Costing a Service
Guidelines
An important element in managing a salon or barbershop is creating the right pricing strategy. Getting this right is the balance essential to attracting your ideal client and you reaching your business profitability goals.
Determining prices in your salon or barbershop requires a basic understanding of your financial and business goals.
Pricing a service is not easy because skills are difficult to measure, and costs vary according to position and size of the business and your team.
You should know what your breakeven point is on the services offered, this is an important part of running a salon/barbershop as it allows you to charge out the services correctly.
The following three cost elements are important to be able to define and record as accurately as possible so that you clearly know your costs and can then price how much you need to be charging for your services to make your business profitable and sustainable.
Material Costs
These costs are linked to the purchase of products needed for the delivery of in-premise services as well as the stock of products available for retailing to your clients.
Overall Costs
All of the following things contribute to your businesses ‘overall costs’ and should be reviewed regularly and checked to see if there are better options available.
Depreciation, petty cash, advertising, repairs and maintenance, company car, electricity, gas, water, waste, sewage charges, travel costs, telephone, fax, internet, postage, rent, working expenses, office materials, cleaning, computer costs, newspapers, magazines, accountancy, promotion, salon decoration, trade magazines, seminars, insurance, employer insurance, salon liability insurance, damage charges, local business taxes, counselling, employee allowances, cashflow costs, electronic payment device, loan and or credit interest, donations, pandemic extra costs e.g. PPE gear, work clothes etc.
It is important to separate these further into
- Fixed costs – costs that you need to pay even if you cannot open for a period of time. eg. rent, phone, internet, base power / gas, insurance, loan interest, some salaries.
- Variable costs – costs that are necessary when you are open for business. eg. magazines, cleaning, newspapers, PPE, work clothes, laundry.
Employee Costs
These costs are usually the biggest part of the total running costs of a salon or barbershop and are difficult to reduce. A common mistake is not to include the owner’s wages/drawings/salary under employee costs. If the owner is taking income from the business, it needs to be included as an employee cost.
Wages are very important when working out any costings for services so remember that your full time employees only work an average of 44 weeks per year, but you are paying them for 52.
- 4 weeks annual leave (at the time of writing)
- 11 days for statutory holidays
- 10 days sick leave
- 2 to 3 days for seminars and shows
This equates to approximately eight weeks away from work annually.
All of the above needs to be considered when costing services in a business. The size of the business impacts primarily on rent and staff numbers, most other costs are similar. The only variation would be the rent depending on size of your salon or barbershop and location.
Helpful hints
Understand your business numbers and your profit and loss reports. Find a good accountant and personal banker that you can talk with.
Be aware if you are discounting or doing advertising deals, such as, Grab One etc, make sure you read all the terms and conditions and understand what type of clients your ideal clients are and if these sorts of deals will attract those clients.
Build a solid relationship with your supplier/s, ask about education, rebates and team opportunities e.g. Fashion Week, Brand Ambassadors.
Stock take and order only what you require. Stock(product stock) needs to be paid for promptly but can sit for a time before being sold meaning necessary business funds can be sitting on the shelf.