In case you missed part 1, I’m including the same intro for the whole series. Ok, so I want these first couple paragraphs to really stick in your brain too! It’s important!
I want every lash artist out there to be successful. You can’t be a success if you are undercutting yourself.
So many lash artists today are starting out with no business experience. While this can be great, as there are no bad habits to unlearn, it can also put a new artist at a disadvantage when it comes to making their business successful.
Not knowing how to price services is a hot topic in many groups and forums. The worst advice I see, on a daily basis, is to charge what others in your area charge.
No! No, no, just… NO!
You are not them. You do not have the same expenses that they do, you likely don’t use all of the same products or have the same amount of space or the same advertising costs, or the same service timing. About the only thing you can guarantee about Judy down the street is that you both pay the same amount at Starbucks.
So why would you price your services to cover costs you don’t have or worse Not cover costs that you have and Judy doesn’t?
The first question you should be asking yourself is…
How much does it cost me to perform this service?
What goes into a Service Price?
There is much more invested in a service than your time and the products that touch the client. There is equipment and tool costs, there are cleaning supplies, there are utilities, there is insurance and licensing cost, not to mention the money you spent on training to offer this service and advertising to get that client through the door.
All of those things factor into your service pricing. My basic calculation is:
Product Cost + Overhead Costs + Hourly Wage + Business Profit = Service Price
Each of these must be calculated for each and every service, because it’s not the same for all services. Today I’m focusing on the most forgotten part of services. Overhead.
Overhead includes everything from your tweezers to…
…the snuggly blanket on your bed to the mop you use to clean your floor to the heat and the electricity that keeps your ring light going strong! You pay for all of those things to provide great service!
Equipment and Furnishings
Things like linens, tools and equipment need to be accounted for and those can last for years.
So how long do you estimate you will use this piece of equipment before you need to upgrade? 5yrs? 10yrs? 3months? The cost of these items needs to be broken down into something managable. I’m gonna stick with 5yrs (60months) for this one:
Cost of item ÷ 60 month lifespan = monthly expense.
A treatment table, for instance. $350÷60=$5.83 is the monthly expense over a 5yr period.
Now we can break that down for services. How many services Are You Able to book per month? Remember, we’re doing this for each service, so I’m going to use a standard 40hr work week and 1hour fills. I “could do” 130 1 hr fills in that time, assuming I took a 1hr lunch break every day. Yeah, I know….the Fantasy, right?!?!
Monthly expense ÷ #of available appointments per month.
Same table from above: $5.83 ÷ 130 appts. = $0.05
That doesn’t seem like much does it, 5 cents? But that’s only one equipment expense. Now you need to do the rest of them.
You have monthly expenses that factor into providing your services. Even if you work from home, you have those expenses for your business and any good accountant will make sure you’re getting deductions for them! Rent/mortgage, utilities, phone, internet, , web hosting, insurance, licensing. All of those things are required for you to provide services to your clients!
Don’t make the mistake that because you pay a bill monthly or annually that it isn’t part of the service! It most definitely IS!
Utilities are a bit different. You may need a month or so to accurately incorporate this cost, but you can estimate by using last year’s bills to gauge what your costs were. If you are renting/buying a space, ask the landlord or the utility company for last year’s averages.
How does last year’s usage compare to this year? Do you need to up your prices by 5% to pay that bill?
Monthly bill ÷ average number of appointments per month.
We’ll use that 130 from above again and say $200 was the highest month of usage from last year for electric.
$200÷130=$1.54 per service
Make sense? Now do it for alllll of your other utilities and monthly expenses!
Booking platforms and payment processors with monthly membership costs are expenses that should factor in, too. These are conveniences for your client. Do not include transaction fees. These are expenses that it is illegal to pass on to the client in the US and Canada. The IRS or CRA will not be happy with you.
Things like licenses or professional group memberships are fixed annual prices that can be calculated the same way. Just divide the annual cost by 12 months first.
Marketing expenses and software come to mind. Did you buy a program like FaceTune to make sure your clients look fab when you post their images online? That is a service to your client as well as yourself! Do you pay to advertise on Google, FaceBook or IG? Do you have business cards? Brochures? Aftercare cards?
Everyone should calculate an annual or monthly budget for Marketing Expenses and one for Miscellaneous Expenses or Petty Cash. If your Marketing budget for the month is set to $500, scroll right back up and calculate it out! If you haven’t done it yet…start adding up those receipts!
Setting a specific budget not only allows you to calculate what you’re adding to service pricing. It also allows you to manage your money and not overspend where you don’t need to. You’ve reached your $200 limit for Misc. this month? Maybe wait until next month to get that cool new set of filters.
So there is another $1.59 from only 2 more items to add to last week’s totals of $2.06 or $2.89, bringing us up to $3.65 (fill) and $4.48 (full set).
Here’s a general list of Overhead Expenses to consider:
- Rent/Mortgage Percentage
- Electric Bill
- Water Bill
- Phone Bill
- License and Permit Renewals
- Equipment (light, bed, storage, disinfecting tray, broom, mop, computer/tablet/phone, your chair)
- Implements/Tools (tweezers, scissors)
- Decor (linens, candles, air fresheners, plants, client chairs, wall art, etc.)
- Office supplies (pens, clipboards, forms, post-its, etc.)
- Marketing and Advertising
Stuff You May Not Think Of
- Booking System
- Payment Processor
- Client Entertainment (Spotify membership)
- Product Shipping Costs
- Additional Training
- Domain Names
- Web Hosting
- Security Systems
- Travel Budget (if mobile, when teaching other than your regular business space or attending conferences and trade shows regularly to learn new skills)
More “things” than you expected? Each and every item listed above is either an essential to provide a service or improves the overall client experience.
Some of these items may only be a single penny in the actual cost of a service, but believe me, those pennies add up. A measly 10cents per service can be the difference between splurging on that new light you really, really want and not being able to get gas next week. Especially when you’re first starting out.
How many of these overhead expenses factored in to your service pricing?
Things you factor in that I forgot to mention?
I’d love to hear from you! Comment, reach out on social media or email me below!
Next week is the big one! Part 3 is all about Paying Yourself!!