JAIME: Welcome to Outgrowth: A Slice of Pro Beauty with your hosts Jaime Schrabeck.
ASHLEY: And Ashley Gregory. If valuing your services was a guessing game before the coronavirus pandemic, the rule book is totally thrown out now. From increased product cost to decreased capacity, every aspect of our salon businesses has been impacted.
JAIME: So what about your prices? Can you afford to keep them the same and meet all the new safety requirements? You won’t know until you learn to do the math for yourself. Let’s grow together.
ASHLEY: Jaime we’ve had all of this time off to anticipate our reopening, and now that it’s happened, what’s changed?
JAIME: Everything’s changed. We’ve had the opportunity to think long and hard about what reopening would look like. We’ve been waiting for guidelines to come out. We know that there are going to be restrictions on what we do and how we do it, and new safety procedures to follow. And in all of this, the one thing that many beauty professionals have been reluctant to do is to talk about money, and that is, how much do they charge their clients when they reopen the salon?
ASHLEY: Well, if one thing has perpetuated through this entire downtime, the pandemic, the shutdowns, and the reopening, it’s that we still, as an industry, are very uncomfortable talking about money. And if what I’m seeing on social media and in discussions I’m having with other beauty pros is any indication, that’s not likely to change, especially when it comes to potentially raising your service prices to meet the new cost of service.
JAIME: And that’s assuming that the service prices met the cost of providing service and the time involved even before.
ASHLEY: And that’s a big if, because as you know, it seems like a Facebook group, or a poll, or pulling pamphlets and rack cards from competitors seems to be the way we do business. We try to price ourselves somewhere in the middle of our competition and hope for the best. Now, I know you know so much more about this than I do, so I’m going to play devil’s advocate here and ask you questions that I’ve seen raised as objections to raising prices, but first of all, Jaime, can you talk a little bit about why doing this math is so important?
JAIME: Doing the math is part of operating a business. If we were just selling retail, say we had a product that we know that we could always access, and it was always going to cost us $5 to obtain this product. And in order to deliver it to clients, there was absolutely no other costs involved other than just a transaction. We could easily just double the price and sell it for $10, and we make a $5 profit, but we all know that’s a really simplistic way to look at how we do business. And primarily because our work requires our time. We’re not only selling our expertise. We’re selling our time and our time is limited, more so now. Our time is even more limited because of the restrictions that we have placed on us because of these new requirements.
ASHLEY: That’s something I was thinking about being in a client-facing situation, knowing that you have to operate at either 25 or 50% capacity until your next phase or in perpetuity, we don’t yet know, and we really discussed that quite a bit in our guidelines and reopening episodes a few back. But knowing that we are operating at reduced capacity, we have all these different processes and procedures that really change every part of giving a service. Why wouldn’t we think about what we’re charging? And I know there’s quite a bit of discussion about the optics of raising prices during this pandemic and what that would look like to a customer, but isn’t protecting your business and making sure you still have one when this is over more important?
JAIME: If you were operating at a loss, or if you were operating and not making a profit, and by that, I mean, not just covering your costs, but actually earning enough to make a living, to support your lifestyle, to pay your rent, your car payment, your insurance, your groceries. There’s been a lot of focus on money recently, but all of the focus has been on getting some sort of financial assistance. We are very focused on money and we’re realizing just how little we need to spend, but we need to apply that same thinking to how we provide for our clients and how we organize our finances around our businesses so that we in fact can have a legitimate, profitable career.
ASHLEY: Going back to your example of the $5 product for a $10 cost, essentially what’s happening now is the product costs $7 because you have to put a mask on it, and you have to disinfect it, and you have to disinfect everything it’s touched in the past 30 minutes between selling this product and the next one. If you keep your price at $10, you have to sell however many times more to make the same amount of money. And knowing that you’re only going to have 25 or 50% of your customer base that you’re able to see in any given workday, how do you rectify that?
JAIME: I use the example of selling something at retail to point out how ridiculous it is to equate that to what it is that we do. We don’t just sell retail. In fact, retail is a very small part of what we do. We have to have a storefront. We have to have a place in which we do business. We have to assign our time to that client. We go through many different types of disposable products that we either have to throw away in the trash, or we consume through the process, for example, hair color, gel polish, any number of things that we end up using up as we’re working, and we don’t have just one thing to sell. We’re offering our clients lots of different options when it comes to different colors, and different products, and services. So that means we have to have a supply of those things. And even now, we don’t know unless we’ve done our research more recently, if those products are even available, if they’re available consistently, and if they’re available at a price that we paid before. It’s likely those prices have gone up as well.
