[I should mention I have a degree in Business Administration. I am not a CEO or anything but I do "get" how business works and I believe it is something that nail technicians needs to understand and luckily I am also a nail technician and can speak "business" without putting you to sleep (I hope).]
Factors
What factors affect how you should price your services?
- Location
- Overhead costs
- Service timing
- Competition ("supply and demand")
- Technician qualifications (more training = higher prices)
- Customer Service & "extras"
Location
In business, as in real estate, it's all about location, location, location! You will not be able to charge the same prices in an inner city, lower middle class neighborhood as you can in a high-end day spa in an expensive suburb. But that doesn't mean that because the area doesn't warrant charging $100 for a full set of nails that you cannot charge what you are worth. Just take into account where you are located - you do not want to price yourself out of business!
Overhead
Even if you don't own a full fledged salon with employees and you work out of your home salon, there are still many costs associated with doing business besides just the cost of your products!
Taxes, rent, utilities, insurance, marketing, licensure and transportation are all overhead. Part of the overhead costs must be allocated to each service performed and must be adjusted annually.
Service Timing
Time equals money, its true. Setting your prices based solely on what someone else charges and not based on your time is setting yourself up for failure.
Decide how much money you need to make per hour. Lets say you need to pay yourself $20 per hour. This does not mean you price your 1 hour pedicure at $20! You need to make $20 after all of your other costs are taken into account.
Take your product cost - lets say $3 - and your overhead costs - lets say we figured out $12 per service for overhead - then the absolute minimum you can charge for a 1 hour pedicure is $35. Now if you think about the fact that being self employed means you pay extra in self-employment taxes, you might want to adjust your prices to account for that as well. If you do discounts or coupons you may want to pad your starting prices to help offset those. If you offer "free" extras then you need to add in a bit for that as well. Lets say we determine that we need to charge $40 for a 1 hour pedicure just to make $20 commission. So that means our 1 1/2 hour full set needs to be at least $60 and a half hour basic manicure needs to be $20. Make sense? Good because in my next post we are going to do some more math <evil grin>
**all numbers here are off the top of my head and not representative of anything other than an example**
Decide how much money you need to make per hour. Lets say you need to pay yourself $20 per hour. This does not mean you price your 1 hour pedicure at $20! You need to make $20 after all of your other costs are taken into account.
Take your product cost - lets say $3 - and your overhead costs - lets say we figured out $12 per service for overhead - then the absolute minimum you can charge for a 1 hour pedicure is $35. Now if you think about the fact that being self employed means you pay extra in self-employment taxes, you might want to adjust your prices to account for that as well. If you do discounts or coupons you may want to pad your starting prices to help offset those. If you offer "free" extras then you need to add in a bit for that as well. Lets say we determine that we need to charge $40 for a 1 hour pedicure just to make $20 commission. So that means our 1 1/2 hour full set needs to be at least $60 and a half hour basic manicure needs to be $20. Make sense? Good because in my next post we are going to do some more math <evil grin>
**all numbers here are off the top of my head and not representative of anything other than an example**
Competition
The goal of business is to make a profit. If the salon down the street is charging $15 for a full set of nails, that doesn't mean that you need to lower your prices to compete with them, especially if it means that you will not make a profit on that service. High volume salons make very little profit on each service - their strength is in quantity, not necessarily quality. Do not try to compete with them (unless that is your business plan). Instead, highlight other factors, like customer service.
The goal of business is to make a profit. If the salon down the street is charging $15 for a full set of nails, that doesn't mean that you need to lower your prices to compete with them, especially if it means that you will not make a profit on that service. High volume salons make very little profit on each service - their strength is in quantity, not necessarily quality. Do not try to compete with them (unless that is your business plan). Instead, highlight other factors, like customer service.
Tech Qualifications
In every industry, people with more training get more money. My sister is an auto mechanic - every time she goes to training and gets a certification - boom - she gets a $1 an hour raise. In the business world, people with Masters degrees make more money.
As a nail technician, any additional training, including trade shows, or certifications you obtain absolutely justify a higher cost for your services because you are more qualified at doing them. Have you set foot into the competition arena? If you have won or even placed second or third in a competition you are justified in raising your prices. Anything you do to raise your status and skills in the industry justifies charging more!
Customer Service & "Extras"
Not charging enough is a common problem for small businesses simply because they frequently find that their costs are higher than they anticipated or they are competing with much lower priced (and lower value) businesses. Many techs do have one advantage, though, and it’s one that justifies charging a higher price – service!
"I’d rather add on an upgrade to spoil my client than have to rush and fit in more people because I am not making enough. That’s not fair to anyone." ~ JESSICA MAHLER, Painted Red Nails, Osterville, Mass.
Clients must feel that they are getting “value” for their dollars spent. If a client has money to spend and could get a basic service or a service with "extras" included, they will opt for getting the "extras" every time. Who doesn't like "free"?
I know of people who offered free paraffin dips (product cost is minimal and clients can dip themselves) and one tech I know offers free basic French nails (white tips airbrushed - it literally took her less than a minute, she did not include pink or anything other than white airbrushed tips for free). Free nail art on one finger, guaranteed work for one week after a service, etc, etc. My point here is if you are offering "free" things then your prices should be set to cover those amenities (so they aren't really free, just built into the price). Its like a hotel - you get free soap and shampoo but do you really think they are free? Nope, they are built into the price of the room. Same concept.
The important thing here is you need to MARKET these things to make yourself stand out from the competition and justify your prices. One easy way to market your service is when someone asks the price of a full set of nails you answer, "My full sets are $60 and that includes a hand massage, free paraffin dip and free optional French upgrade and they are guaranteed for one week."
Some other things that can help you justify higher prices or selling above your competition. include:
- Satisfaction in handling customer complaints
- Knowledge of product or service
- Helpful and friendly staff (even if it's just you!)
- A convenient or exclusive location
- Exclusive merchandise (if you sell retail)
I hope this helped you think a bit more about pricing your services. Stay tuned for more posts on pricing coming soon...
Resources:
No comments:
Post a Comment