To price grooming services correctly, research costs and demographics, then calculate markup.
Setting prices for grooming services can make or break a salon, and settling on a markup amount for a particular service is one of the toughest decisions a business owner has to make. Poor pricing, and therefore poor compensation, can burn out a good stylist, or make it impossible to hire one. Good pricing can keep a valuable employee happily producing and improving the business.
Many groomers (myself included) have set prices by guess and by golly, instead of by using solid business sense. There are many groomers who will simply call the competition to see how much they are charging and then set their salon’s prices based on that information. Finding out what the competition is charging is certainly part of the pricing process, but it should only be to ensure a salon is not over- or undercharging for the area. Owners should also be careful since price fixing in the U.S., which includes colluding on price amongst competitors, can be prosecuted as a criminal felony offense under section one of the Sherman Antitrust Act.
So how does one arrive at reasonable prices for grooming services? To price correctly, carefully research costs and decide what the salon needs to make in profits. Also consider the demographics of the area. In a rural environment, prices will have to be a lot lower than those on Newbury Street in Boston, but rent and other overhead is likely to be lower, too.
Grooming prices have to cover all of a salon’s expenses, so make sure everything the business spends money on is taken into account, including marketing, rent/mortgage, insurance, wages, utilities and other operating expenses, right down to cleaning supplies and blade sharpening.
Doing the Math
In retail, businesses usually mark up items by a certain percentage in each category of product. Toys may have a high markup, while more utilitarian items like bowls or food are much lower. Services can be priced using a similar structure; basic grooming care may be offered at a fairly low markup, while extras or add-ons are higher for increased profits.
The word “markup” simply means profit divided by cost. For example, if it costs a salon $15 to bathe and dry a German shepherd– including wages, shampoo and overhead–and the salon charges $40, the markup is 166 percent ($40 minus the $15 cost equals $25 of profit; $25 profit divided by $15 cost equals a markup of 166 percent).
Add-ons and luxury items can make money quickly. If adding a hot oil treatment costs $3.50 and the salon charges $12, the markup is 243 percent. A profit of $8.50 costs the salon much less than the $25 made on the bath itself.
So how does a salon owner know how much to mark up services? Use the same equation, only reverse it. For example, if the cost of 15 minutes of carding–including the tool and sharpening, time–is $6, multiply that cost by 243 percent. (Multiply the $6 by 243 percent, which equals $14.58. Add the $6 cost back to equal $20.58, and a price of $20 is established).
It’s vital to ensure that on an annual basis prices are set at a level that will not only cover expenses, but also make a profit. John Stazko was one of the first in the grooming industry to address pricing on a business footing in his popular seminars. One example of his pricing strategy is:
Salon’s annual expenses: $20,000
Grooming hours annually: 1,920 (40 per week, 48 weeks)
Expenses divided by grooming hours = 10.42 cost per hour
$10.42 cost multiplied by 3 = $31.25 as a minimum hourly charge
This example is from Stazko’s “Salon Owner’s Series,” which is an excellent resource for the industry and is available in DVD format at www.stazko.com.
Remember, it is always easier to lower prices than to raise them. Therefore, begin at a fairly high, safe range of pricing and offer new client discounts. That way, a salon can either stick to the originals or bring them down to the discounted price, depending upon what works.
When raising prices in an existing shop, be matter-of-fact and give plenty of warning. Signs beginning in August saying, “A price increase of $2 per groom will begin on October 1,” will give customers time to become used to the idea. Don’t be apologetic, and don’t be afraid of losing customers. I’ve always followed the reasoning that if I raise my prices by 10 percent and lose 10 percent of my customers, I lose the cheapest customers, will be working less for the same money and will come out pretty even. And that’s the worst that could happen. The easiest way to resent a job is to not get paid what it’s worth, so don’t underprice the quality work the salon has to offer.
Carol Visser is a Nationally Certified Master Groomer and Certified Pet Dog Trainer. Formerly a pet product expert for PetEdge, she and her husband Glenn now own Two Canines Pet Services in Montville, Maine, which provides grooming, boarding, training and day care services to Waldo County.