Intro: Do you feel like you were meant to have a kick-ass career as a hair stylist? Like you got into this industry to make big things happen?
Maybe you’re struggling to build a solid base and want some stability. Maybe you know social media is important, but it feels like a waste of time because you aren’t seeing any results. Maybe you’ve already had some amazing success but are craving more. Maybe you’re ready to truly enjoy the freedom and flexibility this industry has to offer.
Cutting and coloring skills will only get you so far, but to build a lifelong career as a wealthy stylist, it takes business skills and a serious marketing strategy. When you’re ready to quit just working in your business and start working on it, join us here where we share real success stories from real stylists.
I’m Britt Seva, social media and marketing strategist just for hair stylists, and this is the Thriving Stylist Podcast.
Britt Seva: What is up and welcome back to the Thriving Stylist Podcast. I’m your host, Britt Seva, and we are going to talk about the rising cost of salon goods and how you should be responding to it.
Now, there is no doubt about it. We have seen a significant increase in the cost of salon goods, et’s say over the last nine months, six months, maybe a year. Some product costs have increased by 20%. Some have increased by 100% or more. That’s significant.
And I always have a laugh. So when I tell people what I do for a living, like I coach stylists and salon owners, they say two things. One, “Wow, that’s an industry that needs lots of help,” which to me is like I’d rather you punch me in the face because when you say that, it’s so radically offensive to me that that’s still the perception of our industry, is it’s one of struggle, but I get that comment a lot, which I always correct and point them in the right direction. But I get that a lot.
The second thing I get is, “I don’t understand why hair stylists are so broke. The cost of business is so low.” And that one makes my face bright red, like I’m even getting heated saying it myself. There is this massive misunderstanding of the cost of overhead, of running just a booth, like running an independent stylist chair, and a way massive misconception of how expensive it is to run a salon.
When you look at the cost of insurances and goods and all the things, it’s really, really expensive, and now that we see it getting more expensive, we need to adjust our business model accordingly.
Now, if you don’t know this about me, now you know, whenever anything changes in the industry, I try and stay on top of it. But I also am very observant. I sit back and watch like, I’ll let some weird ideas get tossed out there. I’ll watch actually some bad advice, get tossed around a little bit and I’ll wait and see how the trend is heading and what I think is going to happen.
I do want to talk in this episode about some of the really bad advice I’ve seen tossed around a little bit, because some people are being a bit reckless when it comes to this cost of goods shift and making some mistakes that are a reaction to a short term challenge, hopefully short term challenge, with long-term repercussions.
Even if this cost of goods stays up, like if this is our new reality, we don’t want to have a trigger-pull reaction to it. We need to be very strategic in how we run our business today in all ways and that’s what I want to talk about today.
The first rule of pricing is we never want to make emotional pricing decisions. I want you to take a journey with me back in time and ask yourself how you first established your prices and then how you’re sustaining them today. If any part of you is like, “Oh, well I just charged what my salon told me to charge,” eh, wrong.
If any part of you is like, “Well, I look at what’s going on in my market and what the market value is and what other stylists are charging and I base around that and then maybe I go up or down based on my skillset.” Eh, wrong again.
We never look to our left and to our right when we’re determining pricing. We only look at ourselves and what’s happening. When we do that correctly, we don’t have to worry about things like, “Oh, I’m priced out of my market.”
“Priced out of my market,” doesn’t exist. That is fake news. You can be priced as high as the moon and back so long as the perceived value is there. It is irrelevant what anybody else in your marketplace is up to. It only matters what’s happening in your business, in your four walls or within your chair. That is truly all that, all that matters.
Step one is we need to get out of the habit of making emotional or observant choices about our pricing. It doesn’t matter what the level system is in your salon or what the salon down the street is up to or what a stylist told you to do in a class. None of that really matters.
It’s about the value of your services in the eyes of the market that you are working to attract, period. End of story.
And I think that’s where a lot of salons miss the mark and I definitely think that’s where a lot of stylists miss the mark too. Instead of trying to fit pricing into a box, we need to make it fit the services being experienced by the guests because the guest doesn’t care about the boxes you’ve created. That doesn’t matter to them at all. What they care about is the way that they’re being taken care of, the services they’re receiving, and if the value is there, they’re happy to pay.