ASHLEY: That’s a really good point because, you know, I’m swimming in nail product from now until the end of time, so I haven’t had to price out top coat, and acrylic powder, and all of the things that a salon would be having to source right now, in addition to extra gloves, disinfecting items, masks, capes, whatever laundry needs there are, et cetera, et cetera. And so if we’re looking at it as not just raising prices, but shifting the mental paradigm away from that and the bad feelings that can be associated with it, and instead moving more towards that model you explained. That the cost of actually doing business has increased, therefore the price, and the value, and all of those other things that we talk about during more normal times have to increase as well. I was talking about this actually to my mom this morning, telling her that we were going to record an episode about this and she said the grocery stores sure aren’t having any problem with raising prices. And the essentials that we need, they’re harder to get. There’s less of them. Hello, toilet paper. And so we’re almost creating like a black market for certain items that have a high value like toilet paper. You can’t really live without it, but there just isn’t the supply. It’s the same thing with beauty services. We’ve been unable to supply our services. So the demand grew to the point where people were asking us to kind of do this weird underground, like fight club of haircuts, and we’ve talked about it before in episodes, that the value of our services have been proven now, that people are asking us to risk our health and are willing to risk theirs in order to receive them. So now if the value of something has gone up and the cost to make that thing goes up, price logically follows.
JAIME: It’s not just making that thing. It’s making that thing and doing it safely.
JAIME: Clients are going to value more than just the expertise that you had before in making them look beautiful. They have to place value on the extra precautions that you’re taking to be compliant, and those precautions take time, money, and labor to deliver consistently.
ASHLEY: So, what would you say to someone, cause this is a very popular objection I’ve seen, someone who says, well, I just raised my prices last year. I can’t do it again.
JAIME: To that person, I would say, what did you do to determine your prices last year? What is the process that you went through where you landed on a particular number for every service that you offer? Because, right now, those numbers are not the same. I can’t imagine that if they were to go through the process again, it would look the same.
ASHLEY: Well, and that’s assuming that there is a process to begin with.
JAIME: Exactly, if it was just a matter of thinking, hm, I need a raise. I see other people around me charging more. What sounds reasonable? You know, maybe I’ll just eek it up another $3, or whatever number they land on, something that wouldn’t offend too many, if that’s their thinking. There needs to be a process, and that’s what we’ll focus on today is the process is what determines the price. The process, then, of course, the quality of the data you put into it, because if you’re not using real numbers and real-time numbers. Just this week, one of the products that I’ve added to my supplies is disposable masks. Those weren’t something I was using beforehand, but I will have to use them going forward. I’ve been ordering them over the last couple of weeks to make sure that I had adequate supply to reopen, and the pricing went from $20 a box for 50 to 26.50 for that same box. That’s a 33% increase. And so, what I thought I was going to be able to manage, I have to ask myself, is this enough to warrant a price increase, given the other things that I’m doing that are actually decreasing my costs?
ASHLEY: Interesting. So what would be decreasing your costs right now?
JAIME: One of the requirements in reopening is to eliminate amenities. So sad to say, I haven’t actually said this to my clients yet, but there will be no more Ghirardelli chocolates until further notice.
ASHLEY: Oh, no.
JAIME: And Ghirardelli chocolates, one square costs about the same as a mask, interestingly enough.
ASHLEY: Now I feel bad for how many Ghirardelli chocolate squares I’ve eaten in your salon.
JAIME: But that’s one example of something that’s going to go away, temporarily, is the chocolates. And if you were stocking a full espresso bar in your salon, which I certainly don’t recommend, especially when there are coffee places nearby that need business, if you are doing things like that and that’s no longer an option because of the new guidelines, well, it’s an opportunity for you to rethink what’s the priority. The priority should be on anything that makes your services better. And by better, I don’t mean fluffier or more luxurious, but literally gets to what it is that you do as a beauty professional. That’s where the money should be prioritized.
