Ok Queens and Kings, here’s the final part of my service pricing extravaganza! Did you get all your other parts sorted out yet? Because this is the part that is really going to help you grow your business. Today, I’m talking about…
So far, all we’ve done is cover expenses. Yes, we need to pay those business and personal bills, but where does that leave us? Just breaking even. That’s it!
What about showing an actual profit? What about that new bed you want to buy? That cosmoglo light that you’ve been drooling over? If all you’ve done is pay the bills, how are you going to afford it?
To grow and build your business you will need to make a profit.
The average service markup in the beauty industry is between 7-15% added on to the total of all that I’ve talked about the past few weeks. Remember that whole formula that I kept repeating?
Product Cost + Overhead Cost + Hourly Wages + Business Profit = Service Price
Let’s recap what we had at the end of the last post. Using only 3 products, 2 overhead expenses and a guesstimated income need I got working service prices of: $38.02 (1.5hr fill) and $51.36 (2.5hr Full Set).
I’m going to go off the idea that you’ve already figured your product, overhead and hourly. Let’s say your actual total brings your Classic full set pricing to $100. I’m gonna go high for a change and use 15%
$100 + 15% = $115 Service Price
That $15.00 from each full set goes directly toward your business. This is what stays in your business bank account after the bills are paid and you’ve paid yourself. At only 3 full sets a week, that’s $45. That’s only 15 full sets a month, $225/mo or $2700/yr.
Now include your other 115 appointments, we’ll say 1hr fills, at half the price ($50+15%=$57.50, 115 appointments is $862/month or $10,344/yr).
You’re now at $13,044 in profit for the year AFTER you’ve paid all of your business expenses and paid yourself.
This is the money you use to invest in your business. Renovation, a change of space, researching new product, investing in new equipment and tools, advertising, a Christmas bonus to your employees, etc.
Without this percentage added on to your service pricing, your business will only ever just break even
Most banks will not take on the liability of loaning money to a business that cannot show a profit. No smart investor is likely to buy or buy into a business that doesn’t make money. So please don’t dismiss your potential by undercharging for your services or only charging enough to break even on what you’ve spent. You didn’t become your own boss to just break even.
Sure, it might drive you crazy for a few hours, getting all of this figured out! But once you’ve got it, you’ll have a much better understanding of how much you are spending and how much you need to charge for your services. That’s a great feeling!
As a business owner, You are in control of how you make money and how you choose to price yourself.
If you want to be the affordable local shop that your neighbors come to, that’s awesome! Please, be smart about how you do it though. Drop that profit percentage down to 7% and take a few years to save for the larger space. Or ditch the shoe budget and get by with last season’s comfy casuals. Don’t hit yourself where it is going to hurt, instead consider what you need vs what you want right now.
If you want to cater to the upper echelons, you may need to put more into your Marketing budget and decor. That money has to come from somewhere. It should not be coming out of your paycheck that buys your groceries.
I know the past few weeks have been rough. Nobody I know Loves to do the math, but it is something that we have to think about when we’re building a business. I hope there was something in this series to help you out!
Have questions? Ask away! I’m happy to help, if I can!
Have another way of calculating your costs? I’d love to hear them!
Comment, reach out on social media or Email me below!