Pricing for Profit | Ruth Lundstrom

March 26, 2024

Ruth Lundstrom discusses the key issues around pricing.

As a freelance hairstylist, setting your pricing can be a daunting task. We usually start out assuming that our local competitors are correctly charging ‘the going rate’, so we position ourselves somewhere around their prices.

There is, however, a huge problem with this approach – what if everyone priced themselves using the same method? That would mean no one has actually priced themselves based on anything other than a figure plucked from thin air.

Why is that a problem though?
Well, the foundations of pricing are a mathematical formula. At a very basic level, your prices must cover certain costs that your business is going to incur on a daily, weekly, monthly and yearly basis. If you wish to make a

sustainable career or business in this industry, then it’s vital to understand not only the costs of running your business, but also your own value as a stylist.

First, let’s talk about the costs of running your business. It’s important to factor in not just the cost of your materials (colour, foil, toner, developer, shampoo, etc.), but also other expenses such as travel, chair/studio rent, education subscriptions, phone bills, marketing, and accountant fees.

You’ll also want to consider the amount of time it takes you to complete a service, as well as any time spent on client consultations. As foreign as that may sound to you, factoring in time for consultations is not only necessary but key for you to stay in profit. Whatever time you spend in the salon needs to be paid for. Time really is money in the salon; every minute counts.

Once you have a thorough understanding of your costs, it’s important to consider your VALUE as a stylist. This may go beyond just technical skills and can include things like your experience, education or the convenience of having services done in a client’s home. Perhaps you offer 1-2-1 private appointments – these used to be a luxury of the rich and famous, however post-pandemic it’s almost become standard. It is, however, not standard! Private 1-2-1 appointments ARE an exclusive experience. These things add immense value and should be reflected in your rates.

So, how do you set your rates?
The best way to calculate a base rate is to factor in what your hourly operational costs are, and then add the product cost and percentage profit on top. For example, if your salon running costs are £25ph and your wage is £25ph, a 2-hour colour service with a product cost of £30 would be priced at £130 + your profit margin. Example £130 + 20% profit = £156.

This should be the bare minimum you charge.

From here, you can think about charging more if this particular service is something you are a specialist in, so people aren’t just paying for the cost to deliver, but they’re paying for your experience, skills and expertise.

Why do I need to add a profit to my rates though? Isn’t that unfair to clients?
Absolutely not. Here is why you need to factor in a profit: sick pay, holiday pay, new tools, repairs to the studio/salon, unexpected bills that crop up and education/upskilling – just to name a few!

Profit is the financial cushion that will keep you open and sustain your business should you hit a quiet period or – as we know all too well – we are forced to close due to a pandemic. It’s there to catch you when you need it. And if you don’t need it, then it’s there to buy the margaritas on the Christmas night out!

It’s also worth taking the psychology of pricing into consideration. Prices communicate a lot before your client even contacts you. They place a certain expectation on a product or service. What do you expect from a £50 handbag versus a £5000 handbag?

It’s important that you regularly evaluate and adjust your rates as needed; your prices should alter as your skills and experience grow, not just when the price of a tube of colour increases. It’s important to regularly evaluate and adjust your rates as needed to stay profitable and to build a sustainable career and business.

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