ASHLEY: Agreed. Sadly, the nuts and bolts that make this happen behind the scenes, and I would highly encourage anyone, and I know there’s a lot of us out there that have not yet done this exercise, but determine your cost per service. And, Jaime, I know you have some really great tips on how to get to that number, especially the categories and things we don’t consider like salon amenities. That you can actually have a negative on your balance sheet in order to reflect that savings, but you have to determine how that shakes out with all the new things you have to provide, and the time that you’re losing, or having to add between clients to fully turn over a station, the parts of your protocols that have changed, the things that you have to introduce, like maybe a wooden cuticle pusher instead of a metal implement, just things like that, equipment that would be in other circumstances, more reusable, and more evergreen, now being replaced with disposables.
JAIME: I would start with our largest expense, and that’s something that likely did not increase, but we’re stuck in it because we’re in a contract, and what I’m referring to is your lease. When you’re leasing space, the price does not go down unless you were smart enough and able to renegotiate with your landlord to get lower rent, but your rent is that big number that you’re facing every month. And as we realized, we’re facing it, whether we’re working or not. So during this time we were shut down, we probably weren’t restocking any supplies that are consumable or disposable because we weren’t seeing clients to use it. But our rent, we have to pay regardless so that there may be, in fact, more inventory in terms of spaces available, unless we’re able to get out of our own rental agreement or reduce the cost of that rental agreement, that is going to be the foundation of our calculation when we try to determine how much does it cost to just have the lights on in our spaces.
ASHLEY: Exactly. The other part of this that I think would be confusing for someone who is new to this process is a lot of us have had to lay down quite a bit of cash right now in order to procure all of these PPE supplies, from social distancing decals for the floor, and maybe investing in a new online booking service, or an electronic touchless or contactless payment system. And so even if you have done this exercise in the past, and you’re confident in your cost per service, it’s something you absolutely have to do again to reflect the new normal.
JAIME: That’s so true because it’s not like we haven’t been spending some money. I certainly have. I just haven’t been spending money on the things I normally would. You’re right. I’ve been spending money on making sure that I have the PPE that I need, and enough to last for a couple of months, and any other kinds of equipment, or signage, or anything else that needs to be done and ready before my doors reopen. Some of those are going to be one time costs and others will be ongoing, you know, particularly with the disposable PPE. That’s something we’re going to be using one per client. And in fact, maybe even more than that, when it comes to something like gloves. We’re not gonna be able to get away with one set of gloves for a procedure when, during the course of the procedure, we may have to remove them. We may need to put on another pair to clean the tools, or to do the cleaning and turnover of the station. Just depending on what your processes are, you may end up using even more of what you had before.
ASHLEY: That might also speak to some of the lower performing services on our menu and the associated costs with performing those services, like if it’s something that was booked once every two weeks, or doesn’t have a high demand, but it’s something you hold onto for sentimental reasons, where maybe you haven’t really done the math, and you’re not entirely sure how much margin you’re making on that service. I think cost per service can also be extrapolated out to, does the actual service cost your business? Meaning you’re paying too much attention to it. It’s taking too much time. It’s pulling too much focus, and you’re not reaping any type of benefit from having six different types of pedicures, and 14 different types of glossing treatments, and things that you wouldn’t even be able to do anyway because of reopening guidelines, social distancing protocols, et cetera. This really is a great opportunity to completely overhaul your salon menu, and not use Facebook groups, and the prevailing popular winds to determine what those are.
JAIME: In planning your services, you’re either meeting a demand or creating one. And if you have what we might consider an unpopular service on your service menu because not that many clients choose to use it, maybe it’s not a lack of promoting, maybe it’s just something that’s a total dud. Maybe it just needs to go away and you need to stop trying to make something happen that just isn’t ever going to catch on.
ASHLEY: To use your term fluffiness, if something that’s really popular in our industry to where we almost feel like we have to prove the value of a service by offering all of these add-ons, and amenities, and additions instead of letting quality work speak for itself and adding a few little pampering extras that makes fiscal sense, where it might feel like a really luxurious add on, but it doesn’t cost you anything. And I think one of the biggest parts of that is massage, and I’m not sure for the hair specialties. That’s something that doesn’t really cost you anything if you can build it into your service time. But, I guess, you probably, it would be difficult to do that wearing a visor.
JAIME: And gloves.
ASHLEY: Yeah. I don’t know if I want a scalp massage with gloves.
JAIME: I know, right? Well, yeah, that’s something that we’ll be doing with gloves on when we do our hand and foot services where we’re able to massage up to the elbow or up to the knee. That’s not something we typically do with our gloves on, but we will be doing that in the future, and so it may not feel the same. It may not be something that clients will enjoy as much. And I have nothing against adding something to your services, just as long as you’re being compensated adequately for it.
