Spa and beauty salon entrepreneurs often worry about how to price their beauty treatments. There are a number of factors that go into any pricing decision. Although studying your competitors’ pricing policies is useful, you have to understand the economics of your business so that you don’t end up under-charging. Here’s what you need to know.
- Understand the Economics of Your Business
The driving factor behind any pricing policy is not what your competitors are charging, but what your cost structure looks like. You have to set prices that are above your costs so that you do not make a loss on sales.
So, the first step is to determine what everything will cost in order for you to be able to provide the beauty treatment. You should be able to get a cost sheet from the brands that you are thinking about using. Some brands offer cost per use in their programs.
Understanding your cost structure implies that you know just how much of each input you need to provide the beauty treatment. You don’t want to add more of a product than is necessary.
You should also calculate your other business costs, such as rent, mortgage payments; insurance policies; professional memberships, lighting, laundry costs, heating, utilities, office supplies, uniforms, depreciation of assets, and other costs.
You want to arrive at a monthly cost figure, which you can turn into an hourly cost figure, so you understand how much you need to make an hour to break even.
- It’s the Experience That Counts
You want your clients to come to you; not just for treatments, but for the overall experience, which goes beyond specific treatments.
Experience is also important in a more literal sense. As you gain experience in the industry, and learn new skills, you will be able to offer more treatments at a higher level of quality. That affects pricing as well. You see, two people with different amounts of experience, will be able to charge two different prices. That is why, at dermani medspa franchising, staff are supported in their efforts to improve their skill set in order to add to the customer experience and ensure a more profitable enterprise.
Customers can sense the difference in experience. Experience in the form of how the client is treated, the pleasure they derive from coming to you, and experience in terms of how well you provide the treatments on offer. Sell experience, not treatments.
- Pay Yourself
Many entrepreneurs do not pay themselves. Strange, but true. Entrepreneurs seem to think of all the costs but how much they need to earn every month. That is a legitimate business expense that you should take account of.
Calculate your monthly pay and then divide that by the number of working hours. Add that to your company’s hourly cost. You need to make sure that you pay yourself a figure above the minimum wage. You should also give yourself the same vacation time as everyone else, as well as sick days.
- Add a Profit Margin
Once you have an accurate estimate of your costs, you can add a profit margin. In the United States, the average profit margin is 8.19%. That doesn’t mean that should be your profit margin, but it is certainly a guide. Aim for 10% so you get a decent return on your investment. Your numbers should reflect what you are offering, and this may mean a higher or lower than average profit margin for beauty treatments in your market.