Business Basics: Inflation, Cost of Living Index, and more fun stuff.

It is important to understand that what you charge for nails will be unique to YOU.  We already talked about pricing services and figuring out your own prices, but lets be honest, not everyone in the beauty industry is interested in the hard business skills - how many of you actually have sat down and done the math??  Yep, thought so. Well, I hate to tell you but there is more math in this article :)

Once you have been in the business for awhile, you will find that you will need to raise your prices. Yes, you will.  If you are not raising your prices each year or two, you are effectively taking a pay cut because of inflation. And if you move to a new city your prices need to be adjusted because of the local consumer price index (a.k.a. cost of living index)

When I started doing nails 15+ years ago in Midwest small-town USA, I charged $45 for a full set (of which I made 50% commission - about $15 per hour with an hour and a half full set).  After 15 years of inflation that price should be $62.28 minimum - and actually it should be more because my skills and training would have increased my prices.  (Try this nifty inflation calculator).

Now, taking the fact that if I was still in Midwest Small Town USA I should be charging $62.28 and the fact that I now live in Midwest Big City USA, which has a higher consumer price index, I should be charging a minimum of $69.83 for my full set just to equal the $45 I charged when I was starting out.

If you want to figure this out yourself:
Take the base price ($45)
Use the inflation calculator to get your current price ($62.28)
If you have moved to a new location or are just curious about what people should charge in other parts of the US to get the same buying power as what you charge, you would take the cost of living index (COLI) of your new location, divide by the COLI of your old location and then multiply that by your service price.
111/99 = 112.1
112.1*$62.28 = $79.83

If I was in Manhattan (New York City), I would have to charge $138.21 just to equal the buying power of $62.28 in Midwest small town USA.  Pretty mind boggling when you think about it!




References:
http://www.bls.gov/cpi/
http://www.usinflationcalculator.com/
http://www.bls.gov/data/inflation_calculator.htm
http://money.cnn.com/calculator/pf/cost-of-living/index.html
https://www.coli.org/