JAIME: Whether it be nail art or, some extras, time spent styling someone’s hair or whatever that is, as long as you’re being compensated, I have no issue with that. But when it becomes an expectation that you do more than what you’re being compensated for, then you’ve created a problem for yourself.
ASHLEY: And this is definitely an opportunity to look at some of the add-ons and extras we offer to see if they can either be substituted right now without any additional expense or laying down of any kind of money for, because they’re just not physically possible through either social distancing, or whatever reopening guidelines we’re operating under, depending on where we’re located. And this is a great way to drop those dead services and blame it on COVID. We’ve all had that one client that we see every so often who keeps booking this service that we originally put on our menu in 2003, and they’re the only one who gets it, but we leave it on there because they’re such a fantastic regular client. This might be the time to transition them into something that makes more sense for you and your salon.
JAIME: What makes that worse is it’s often that with these types of services, they have their own special product needs that are just sitting there on your shelf, right? It’s a waste to have to invest in having something available for something that’s not requested very often. But getting back to what we were talking about before, about rent being one of those fixed costs, the thing that’s variable and, oh, so variable, especially now is our schedule. And when we work alone, we often don’t think about it in terms of payroll. We’re not thinking about compensating ourselves the same way we would need to think about it if we were compensating an employee. But we do have to think about it that way, because we’ve proven to ourselves that if we don’t plan, if we don’t require that our clients compensate us enough, we’re in a total bind when tragedy strikes, or we get sick, or some other circumstances benign as getting jury duty throws us off our game because we’re not able to meet the demands of our schedule. So one of the things that I like to recommend is that people just do this simple test. It’s not even a test really, of your pricing currently. Are you earning at least a dollar a minute from your clients? And by earning, I mean, collecting. I mean, we’re not talking about like what your net profit is, but are you charging at least a dollar a minute for what you’re doing?
ASHLEY: Interesting. Why a dollar a minute?
JAIME: A dollar is an easy number to work with especially for people who don’t like to do math. So if you’re doing a service that takes you 60 minutes to deliver, are you collecting at least $60 from your client for that service? And mind you, that’s not the same as making $60 an hour.
ASHLEY: Right, because we always have to think about the cost. And especially for those of us who are independent stylists, or suite renters, or booth renters. This is still math you have to do. Just because Square says $60, it doesn’t mean you get to keep all of that sadly.
JAIME: Not even close. And I use the dollar a minute because it gives people a sense of what’s reasonable, what’s feasible, and how easily that number can gauge where you are, in the hierarchy, really, of the beauty profession. When you think about this, if you were a massage therapist, and I know that massage therapists sort of straddle health and beauty. They’re not necessarily considered beauty professionals, but you’ll often find them in the setting of a spa, for example. Just about anywhere you go, if you go to get a massage, you are going to be paying approximately a dollar a minute, at least, if not more. And you really realize that you’re paying for time. But when you think about how little in product, for example, it takes to deliver a massage, it’s mind boggling because you’re not choosing from a hundred different types of massage oil as a client like you would if you’re going to get your nails done and you’re choosing from hundreds of different colors of polish or gel polish. It’s very restricted in terms of what it is that you need to invest in to provide your services when you’re a massage therapist. So if a massage therapist can get a dollar a minute for the very minimal investment in the product, and really we’re paying for their time, why can’t we justify earning at least a dollar a minute? What’s wrong with us?
ASHLEY: Well, Jaime, I might lose clients if I raise my prices, or I think it’s gross to charge COVID fee, or my clients have suffered a lack of income, just the same as I have right now.
JAIME: So let’s go ahead and take those three objections because I’ve heard them repeatedly and they apply regardless, except for the one about the COVID fee, because the sense of that one is that that COVID fee would be temporary. Well, let’s talk about that. We have these new guidelines. There is no end date on these new guidelines. We have no idea how much of what we’re being asked to do right now to reopen will become permanent.
JAIME: We don’t know if perhaps these best practices that will get us through the worst of this particular pandemic won’t be so valuable that regulators and legislators might just say, you know what, in order to protect ourselves and these industries from this future risk, because we know we are going to face this again whether it’s COVID-19 or some other type of infectious disease, maybe this just becomes a permanent change.
