4. How to determine costs and pricing for Salons & Spas?
Start-up costs
“Start up cost is a very variable issue as we have seen some very up market salons costing in excess of R1million and some salons put up for just a few thousand rand (at home or informally)”, explains Wille Pietersen, President, Employers Organisation for Hairdressers, Cosmetology and Beauty (EOHCB).
Pricing
Another important part of your salon development plan is the appropriate pricing of your services. Set prices too high, and you’ll limit the number of people who can afford them; set them too low and you’ll limit your profit potential and possibly put the business at risk. Of course, the price the market will bear is very much dependent on the demographics of your service area.
If you’re in an upscale area with larger homes occupied by people with more disposable income, you can price your services accordingly and even offer high-end spa services. But if the surrounding community is peopled by young working families, you’ll have to forego the spa services (or offer no more than the bare minimum) and concentrate instead on basic haircutting and color services that are affordably priced.
When setting prices, you must consider the three factors that will influence your prices: labour and supplies, overhead, and profit.
Labour costs for salons include salary and benefits costs for both your stylist/spa staff and administrative people (including your manager, receptionist and other support staff). Your own salary is included as a part of this cost.
This cost is generally expressed as a price per hour and can vary depending on the amount of time it takes your employees to cut hair or perform other services. Next, you need to consider your overhead costs, which consist of all costs required to operate the business other than labour.
This includes your lease or rent, utilities, and so on. It’s reasonable to estimate that your overhead will be from 40 to 50 % of your labor and materials cost. (This figure can be adjusted later as you accumulate financial data.) So let’s say when you tally up all your labour and materials costs for the year, you arrive at a figure of R300 000. Your estimated overhead expenses (at 45%) would be R135 000.
The last part of the pricing equation is profit. Salon owners generally can expect to have a net profit of 11 to 15 percent (although you can certainly make this profit figure higher or lower as you see fit). To arrive at the net profit you want, you have to add a markup percentage factor to your services so you’ll arrive at the approximate gross amount you’ll earn.
On the hair salon side, the most sought-after service is, of course, haircutting and styling. This includes everything from styles created with a blow dryer, curling iron or hand scrunching to tried-and-true roller/dryer sets for the “mature” clientele. Popular colour services include highlighting, tints, corrective colouring and hair and scalp treatments. Texture services include permanent waves and anti-curl treatments.
Braiding and extensions, which has made a strong comeback falls into a category of its own. Finally, special occasion hairstyling, for events like Matric dances and weddings, round out the typical hair services menu.
Although technically it’s an aesthetic service, nail and foot care is often offered in hair salons. Nail services include:
- Manicures (both traditional and French manicures)
- Pedicures
- Acrylic nail application
- Nail tipping
- Paraffin treatments
- Skin exfoliation and hand/foot massage are often part of the manicure and pedicure processes.
Whether you offer nail services is entirely dependent on the size of your salon and whether you can afford both the equipment and the salary of a nail technician at the outset. Today’s nail client is used to visiting shops devoted only to nail services, so she won’t be surprised if you don’t offer manicures, acrylic nails and tipping.
But you may be able to get her to leave her regular manicurist if she sees that you’re offering the same service at your cool new salon. At the very least, you should offer haircuts and styling, basic perms, straightening treatments and highlighting.