due.

"If you offer a value-for-money service, most clients will understand the need for an increase, but no one likes to be caught off guard when they get to the till," explains Peter. It's a method embraced by Sean, who increases his prices annually, creating leaflets that clients can pick up at reception. David advocates two lists, one for services and another for products. "Inform the client there will be a price review rather than an increase, bearing in mind that not all prices will necessarily go up. If your reviews happen regularly, the increase should be minimal enough for clients to feel comfortable". Peter is convinced that a combination of good maths and confidence will create a winning formula. "Hairdressers must not be afraid to charge the right price, because clients buy on satisfaction and value for money. They seek service, skill, knowledge and advice and if these needs are fulfilled, they'll return."