ASHLEY: That’s a little scary, but you’re right. I personally plan to wear a mask in public for a long time coming just because until there’s a vaccine for COVID-19, we won’t know what the next steps will look like. Again, it’s just a big question mark for the future, but what would be our next step then for determining our costs? So we’ve got our rent and we have our time. So that’s a very basic breakdown of two of our biggest costs. And then of course the container in which we can provide the service being our time.
JAIME: Right. So let’s separate those two because time is variable. How much time you want to spend, or make available to spend, with clients is entirely up to you. But once you’ve paid for your rent, presumably you have access to that space 24/7. Well, we know you’re not going to work 24/7, but we know that there are costs associated with operating that are there regardless of whether you’re there working or not. So, for example, there’s a baseline number for your utilities. Of course, if you’re there more often using the lights, for example, we expect your electric bill to increase, but there are some fixed costs: your internet service, your insurance, your licensing, the equipment that you bought, the furnishings that are there. If you are paying someone to clean, there’s some outside services to consider. So there’s just a lot of different things that go into this, and I know that it’s very likely that you and I will be putting something together that will help people realize what it is that they need to think about and where they might be able to reduce their costs. But let me just say that, pulling all this information together, if you’ve never done it before can be really, really intimidating. And when you see it all in one spot, I think that’s what makes it scary because normally you’d be working, and you just pay your bills, and you don’t even think about it. You might grumble a little bit, but when you’re not working, and you’re still having to pay your bills, that’s where I think we’ve all had an awakening to the things that are most important and the things that we can eliminate in even just operating our business.
ASHLEY: Absolutely. I’ve taken the first step because I’m not yet back on set and working. They’re still figuring out guidelines for that. But I’ve gone through just subscriptions, things I pay for monthly, that come out of my account without my knowledge, or in some cases consent, and just going through and assessing, do I really need this? Or do I have something that does this for me anyway that might be a feature I’m just not utilizing, and really trying to cut costs that way so that I can be like really lean and efficient, and hit the ground running when it is time to go back to work. Because my work does include quite a bit of travel too, so, understanding that some of those costs are variable, but if I can get my fixed costs taken care of now, I can really have more leverage or more flexibility when it comes to those more variable costs in the future.
JAIME: And just because a cost is fixed, doesn’t make it necessary. Like your example of a subscription is an excellent example because it was a fixed cost. It was costing you either monthly or on an annual basis. But when you look at it and think, is this really necessary for doing my work? No. So you get rid of it.
ASHLEY: Exactly, or I’ve found even some of the services I use for like social media posting and planning, or things that support my website, or whatever, they’ve added features that now cancel out something I’ve been paying for monthly. So that’s been a really fun activity while I’m stuck in the house and bored in the house is to just assess those things that I can cut now so that later when I have the increased expense for PPE, those costs won’t be so painful for me then cause I’ll have a little bit more flexibility and wiggle room.
JAIME: Yeah, and we all need the wiggle room. It’s those fixed costs that are the biggest. And because the rent, as I mentioned previously, is something that you’re locked into by a lease. It only matters that that’s the biggest chunk,and we have to make sure that that arrangement, whatever that looks like, is in your best interests as much as possible. The variability of the time that you spend and the number of services that you can perform impacts the amount you’re going to spend on products. So it would make sense that the more products you use in a service, the more the service is going to have to cost. It also makes sense that the more services you do, the more products you consume, the more you have to spend. So there’s this balancing act whereby you don’t want to commit yourself to so much time in trying to make use of your fixed costs. So, for example, you’ve got your rental situation set up. You can’t possibly work 24/7. What makes sense for you to work? And then within that limited time, because all of our time is limited, now more than ever, but within that limited time, what can you do? What services can you offer? Which ones do you want to prioritize? And how do you make sure that those services are profitable? And that’s where the math comes in. That’s where this calculation of cost per service factors in because your fixed costs are going to determine what your operational costs are so that every hour that you’re there, we know that you’re still paying for hours that you’re not there.
ASHLEY: And this is an activity or exercise that needs to be done per service as well. So it’s not just cost per service as this blanket term that, oh, every service I do cost at least this much. Yes, some of those things like your fixed costs can apply to everything, but your cost per service with the product you use, the time, et cetera, those change based on the type of service you’re doing anyway. And I think we’d be hard pressed to find someone who could say or name their cost per service if asked, and just be able to rattle it off off the top of their head.
