Let’s be real – we’ve all tried to save a few dollars by making coffee at home instead of grabbing a Starbucks on the way to work. It’s a small amount to save, but with the average Starbucks coffee running over $5, it really adds up! If you make coffee at home even once each week, you’ll end the year with nearly $300 in your pocket to enjoy other things.
You keep track of small savings with coffee, so why not with the BIG expenses that salons incur every day?
Well, if you take the same mindset that small dollar amounts can cause big expenses over time – it’s easier to understand the impact that even a single dollar can have on your business.
Let’s Talk Numbers
Let’s take a look at some math behind little savings.
As a stylist, if your exact product cost is off by as little as $1 and you do 3 colors a day, that’s $3 total.
Now, if we take that $3 and multiply it by the 21 days you worked that month, there’s $63 in losses. Take that $63/month over the 12 months in a year and you’ve just lost $756. However, $756 must be replenished, so another $756 is coming out of your pocket to replenish that lost profit.
The stylist in this example lost $1,512 a year, simply because their pricing was a single $1 off!
Fixed vs. Percentage Budgeting
So now you understand the impact of $1, let’s find where you lose all that money!
For years, salons have created their pricing menu with color budgeted around a fixed amount. The customer pays the same every time, unless an additional bowl of color is used, then a specific amount is to be added. Let’s talk about the customer.
Customer A has shoulder-length thick curly hair and leaves the salon after getting her hair colored paying $200.
Customer B has shoulder-length fine and straight hair and pays $200 as well for the exact same service.
However, Customer A used $50 in products, and Customer B used only $25.
This means one customer is underpaying and the other is likely overpaying. Plus, you’re having unpaid color walk out your door because the exact amount used is unknown. Salon owner Blanca Mendoza shared how her experience with SalonScale has enhanced her customer relationships. She states: “I’m more aware of not wanting to overmix and end up charging them more than what they’re actually needing.”
Not only is this fixed method incorrectly charging to your customer but it’s hurting your business by not keeping track of the products used.
With fixed pricing, most customers are walking out the door with at least $1 in underpaid product in their hair.
Percentage Based Budgeting
Now let’s talk about another traditional method, the percentage of price based.
Percentage of price includes product cost as a percentage of the total cost the customer pays. This hurts your customers and salon in the same way fixed pricing does, but it especially hurts your senior staff.
If your senior stylist does the exact same service as a junior stylist while using the same amount of product, the senior staff member has more removed from the top in product cost because they charge more to their client. On top of that, it’s not uncommon for junior stylists to overmix more color than seniors.
Not only is this unfair to your stylists, but it also doesn’t help mindful mixing – that’s at least $1 in lost profit!
Getting to Know Your COGS
At SalonScale, we want to make you money so – let’s find that $1 together!
The best way to cover product expenses is to know the EXACT cost of the product used – that’s the foundation of your business. SalonScale will help you control the cost of goods sold (COGS) and leverage that data to run a transparent and more profitable salon. All your back bar products use are tracked through our easy-to-use digital tools.
Losses from old-fashioned pricing strategies are no more. Let’s create a transparent pricing strategy where everyone wins – customers win, you win and your salon wins. The impact of one dollar can be detrimental to your business. Put that dollar back in your pockets today!