I want you to cling onto that last bit of what I just said. If the value is there, they’re happy to pay. And this is where it starts to get a little bit reckless for me as I think that, and I understand why, some people felt the cost of goods was going up and just said, “Oh, gotta pass it on to the guest.”
First of all, I do believe the guest should pay for the increased cost of getting their hair done. Like you’re the one who wants the color on your head, the cost of it went up, here’s the new price. I’m all for it. I’m not going in the direction of I think you should just eat the cost. That’s not where I’m going with this.
But what you have to understand is that the guests don’t need to see how the sausage is made, nor should you try to explain it to them. It really ruins the connection and the experience in a lot of different ways, and also it’s not going to be the cleanest and smoothest way to execute this price increase at all.
So if you go into your salon and you put up signs that say, you know, “Due to cost of goods increase, we’ve had to increase our prices.” Or even if that is the verbiage that comes out of your mouth or it goes up on your social media or into your policies guide or whatever, that is way more information than a guest ever needs to know.
I don’t know what the cost of producing a rotisserie chicken is right now. All I know is when I go to my local grocery store, it’s $3 more. I don’t need to know the difference. We all understand what’s happening in the world around us. You don’t need to get that detailed about what’s up.
The reason we try to justify pricing is because we are insecure about it. 100% of the time. Even if you’re like, “No, no, no, I feel good about it. I just like to be transparent.” That is not transparent. That is like running around your salon naked. It’s like overwhelming transparency. You don’t need that. It’s too much. It actually makes the guest uncomfortable and puts them into a tough position. You’re sharing way too much about the inner workings of your business when we explain the cost of goods increase.
Instead, the smoother thing to do is to just implement a regular old price increase like you would any other time—we are going to talk today about some of the indicators of when it is time to do a price increase, but the most important factor, whenever you do a price increase, is that the perceived value is there.
I probably say that phrase in like nine out of 10 episodes I do on this podcast because it’s that critically important. It doesn’t matter how great I think you are. It doesn’t matter how great you think you are. It doesn’t matter how great your salon owner thinks you are. All that matters truly is how great clients think you are. And if the perceived value is not there, you can make a dangerous decision in your business.
For me, whenever we’re implementing a price increase, it should feel justified. And when it’s justified, there is a landfall victory to a client. If they don’t feel like “Well, absolutely, I mean, this price increase only makes sense, this stylist is amazing,” or whatever. There will be pushback and you’ll likely lose more guests than you can handle.
Whenever we do a price increase like this, I always encourage you to increase perceived value. And increasing perceived value doesn’t have to cost you a nickel. In the last episode, we were talking about Scaling Stylist strategies, which are much more advanced. That is a very different topic than what we’re talking about today. But in that episode, I dropped to you some ideas that cost literally nothing at all.
So when you’re increasing perceived value, it doesn’t mean, “Oh, here’s another thing that’s going to cut into my profit margin.” It’s just the way the guest sees you.
Here are some free things that increase your perceived value: A better show up on social, a better website, a cleaner salon space, better conversation, like really simple things make a huge difference in perceived value. You not running around so frantic. The value in that is massive. A more streamlined way for me to book my appointment than having to call you or text you or anything like that.
The perceived value goes way, way up when we do those kind of things. Systems and structure are sexy. I know to us, when we implement them, they feel boring and dull. To clients, consistency and boringness are highly appealing. It has to still feel like there’s a sparkle to it. But actually the more processized things are, the higher the perceived value goes in most today’s consumers’ mindset.
Okay, so talking about—I’m going to go back to cost of goods in a second here, but I need to drive a point home first. Talking about prices in general, when we use the Scaling Stylist Pricing Calculator, which is included in any of my trainings that you invest in—Thriving Stylist, Scaling Stylist, Thriving Leadership, you get it no matter what you join—we take into account several different factors into an intuitive calculator.
Factor one is the annual income for your city. Factor two, how many hours you’re available each week. Available meaning how many hours are on your schedule each week? How you’d rate yourself as a stylist. If you’re like a more of a basic cut-and-color stylist, or if you are an extension-service specialist, meaning 50% or more of your guests are in your chair for three hours or more. So if you do a lot of color corrections or balayage or extensions or whatever, you’re going to categorize yourself differently. That’s factor number three.