JAIME: No, it would be hard to do, particularly now because if you hadn’t done your research to make sure that you can still access the products and supplies you were using before. You might be surprised at the increased cost, and the shipping may have gone up. The availability, maybe there’s some new requirements that you have to buy larger quantities, or you may be restricted. You may be forced to buy smaller quantities, in which case, you’ll be paying for shipping more often. You might have to source that same product from a completely different supplier in order to have a good relationship, and make sure that the continuity of getting that supply, or you may have to just switch products altogether. And that’s something that’s worth doing because if you can buy one product that does multiple jobs, for example, that would be great because you’d only need that one product to accomplish more than one task. Likewise, you don’t need to have six different base coats, for example, in the nail world, in order to do a quality service. Pick your favorite products and invest in those.
ASHLEY: Well, and it’s also a good idea too to never build a service around a specific product because circumstances could change. The sands could shift and accessing that product could become very difficult, especially now. That’s what I love about being in the beauty industry in the US is that we learn technique or we learn a product category, but we don’t necessarily learn just a specific brand. And that way, if we know the technique behind it, regardless of the product, it gives us complete free reign to choose, or have that flexibility if the choice is made for us, to use something different.
JAIME: That flexibility is so important because we are not using the same products that we used when we first graduated beauty school and became licensed.
ASHLEY: We sure are not.
JAIME: And if you are, I worry for you, unless of course you graduated more recently, and by some stroke of luck, you had access and were trained to use the best quality products available. That’s not what most people experience though when they go to beauty school.
ASHLEY: It’s not.
JAIME: Getting back to your objections though, I want to tackle the other two, cause we talked a little bit about the possibility, and I think it may be a strong possibility, that some of the things that we’re building our services on now, and perhaps charging some sort of surcharge as a COVID fee, are we going to rename that when the next thing comes along? I mean, at some point, those things would have to get rolled into your service price, and you’re not going to break it out in any particular way in order to justify it, nor should you feel you have to.
ASHLEY: Agreed. Calling it a COVID fee or a COVID surcharge, it takes the heat off of you because you can just blame it on this amorphous virus, but we have to own every decision we make in our businesses. And we also have to be able to justify them to ourselves, not really necessarily anybody else, but if your cost has gone up, the price has to reflect that. We are all very giving people. We’re all very creative people. A lot of us are empaths, and we feel like, well, it’s not fair that we have to pass that cost onto the client. But again, we have also learned through this that unfortunately our industry, our category, the services we provide in most cases are not essential. Therefore, they are a luxury. They are a want. They are not a need. So if the client has a problem paying an extra $5, $7, $25, whatever it is, to receive this luxury service, then I personally would much rather see one client at $150 than three at 50, because it’s so much more work. Yes, the end result is essentially the same on the balance sheet, but I’ve had to deal with three different people, tear down, and disinfect my station three separate times, deal with booking those three people, the DMs back and forth, the emails, the calls. There is something to be said for using this as an opportunity to really price to reflect the value of what we do. And thank you for coming to my TED talk.
JAIME: So that goes back to what you said about being concerned that your clients have lost income also. That may or may not be true.
JAIME: And, really it’s none of your business because you’re not in a position to dictate how your clients spend their money. If you happen to be their one luxury, and this has happened to me quite often, where I have clients who are very frugal, but they allow themselves this one bit of pampering, which in my case is getting their nails done. Who am I to say that they should spend that money doing something else? As long as they’re taking care of their needs and any of their responsibilities, that’s not my decision to make. So on the flip side of that is you’ve had to make changes. You’ve had to reprioritize your finances. It’s quite possible that your clients are doing the same thing. Now they’re either going to come to a decision that your services still fit in their budget, and they still value them, and they want to keep coming to the salon, or they may decide that they can’t afford to anymore at all, or there may be something in the middle, some sort of compromise, and I don’t mean a lower price that you’ve negotiated with them or anything like that, but I mean, perhaps they scale back what they’ve had done in the past. Maybe they’re not coming quite as often. Maybe there’s a service that you offer that’s not quite as luxurious, but will still meet their needs.
ASHLEY: This industry is very good at spending with our clients’ wallets. And what I mean by that is not allowing ourselves to charge for the things we should be charging for. And I see you people giving away free nail art, or pricing your updos, or fancy braids, or the things that are kind of difficult to price because they don’t necessarily have a lot of product involved. We’re so good at using the discomfort that might be caused by that to hold ourselves back. We use it as the excuse for why we don’t sell retail, or sell it well. We use it for the excuse that we won’t raise our prices. We use it as the excuse to keep our businesses from thriving in the way that they really could. And these self-limiting beliefs are something we could absolutely talk about in a separate episode, but isn’t it time to really take a step back, look at your finances, look at your service pricing and use this as an opportunity to create some real change?
