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Obviously, as entrepreneurs, we need to take accountability and we need to see what’s happening in our business and be able to change it. But in order for you to change it, you need to understand it and you need to know where these challenges are coming from. And that’s why I say the systems are failing you because in just the time that I’ve been in the industry, it has completely changed and we have not changed with it. The haircut prices are not very far away from when I started when I was 15, skipping school to go to the salon. So today we’re gonna give you a few examples of how um, the salon industry has changed and why the model and the systems are broken. And when you have all of that working against you, hard work is not the answer. You can keep working hard for years and years and years and it’s not gonna change your situation.
That was the realization that I had when I bounced my first payroll, I looked at my business and said, I can keep doing the same thing expecting different results, but that would be the definition of insanity, or I can change, which is really hard to do. Um, now. And I realized I had to change my payroll. I had to change everything that we were doing and, I thought to myself, I can change now. I might lose my team, but if I start now the right way 10 years from now, I’m gonna be way further ahead than I would be if I just keep kept doing the same thing. So it was a really eye-opening moment. I had actually a business coach who said to me, What would you do if you were Boulder? And I thought, well, I would definitely change my pay scale.
And he said, Why are you not doing it? And I was like, I don’t want people to leave. And he is like, Why do you think they will leave? Like, don’t you think they want you to make money? And I thought I don’t think they care. Uh, which was really false because your team does care about you and they just wanna know that their pay is fair and right and honest. And so when they’re always asking for more money and more commission, it’s because they don’t understand the cost of the business and they think somehow they might be getting cheated. So when you can shift into transparent leadership, then you can gain the trust of your team and they will help you win. And so that’s what happened. I changed all of our systems and I was very fortunate that my team stuck by me.
And from there we started to really grow the business. Um, so I resonate with your fears. I resonate with where you might be right now. Um, thinking like I can just ignore it. Um, because I’m not ready to face these scary things that come with change. In this series, we’re gonna show you how to make it easy. And it doesn’t have to be scary and it doesn’t always have to be dramatic changes. Um, but it does have to be consistent changes to keep up with the world. So let’s talk about the big one that’s happening right now cuz it’s kind of the buzz, right? Let’s talk about inflation. So here is something happening in our industry right now, but it’s not just happening right now. It’s happened every single year that you’ve been in business and whether you notice it or not, whether you change with it or not, inflation has been happening.
We’re noticing it a lot more right now because it’s a more drastic inflation than the usual annual rate, which is about two to 3%. Let’s look at how inflation impacts your business. For this example, let’s say we did a thousand haircuts per year and we’re going to start back at 2010. We’re dating ourselves back here and we’re charging $60 for a haircut. I wanna show you what your prices would’ve looked like if you had kept up with inflation. We’re going to have a version that you can use yourself at the end of this video. So right now you can slot yourself in where you see yourself and look to see if you had kept up with inflation. And then you can compare notes. So the first year you’re at $60. In year two you’re gonna add 3% to account for inflation and your new price is going to be 61 80, not very much, right?
Like no one’s gonna get really upset about paying an extra $2 more a year later for year three. Now we’re at $63.65, let’s move up to year five, which puts us at $67.53. Are you starting to feel like, oh, that starts to add up fast? But the interesting thing about the compounding effect is the longer that you don’t do something about it, the more results you’re missing out on. Let’s jump to year eight, which sets our prices at $73.79, year 9 at $76.01, year 10 at $78.29, and year 11 at $80.63. You see how it’s getting up there, right? Let’s take us up to year 15, which puts us at $90.76. And I wanna keep talking you through it to year 20 when your haircut should have been a $105.21. So let’s just say you went somewhere in the middle and waited five years and you raised your haircut price by $7.50 cents, you would say, Well that’s the same, isn’t it? No, it is not. And here is where the compounding effect comes in because you actually missed out on all those years, you didn’t increase your prices. And that’s the micro difference between the compounding effect. So because you didn’t raise those other four years, you lost approximately $11,000. Inconsistent price increases don’t allow you to catch up. Let’s look at it some more and say we increased our prices at year 10. Now we’ve missed out on $31,000. In year 20, we’re looking at $84,000.
So how many of you right now have your jaw dropped onto the floor? Like, the example we shared is 20 years ago starting with a $60 haircut, which is pretty average. I think that’s kind of where I started out. But I definitely did not move to that $105 haircut with just my inflation price increases. So if you’re like me, you probably didn’t either. So likely, you know, many salon owners are not raising prices, especially solo printers like chair renters because you don’t have, like, you don’t have the owner at your back saying time to raise your prices, time to raise your prices. So years can go by and you didn’t raise them. Um, and often you don’t know by how much. So you know, maybe you didn’t consider that in there either. Um, so when you see this example and you go from that $60 haircut to 20 years later that it should have been 1 0 5, you can really see where we’ve missed the mark in our industry.
So part of the solution is just simple. It’s consistency, right? It’s just the time of year that you do your inflation price increase and you update your prices by 3% and we’ve got some great tools for you. So make sure you say to the end because we’re going to be giving you some scripts on how to roll these price increases out. So if there’s any fear there, I want you to put that fear aside because we’re gonna support you in that. You might be thinking like, Yeah, but I didn’t raise my prices 10 years ago and I didn’t do those things. So you know, what do I do now? And it’s just, we have to just mark today as the start of I’m gonna start to put these practices in my business and to start to make the changes. Now I really love doing price increases, our inflation prices in November.
So many salons, want to raise prices in January. But everybody’s raising prices in January and everyone just spent all their cash in December. So it’s like the worst time to raise prices. So if you raise your prices in November, you’re actually gonna have the price raised for your busy rush. So you’re going to make more money through that busy rush and while people have money, and then you don’t have to think about it again for the rest of the year for this type of price increase later, I’m gonna tell you about another type of price increase that as an industry we just totally missed out on. So you understand where the industry’s gone wrong and where we haven’t kept up with what our pricing should be like all the other industries, you know, it just keeps changing. And so we haven’t done that as an industry and this other problem of consumer demand has not been addressed.
So if you wanna know again, that like quick, easy solution that you do consistently in your business that’s gonna make all the difference, like I’m telling you all the difference in not only the money you’re gonna make but in how much time you’re gonna spend at work and how much pressures on you. Because when there’s so much pressure on you, something’s gotta give. And so I don’t want you there in that space. So we’ve gotta like tone it down a little bit. And so if you’re interested in that easy solution, check out our next video. We’re gonna reveal to you a really easy method to keep up with that consumer demand problem that we have as an industry.