Deciding how and when to raise your salon prices can be difficult. In today's economy, many salon professionals rely on price increases to cover the rising costs associated with running their salon business. And if you're considering raising your prices, we encourage you to keep reading to learn how the 4E's: Economy, Education, Experience, & Economics often indicate if you're in an ideal position to raise your salon prices.
Do you follow Industry Speaker @dawnbradleyhair? If you do, then you might already be familiar with the 4E's in addition to Dawn's philosophy that knowing your business costs is the most important component of setting and raising your prices. But you should only raise your prices if the 4E's are well balanced. So, let's dive more into each "E":
The most crucial factor to consider before even thinking about raising your prices is the condition of the economy. Is the current state of the economy strong or slow?
According to smallbusiness.chron.com, if the economy is strong, disposable income is high and consumer confidence prompts people to pump their money back into the economy through purchase of essential and nonessential goods and services. Therefore, salon clients are more likely to accept your price increase with less push back when the economy is in an upswing.
When the economy is slow, just the opposite happens, consumers fear the financial effects of a poor economy so they're cautious about spending money on nonessential goods and services. In turn, salon clients will be less likely to pay more money for hair services, so we highly suggest to hold off on raising your prices during these times.
Have you taken any new classes within the last year that sets you apart from your competitors? Do clients seek out your chair weeks in advance because you specialize in a specific hair service (e.g., color correction, extension techniques, precision cuts)? If you answered yes, this is an indicator that you should raise your prices. That doesn't mean that you must charge this new price immediately, but it gives you an idea that you're in a good position to start charging the correct value that your talents are worth.
Never justify raising your salon prices solely on the amount of years you've been doing hair in the industry. Experience extends further than seniority behind the chair; and seniority doesn't always equal earning more money.
Regardless of how many years you've been licensed, clients are more inclined to accept the news of a price increase when they're able to see your experiences show up in your work. For instance, maybe you do beautiful hair in 45 minutes, but you've mastered this skill because you have exposure styling on stage at industry events, or you teach in-salon classes. These types of experiences add to your brand value. And when your brand value increases, your salon prices should too!
For the simplicity of this blog, economics refers to supply and demand. Supply is the amount of something, such as a product or service, that a market has available. Demand is the amount of the product or service that buyers want to purchase. If demand increases and supply remains unchanged, then this leads to higher prices and quantity. If demand decreases and supply remains unchanged, then it leads to lower price and quantity.
So, how does supply and demand help determine if you should raise your prices? It really depends on your location. For example, if you're a stylist residing in a populated metropolitan area such as Atlanta, Chicago, NYC, or Los Angeles there are thousands of hair salons and hairstylists in your market offering similar services at various price points. It's not uncommon to see several salons located on the same city block (only a few hundred feet apart), or salon suites being built at a rapid pace. Due to such trends, salon markets in metro areas are often saturated, which means supply is higher than demand; making it very easy for clients to seek new services, visit new salons, and book with competitors. So, ask yourself:
- What are the average salon rates in my area? Am I charging too low or too high?
- If I raise my prices can I still compete with stylist in my economy/market?
Now let's look at the effects of supply and demand when a stylist works in less populated regions, like small towns or rural areas. These areas are often in higher demand by new and existing clients due to the limited number of stylists and salons available. That said, if you provide quality salon services and have strong retention rates; at least 80% requested, 80% booked, and 70% retention, then you should definitely consider raising your prices.
So, will you be announcing your new prices soon? Here's a few closing questions Dawn Bradley would have you answer to determine if you're in a good position to confidently raise your prices:
- Am I fully booked up at least 2-3 weeks in advance?
- Have my bills inflated? (If you're still charging the same but your bills have gone up, you're taking home less)
- Have I taken some new classes this year?
- What kind of new experiences and exposure have I had this year?
Feeling confident? Click here to learn how to tell your clients that your prices are raising!
Design Essentials wants to give a HUGE THANK YOU to Dawn Bradley for coaching our DE Educators on how to become a '6-Figure Stylist STRESS FREE' at this years MRL Annual Sales & Education Conference. We truly enjoyed your candid transparency regarding industry demands and showing us how to leverage financial opportunities to make more money without working more!
Should I Raise My Prices?