Number four is how many guests do you see on average every month. Factor five, how many weeks are you booked out currently. Factor six, how many referral requests are you receiving every month, even if you’re not able to fit them in? And then factor seven, is what are your product costs? And then I have a space in place for you to list out the cost of running your business.
When we’re looking at pricing structure in any of my Thriving programs, we’re taking all seven of those factors into account. It is, to me, the most well-rounded way to look at pricing that I’m aware of today. I think we’ve left no stone unturned.
When we run somebody through this pricing calculator, I’ve put in some basic data for annual income based on the city that somebody lives in. Let’s say that this person I’m running works 25 to 32 hours a week. Let’s say that they’re not a specialist. They do basic cuts and color for the most part. How many guests do you see each month? Let’s say this person sees 82 to 89. How many weeks are you booked out? Let’s say this person currently is booked out zero to three weeks, like there’s not a ton of demand. They have a good base, but they’re not booming, and let’s say they’re seeing zero to three new requests every month. Okay, great.
Based on that data I shared and I put in here to start that the average permanent color cost per unit is seven bucks. So based on those data points, when we look at the calculator, it’s saying that a root touch-up would end up being $80.94 just for the color. And then the haircut, blowout would be another $73.94 if this person takes 60 minutes to do it or $55.46, if this person takes 45.
We also take into account things like your speed and this calculator is very intuitive and interactive, so you can change things on the fly as you’re working through it. So this client would end up walking out, paying, I don’t know what that ends up being, somewhere between $130 to $155, something like that, depending on how fast they’re doing that cut and style.
That’s the pricing breakdown here. What I do on a calculator, let’s say that my cost per unit of that color, though, has gone up and it is now $11 per tube of color. Great. So when I run that same person through the same calculator, well, now the cost of the root touchup has gone up now in my calculator. It’s showing it should be $84.94. That justifies a price increase right.
Now the other cool thing about this calculator too is let’s say we changed some of the data about this stylist. I’m going to put in that increased color cost. I’ll leave that there, but let’s say that their demand increases too, and now they’re booked out four to five weeks and they’re seeing four to six referrals a month. Well, now that root touch-up price is $94.94. It’s jumped up by $10.
What we do when we look at pricing like this is we don’t just have a reaction based on one facet of our business changing. We are making logical decisions all the time that protect that profit margin, ensure we’re covering ourselves, but don’t blow our clients out of the water in the process. You are making sure that you have the demand in place to justify the pricing that you’re charging.
When I talk about reckless advice, I saw, I can’t remember now if I saw this in a Facebook group or on social media, but I saw somebody posting like, “Oh, well, the best way to shift your pricing based on this cost of goods increase is to figure out how much you want to make per hour and your profit margin, and just shift your pricing to be based on that. You just make up whatever your goal take-home pay is and you just charge it.” Like if I said, “Okay, well, cost of color has gone up, but I still need to take $60 an hour, and I still want to make a 50% profit margin, so, boom, I’m just going to charge this number.” That to me is extremely dangerous.
I can’t just make up whatever the heck hourly rate I’d like to be making. It doesn’t hardly matter what I’d like to make. My income is dictated by what I call the market opportunity formula, which is your market times the perceived value of those in that market. The end result of that equation is the amount of money that you can make.
If the market doesn’t care for what you offer at the price point you’re offering it, your business will flatline. So while I understand, we have to cover the cost of goods, you have to think about how that increase is going to be perceived by a guest.
Now, when we have those seven factors and they’re all firing, like you are booked out a certain amount, you’re seeing a certain amount of new guests every single month. You can do that and not have to worry about it. But if your business is a little shaky/rocky, and then you put a COG or a cost of goods increase on it, it’s going to make it that much shakier and rockier.
Or because you were kind of not doing that great before and now your profit margin has shrunk and you’re taking on an additional expense, that’s only going to make it harder, right?
The reason I talk about that is not to sound scary or negative, but to make us all realize the way to manage these things in the best possible way is to set your business up for massive growth and massive success.