JAIME: Absolutely. It’s not about what you would pay for the service. You have those skills. That’s not even something to consider. It’s what the service costs you to provide, and whether that number allows you to make a living doing that, because if it doesn’t, you really don’t have a career.
ASHLEY: I know personally there are some people that have gone through this exercise and found some of the services they’ve been performing are actually losing them money, and not a small amount either. And when you look at what things cost and how much is used just on the surface, it seems unbelievable that that could ever be the reality of it. But I know for sure that for sure, some pedicures just based on the time that they’re taking, there’s some total color transformations and things where people are really, really undervaluing their services by giving them a bargain basement price because they’d rather charge less than have an uncomfortable conversation.
JAIME: I guess they’d rather be busy than be successful.
ASHLEY: Well, that’s a whole other conversation as well.
JAIME: So, no matter what, if you make a change, it’s likely to cost you some clients, but it also creates opportunities for more clients to join your clientele who are coming in at your new pricing, who are coming in with your new procedures in place, who understand what they’re getting because you understand what you’re giving for a particular price. So I don’t ever worry about that as much as others might because whenever there’s some sort of transition, even if you move salons, and I haven’t met the person yet who has stayed in one spot their entire career. When you change salons, you could move across the street and not change anything other than location and still lose clients. It’s not something to be afraid of. It’s part of your growth, the growth that comes from understanding that what you offer and what you charge at one point in your career is just that point in your career. And what we do years later should never be cheaper. How is that possible? How is it that the average price of some services in our industry have become so cheap?
ASHLEY: That is very true. I know we can both speak to the nail industry and the fact that service pricing has been generally the same in the past 30 years, now, not accounting for gel polish and the fact that that’s a relatively new service, about seven, eight years. It’s important to take ownership of what you’re charging based on some type of fact, instead of just going with the flow. Because it’s that sort of group think, it’s so funny. We love to kind of segregate our industry by discipline. We love to break off into little groups, whether it’s the state that we’re in, the discipline we focus on, the type of license we hold. And we rarely come together on certain issues, topics, whatever, but this is something we are really doing across the board is not pricing our services correctly. And we love to come together and create this sort of group think around, well, I can’t charge more than $40 because no one within a 50-mile radius is charging more than $40. Okay, we don’t know their circumstances. We don’t know how they’re able to make that possible, so.
JAIME: Well, and the assumption is that in all of this is that whatever you’re doing, you’re being compliant. So if you’re cheating on your taxes, if you’re pocketing your cash and not claiming your tips, if you’re not throwing things away when you’re supposed to, I’m assuming in all of this, that you are committed to being compliant. So that’s where those real numbers come from. That’s where this conversation needs to focus on what’s real and what needs to happen, because I think that’s part of the reason why consumers in particular have become accustomed to things being so inexpensive is because they don’t understand what it costs to really do the service and do it legally. And by that, I mean, everything being taken into account, not just the quality of the products, but that you are licensed, and that your business is maintaining a license, and that you are paying sales tax on the retail sales tax that you’re collecting, and it goes on and on and on. So, taken together, our services should be reflective of all that. They have to be in order for us to be a legitimate business.
ASHLEY: Definitely. Girl boss, right?
JAIME: And this is, I will say though, that this has really leveled the playing field because we’ve often heard that nail professionals shouldn’t be charged as much for their stations because they cannot possibly make as much money as a hair person because look, a hair person can stack their clients or double book, when normally in our world, we could only work on one client at a time. And now hair professionals have to do that because their guidelines and their states may require that. It’s a whole new world when they can’t layer one client onto the appointment of another while color is processing.
ASHLEY: Yeah, this has been kind of the great equalizer. I’m hopeful that the drastic change in cost per service will lead to more people actually sitting down and doing the math. You alluded to putting something together to make that easier.
