Should Your Salon Have a Covid Fee
With the increase in cases and other expenses salons are facing, such as personal protective equipment, (PPE), many small businesses have decided to introduce a covid fee in their pricing. Implementing a covid fee means adding a surcharge onto receipts to recoup some of the money spent on new sanitation, PPE, and physical distancing measures.
We’re all for making sure the expenses you incur are paid for so that your business is profitable. But, before you decide to introduce a “Covid fee”, you should look at your current business model and see if this is the right route for you.
There are some downsides to implementing a covid fee. Such as:
- You may turn away customers who are already continuous with their budget.
- Some may argue that it isn’t up to customers to pay for your expensive PPE equipment. Especially if you don’t offer any to your customers. (Some businesses have charged $2 a client, while others have charged $40 a client.)
- A covid fee means a temporary fee, meaning this extra cash coming into your pocket won’t always be extra incoming revenue.
- Customers may feel uncomfortable with the connotation behind “Covid fee”.
Some upsides to a covid fee:
- The transparency that as a small business you are working to keep your staff and customers safe, but you’re also making sure you can cover your expenses to keep your business open.
First, look at your current budget. We recommend doing a side by side of your current budget without the new expenses and then the next one that includes how much you intend to spend per month on PPE and sanitation in your salon. How many of these are one time expenses? (i.e. dividers between washing station or protective glass at the front counter) versus recurring expenses (i.e. masks, sanitizing products)? Is your current pricing allowing you to make a profit every month? Does it allow you to breakeven? Or are you losing more money?
If you’re able to make a profit, that’s fantastic. We do recommend that you continue to analyze your budget monthly, if not weekly, and look for changes in your cash-flow. Getting to know your numbers will allow you to continue to maintain a healthy bottom-line.
If you find that the new expenses are causing a significant decrease in your cash-flow and profits. You need to analyze how the new expenses are going to affect you from breaking even each month. If this is the case, you will want to go back and find out what your new break-even point is. From there you will be able to accurately adjust pricing, hours, and stylist rates to ensure your salon is profitable!
If you are losing money in your business, we recommend you check out our Free class on Parts + Labour Pricing and our Labour Pricing Blog. Our pricing classes offer you a step-by-step guide on how to find your break-even point and your hourly base rate, and why you should implement a Parts+ Labour Pricing system in your business!
Should I introduce a Covid Fee?
Unfortunately, a Covid Fee is perceived as a temporary fee. Therefore will only help to cover added business expenses in the short-term. Having a system where these additional expenses are already covered in your pricing model will help you have more financial security.
Today sanitation, face masks and shields are the “new normal”, and some businesses like restaurants have had to hire extra staff to meet sanitation expectations. So increasing pricing or adding a covid fee helps them to make ends meet! Some salons that normally would offer beverages and food to increase the customer experience, have had to stop doing so and covering PPE and sanitation supplies from this area of their budget.
As well, some salons are discovering that their rent and property taxes are increasing in their communities. If you learn that these are the same realities to you due to Covid-19, you should be exploring adjusting your pricing rather than introducing a covid surcharge. This way you are able to have long-term sustainability. But is also a solution that won’t cause you to get dinged come tax time either, because your covid fee could be seen as extra revenue that could put you into a new tax bracket. You can read more on how your pricing models can influence our taxes here .
Having your added expenses accounted for in your pricing helps you to ensure that you’re covering your bases. It also helps to keep you more in-tune with your budget. SalonScale hair color management software allows you to ensure that all of your variable expenses, such as hair color are covered. But it also allows you to include mark-up, so that you can ensure your supplies are also covered such as foils, masks, hand sanitizer, brushes and more. Allowing your business to have that long-term sustainability!