Larry, thanks for your blog. I appreciate all the information that you provide. I remember a while back attending one of your programs and you talked about when to increase prices. I have not increased prices for some time and am wondering if it is time for an increase. Do you think that I should increase prices and if so, when? Thanks
In a word, NOW! My wife was a stylist and we owned a salon a few years back. I know how difficult it was to convince my wife and the staff that we needed to increase prices. There was always some reason not to do an increase. At the same time, it is important to be profitable.
Recently I was working with a new client and I asked how she determined her prices. She said that she called around to other salons to see what they were charging. Given that and according to some industry numbers, 70% of the salons in the USA are not profitable. She was most likely setting a price point for failure. She then went on to tell me that most of the salons that she talked to were not making money.
Here is my advice. First, we always increase prices on or around November 1st. I want the price increases to come into effect before the busy holiday season. The price increase offsets the fact that all costs are going up. We do a calculation for our clients and, just to keep up with rising costs, they must increase prices by anywhere from 2% to 4%. If you don't do this you will most certainly lose money.
Secondly, as you or your staff advance, it is time to raise prices. This might be due to education or some other factor. One factor should be how booked the person is. Once someone becomes around 60% booked, it is time for a price increase.
I have not yet talked to a salon that increased prices and regretted it. The only regret I have ever heard was, "I should have listened to you earlier."
Larry Kopsa CPA
In a word, NOW! My wife was a stylist and we owned a salon a few years back. I know how difficult it was to convince my wife and the staff that we needed to increase prices. There was always some reason not to do an increase. At the same time, it is important to be profitable.
Recently I was working with a new client and I asked how she determined her prices. She said that she called around to other salons to see what they were charging. Given that and according to some industry numbers, 70% of the salons in the USA are not profitable. She was most likely setting a price point for failure. She then went on to tell me that most of the salons that she talked to were not making money.
Here is my advice. First, we always increase prices on or around November 1st. I want the price increases to come into effect before the busy holiday season. The price increase offsets the fact that all costs are going up. We do a calculation for our clients and, just to keep up with rising costs, they must increase prices by anywhere from 2% to 4%. If you don't do this you will most certainly lose money.
Secondly, as you or your staff advance, it is time to raise prices. This might be due to education or some other factor. One factor should be how booked the person is. Once someone becomes around 60% booked, it is time for a price increase.
I have not yet talked to a salon that increased prices and regretted it. The only regret I have ever heard was, "I should have listened to you earlier."
Larry Kopsa CPA
