So on top of inflation price increases, we need to raise our prices for other reasons. And some of those reasons are we got more education, we’re more skilled, we have more experience, um, and we’re just in more demand. Like we have this huge consumer demand on us as we grow our clientele. And so the example I just gave you is if you’re just keeping up with the status quo like you never improved yourself, you’re the same as you were the year you got outta hairdressing, school. As we know that’s not true, right? And so, and some of you are somewhere along this journey where you’re like with me going like, Yeah, I remember doing $60 haircuts 20 years ago. We’re likely far behind that. There are some of our top leading salons that are in that price range. We haven’t even scratched the surface because we haven’t talked about all those other elements.
That’s just the inflation pricing grease. So now what I wanna talk to you about is the other reason why you raise prices. And the other reason we call it consumer demand. And so you only have so much time in your life. You only have so many hours in your life. And so, uh, we recommend that you do a consumer demand pricing grease. And what that means is you monitor your schedule every three months, um, for how productive you are. So what’s productivity? Productivity is how many hours you have available to book and how many of those are filled with clients. And we get a percentage by dividing how many are booked by how many you have available. And when we do that, we can see ourselves getting busier and busier. And some of you are 120% productive, meaning you’re always working overtime, you’re always squeezing clients in at the end of the day.
And that everything has a ripple effect to it. And so that is likely causing you health challenges. It’s likely causing you challenges in your relationship. You’re maybe not getting to your workout. Um, so there are so many ripple effects of this problem in our industry of working more and more, more saying yes to everything. And so I wanna tell you about Jessie. She was one of our stylists and she was doing this and I think we’ve, we’re all guilty of it. I’ve worked the six, 10-hour days myself, so guilty of it. Um, but Jessie in particular, she was at 120% productive and I was always as her as the owner of the salon telling her like, Jessie, you need to raise your prices. And she was having to miss soccer practice and she had her fiance saying, you know, like, this isn’t cool, you’re late for dinner.
Um, and so I put a lot of pressure on her and we worked together. And so our goal is that every time we hit about 80%, we start to increase the prices. But Jessie was fearful about raising her prices. So we kept doing small incremental changes. Um, and so what happened was we had to do them every three months for like a year and a half. And I’ll tell you what happened because her clients loved her. She was such a great stylist and she had a great personality she connected with her clients like I’m sure you do too. And so she went from 120% productive to 117 to 113 to 97 to 92. And then we’re like, okay, you know, we’ll give the clients a break for a while and we’ll stop raising. So in the previous example, we just talked about inflation price increases, but we can all agree that isn’t the only price increase to do so again, with inflation, for this example, we’re starting at $60 and in 20 years we’re looking at being at 105.
That’s your base rate. This $105 represents this $60 in real-time. So this is, you’re not actually getting any more value here for your skill set. So we have to take all those things into consideration. So your haircut actually should have grown more than that. We have to add in your client demand. So in our first year, you’re 60 times 10% would give you a rate of $66. Now, this is because of skill sets, not inflation. More people wanna book with you and you just don’t have enough time to handle everything. So this one works a little bit differently because the inflation price increase we’re actually doing once a year, regardless if our business is growing or not. This one is directly tied to your growth and your productivity. So you might be thinking, Oh, the haircut is getting expensive, the market’s not going to adjust to that. But if everyone was doing this, there would be a new standard pricing model and it wouldn’t sound so expensive, right? Because houses have doubled in five years. All the other expenses have doubled in just five years and the haircut price has definitely not doubled at all.
So this is another example of a price increase based on your client’s demand. This one you could do this every three months, but this is regulated by your productivity. So every time you hit that 80%, you jump up and look how much faster it goes after five price increases that might have happened after every three months. It might have happened after every six months. That’s based on how much demand you have. The haircut already grew to $95.
So it’s not just your problem, it’s an us problem. Um, but we’re all going through the same emotions of fear. What if my clients leave? Um, you know, what if I won’t be as busy? All of these what ifs. Okay, so you get it right? You get that we’ve been undercharging. Um, you get that there’s been an emotional journey behind it. Um, but that we have to put that aside. And so let’s talk about another industry challenge, which is also related to pricing, but in a different way. This is more about our color and this is really specific. Um, it’s actually to stylists and salon owners. Um, but the way mostly I’m gonna speak to salon owners here. I’m speaking to salon owners. This is, we have been paying a commission on color. Okay? So let’s think about that for a second. Cause that was mind-blowing to me when I finally like realized what was happening in my business.
But you’re not just paying someone to do the service, you’re actually paying on the tube of color. So for easy math, let’s just say we buy a tube of color, and um, it’s $10 and we’re paying and it’s all like jumbled up in the price. And so we’re paying 50% commission on it. And so that means that tube of color actually just cost us $50 when it should have cost us 10. And we’ve been doing that for years. And so the big question is why did it work then and it doesn’t work now. Well, why it worked then is because we often were doing services like a root touchup and we use half a tube of color. And so that only equaled to like an extra two 50 that was kind of slipping away without us really knowing why it doesn’t work Now we’re doing these color corrections, these balayage services and we’re using like $60 worth of color, and then we’re paying a commission of like $30 on top of that.
So $90 of that is just already going out and you haven’t even paid, um, your service provider. And we haven’t even paid all of the other costs of doing business, which is huge. So we have come up with a way better way to price. So the solution to the original problem doesn’t work. So what does work? Just stay tuned in, and join us for our next video. And I’m going to tell you about the new pricing model that I don’t know why we didn’t think of it 20 years ago because it just makes so much sense for everyone. See there.