In a discussion with a salon owner the other day, the subject of pricing came up. This particular salon owner hadn’t had a price increase for over five years. So, we asked her if her rent or utilities had gone up in that same time frame. Sure enough, the owner was paying a substantial amount more in costs than she had five years earlier. So why hadn’t she passed some of those cost increases along to her clients?
The problem with holding your prices for an extended period of time is that you reach a tipping point. This is where your prices and revenues remain the same, but your expenses continue to rise. At first, your revenues may be greater. But as your expenses rise, you reach a plateau. Eventually, your costs outweigh your revenues and you are now “tipping downwards,” on a slippery slope to mounting debts and business catastrophe.
Pricing is Magic
Finding the right price is the first step, but it’s only the first step. Inflation and your costs continue to move upwards either with you or without you. Every increase in inflation or costs means your prices and profits are going down. Pricing can never be static!
Too many salon owners set their prices out of fear. Then, they become boxed into “average” by their own pricing. They perceive their products and services as being ordinary. Here is what we see when salon owners are pricing their services: They find out what their peers are charging for their services and then build their price structure on what they see is going on in their community. This is unfortunately an industry norm that hurts everyone. For small business owners, there are typically three different, better ways to determine the prices you should set for your marketplace.