The love of money

Business coach Jessica Crane explains how to successfully introduce a price increase in your salon post-coronavirus lockdown with this four-step plan

As beauty salons across the UK gear up to reopen their doors to clients once coronavirus lockdown restrictions are lifted, there’s never been a better time to assess and get to grips with your business numbers. You need to work out your profit percentage on every treatment to ensure you can keep your business afloat during this time where social distancing measures mean you can only see a certain number of customers per day, followed by the extra added cost of essential PPE.

Salon consultant Jessica Crane reveals her four-step plan to successfully introducing a price increase in your salon post-lockdown and how to communicate this with clients.

1Get into the right mindset When you’re embarking on implementing a price increase, there are two critical steps that you need to master, the first being the mindset element. What feelings come up when you think about doing this? Do you feel resistant? Nervous? Happy? Worried? It’s important to figure out if it is positive or negative thoughts that are creeping in because you need to feel confident about your increase so your team get onboard with it too,” says Crane.

“Next, for you to feel empowered, knowledgeable and • When do I need to increase them? confident in your price increase strategy, you’ve got to “During the past few months of lockdown, your know what money blocks might be putting you off doing business finances will have drastically changed from what is essential for the business. A price increase has before, so you need to make sure you’re covering all your absolutely nothing to do with what your clients can or can’t outgoings – bills, loans, deferred bills, credit cards, stock afford, it has everything to do with your own fear about bills, payroll, etc. Hopefully, during this time of enforced what they think. You’re not there to judge what closure, the latter has been covered for money clients have to spend, they are perfectly capable of making that decision themselves. “There’s no denying that due to the coronavirus THE PROFIT EQUATION: most of you by the Government’s furlough scheme, but some may have been topping salaries up with that extra 20%,” she adds. situation some clients might have lost their jobs or business + stock + “You need to reassess your costs from be on a reduced income. However, if people are VAT/tax + your worth scratch to make sure you are factoring in all making appointments with your salon it is (wage) + profit = these changes to figure out what your because they’re choosing to – they can afford to treatment cost treatment prices will need to be when come. When you reopen, it’s important to focus you’re back in salon. Checking your on the hundreds of clients who are happy and numbers is something you should do regularly, examining accommodating to your price changes. Do not focus on them monthly to make sure everything is in check.” that one person who has commented negatively because it will have a knock-on effect on your confidence as you move forward.” 2 Understand why you’re making the change “The second part of doing a price increase is figuring out the how. It’s about really knowing 3 Work out what your profit needs to be To make sure you’re in the black when you reopen, Crane advises using this profit equation formula to assess what your price increase needs to be going forward to cover your current business costs: business + stock + VAT/tax + your worth (wage) + your numbers inside-out because educating yourself on profit = service/treatment cost. this is going to be the key to you and your team “Let’s start with the first part of the formula – business. implementing it,” she explains. There are three key You should know your business costs, every output from questions Crane says you should be able to answer before bills to buying tea and coffee supplies, so you you execute your price increase: understand what it costs you to open your doors every • How much do I need to increase my treatment prices by? day. You need to know this because if you’re going to do • Why do I need to increase them? a 60-minute treatment, then you need to know how much to factor in for the business costs for this; for

example, electricity and heating,” Crane explains.

“The next element to consider is stock. Product costs go up and down all the time. For example, you might have changed product houses this year or brought in a brand’s luxury range, so your bill would have gone up. You need to include the stock you’re using in treatment in your menu prices.

“The VAT/tax element of this equation is really important to include too, and it also explains why you can’t look at the salon down the road for ideas on how much to do your price increase by, because your businesses are completely different. For example, you might not be VAT registered, whereas the salon down the road could be on a 20% VAT rate, so to use them as a benchmark is like comparing apples with pears.”

Next, Crane says to factor in your worth – your wage for performing that treatment – including commission, before doing the last, and usually most forgotten element of the equation, profit. “I speak to so many clients who haven’t been factoring in profit, but if you don’t charge for profit

then you won’t make any. A profit percentage in your treatments will ensure that your business is profitable whatever the situation,” says Crane.

“I teach my clients to think about the bigger picture and then reverse engineer the whole process. If you want your salon to make £100,000 profit this year, then what do you need to do per day to reach that goal? Figure out how much profit each team member would need to make per month, then break that down to per week and then per day, so you understand what turnover you would need to make daily to achieve that goal, then adjust your prices accordingly. That’s how you reverse-engineer profit.”

4Don’t forget about the added

expense of PPE

“Sourcing PPE for staff can be expensive so you need to factor in this cost. The other thing you will need to consider is that you may only have half the trade you usually have coming in and out of your business when you reopen due to social-distancing measures. This means you’re going to be paying your staff a wage bill for potentially more whitespace in their column,” says Crane.

“Therefore, you may want to look at a temporary surcharge on top of your price increase because of these extra costs. The best way to do it is just to communicate clearly and honestly with clients so they thoroughly understand that this charge is for extra cleaning, PPE and everything else that’s required to work in a safe and socially distanced way, and as soon as these restrictions are lifted prices will go back to X.

“So, you may choose to have a temporary price increase, or you might have a permanent increase plus the surcharge. Choose what’s right for your business and your numbers. Remember, profit is not a luxury, it is essential to survival and gives you choices in business.” PB

Jessica Crane is a salon business and money coach. Watch her full webinar on “When is the best time to introduce a price increase in your salon” on PB’s YouTube channel.