I know this COG increase sucks. I know it blows, like totally understand the stylists and salon owners who are not feeling this COG or cost of goods increase much were already growing at such a rapid rate that they’re able to take that tiny hit on profit margin. I understand it’s a huge increased expense, but when you look at people who are producing it high volume, they don’t feel the margin shift in such a huge way. They were able to absorb that margin hit temporarily, but then shift their perceived value in such a way that they were able to implement a price increase really quick and nobody batted an eye. They never had to explain why they were doing it. It just made sense because it was so clear that this stylist or salon owner is going places, is growing, so clients expect it.
We know that, right, when a new Apple iPhone comes out, does any part of you ever think, “Oh, it’ll probably be the same price as it was when it came out last year”? No, you know it’s always going to be more expensive, like you can bet on that. It will always be more expensive. Why? Because the perceived value is there, because they can is exactly why. You can do that too. And people line up around the block for new smartphone. You can do that too so long as your business is set up to be perceived that way.
Now, the reason I’m so big on not explaining the cost of goods increase is because I don’t think it lands well. I think it leaves a really poor taste in the client’s mouth.
When we say like, “Well, I’ve taken on a new expense, so I have to pass that along to you,” to them—for me, I’m your business coach. I get it—for them, it feels like you’re nickling and diming. It feels like, “…but nothing has changed to me.” To them, the end result is identical. They love you. They don’t care that much that the cost of the tube of color has gone up $4.
And I know as I say that, some of you are like, “No, no, no. I’ve explained it to my guests and they understand.” They’ll tell you, they understand, absolutely. But when they’re driving home or when they’re checking their checking account at the end of the month, there’s a piece of them that also doesn’t—because in human nature, there’s a piece of them that’s like, “Well, that’s your problem, not mine.” They love you to a point and then there’s a shift over.
When I say clients always have a wandering eye, I mean, it. We are naive to think that consumers aren’t always looking for the best possible value. You are, I am, we’re all always doing it. We are in love with the brands we’re loyal to until something better comes along.
I wore OshKosh B’gosh jeans when I was a kid in the eighties. Something better came along and I haven’t worn ’em in 25 years or whatever, right? So we’re always extremely loyal until the next best thing happens.
You don’t want the next best thing to come along and swoop up and get your clientele. And when we do these COG increases in a way that’s not justified, or we overexplain it, or the perception isn’t there to the guest, you might lose some clients to the next best thing. That is the most dangerous part of this situation.
General rules about adjusting to the rising cost of salon goods:
Know you can’t absorb that cost. You need to be passing that along to your guest in order to protect your profit margin. Your profit margin is your lifeline.
Two: Most of you are already running on a profit margin that’s too tiny because you’ve been undercharging for years if not decades. I saw some other really terrible price increase advice the other day that said, “One of the things you can do, if it makes you feel better, is charge your old guests one price and your new guests another.” What business does that? Absolutely not. You can’t do that. You are killing your profit margin when you do that. So no, that’s not going to work.
Three: When we pass along this cost of goods increase, never do we ever let “this is because of cost of goods increasing” cross our lips, never, ever. We just do it as a justified price increase.
Step four is make sure that it’s justified. If your business isn’t growing month over month, if you’re not seeing new clients come in every single month, if the demand isn’t there, if you’re not booked out for several weeks, if you’re not already seeing price increases two or three times a year, that is the actual core of the issue.
This is one of the things that I think actually holds us back as an industry as a whole is instead of healing the deep wounds, we worry so much about the boo-boos. Like to me, the cost of goods increase is painful. It’s like a really bad cut on your forearm, but you’re already bleeding out through your right leg. So the cut on your forearm sucks, but if you’re already bleeding out of your right leg, like what is actually the bigger problem?
It feels easier to put a bandaid on that cut on your arm and be like, “Okay, $5 cost of goods increase.” That feels easy, but you should have had a $25 price increase two years ago and now you’re bleeding out your right leg. And so instead of worrying so much about the boo-boos, I want you to really dig deep into what is structurally not working in your business, where you are losing profit margin before any of this even happened.
This is your chance, 2022, to get everything on track, like really get organized with your pricing, make sure that you are charging your guests based on data and facts, not just emotions or comparison.
Now if you want a tool to help you along the way, you can certainly use the Scaling Stylist Pricing Calculator, which comes totally for free when you invest in any Thrivers programs this season. But until then, and until the next one, so much love, happy business building, and I’ll see you on the next one.