JAIME: Yes, I think what we’ll do because we have a colleague, Tina Alberino, who already has a fantastic toolkit that’s available. It’s spreadsheet-based. It’s everything done for you in terms of the math that is going to get done. You just need to be prepared to supply the information. So you would have your rent costs and what your utilities cost, and those sorts of things available. You would input it into this toolkit and it will do the math for you. But I think what we need to do, and I think we could help our listeners, is to talk about what it is that you do with that information once you have it, because this is where the decisions need to be made. Which services could be eliminated? Where can you save money? I think that’s where we could be most useful because I don’t want to recreate what’s been done previously and was done very well with Tina’s toolkit. And I would recommend it to everyone because you only need to buy it once and you can use it over and over and over again. Plus it gives you the opportunity to play around with the numbers, like if I were able to negotiate a lower lease cost, how does that impact my income? Those sorts of things you can play around with, oor if you decided to expand your schedule, for example, and you wanted to calculate how many more services you could fit in. These are all things that you could do very easily with this toolkit, but it’s a matter of figuring out what makes sense once you do that, because this is what you’re doing for yourself, and everyone needs to do it for themself, but how do you convert that to something that’s presentable to the client. In other words, you’re not going to let a client see what you’re doing. This is not any of their business exactly what things cost.
ASHLEY: Right. All they really need to know is what it’s going to cost them.
JAIME: That’s exactly it. They need to know what it’s going to cost them, and if a client doesn’t think that through all of this there are going to be some increases in costs to the things that they value, I don’t even know how to explain that to someone.
ASHLEY: I don’t think that clients really think about that, honestly. I think they think once you have the skills, and you’ve gone to school, or learned, or apprenticed, or whatever it is you’re doing, that you can just inherently do this stuff, and that you have to pay for a bottle of shampoo here and there. But maybe it is a conversation that we have by traditional sales conversation of sharing features and benefits. If clients are objecting to your price, then you’re not adequately demonstrating the value, and that’s also probably a conversation for another time.
JAIME: That’s exactly it. I think that’s where we could be most helpful because it’s not enough to say something costs X. If you haven’t explained what something is. So, for example, if you were selling some product that a client could shop comparing prices from salon to salon, the assumption there is that the quality of that product is the same everywhere you go. And we know that’s not the case. We’re not selling widgets. We are selling ourselves. We’re selling our expertise. We’re selling the quality of the products that we use. The environment we’ve created. There’s so much that goes into the experience that you offer clients. How do you place a value on that? And this is where this basic math must be done because that’s the baseline. That is the baseline price that you must charge in order to support yourself.
ASHLEY: I always enjoy listening to you speak on this topic in particular, because I learn something every time. and I also think of different variables and things that I hadn’t thought of before that I need to add into my cost per service. So any resources that we come up with will be of course available on Outgrowthpodcast.com. And you can, of course, check out the link to Tina Alberino’s pricing toolkit in our show notes.
JAIME: I look forward to having additional conversations because I think once more beauty professionals start doing this math, and we’re making it as easy as possible by suggesting this toolkit, but once they start doing the math and realizing where they have essentially compromised their own financial situation by giving services to clients at a price that’s not profitable, there are going to be more conversations to be had about how to best describe the services, how to best market them to appeal to clients who will appreciate them.
ASHLEY: Absolutely. This is just step one in a process of many steps, but it is the most important because if you’re not operating from a profitable place, you’re going to create bigger problems for yourself immediately.
JAIME: And no amount of assistance is going to bail you out of this long-term if what you’re doing is not sustainable. So I worry, to a certain extent, about those who have been able to obtain, for example, an SBA loan, if that’s worth doing, because if you’re not going to be able to make the changes in your business now that will allow you to be profitable, how are you going to pay that back?
ASHLEY: Exactly, and keep the lights on, and your bills paid, and, and, and, and so, unfortunately, I think in some cases, the SBA loans are just kicking the can down the road. So yeah, you’re going to have to figure out a way to make up that additional income every month. And we want to be a good resource for some of those strategies that you’ll need to implement to make that happen.
JAIME: I think between the two of us we have some really good things to offer people.
ASHLEY: I mean, you know, we’re a little biased, but I think so too.
JAIME: I do.
ASHLEY: Oh well, please subscribe, rate, and review Outgrowth on your favorite podcast platform. It helps us reach more listeners like you who need fact-based, accurate information about business. So any share, we see them all when you tag us especially. We appreciate them.
JAIME: If you leave us a review on your favorite podcast platform, we might read it on our next episode. In fact, we have a new testimonial to read. This is from JenPlusColour, and she came to us through Apple podcasts and Jen says “Loving the hard hitting topics and the very wise and professional information provided for the beauty industry.” Well, thank you, Jen. That’s exactly what we’re trying to do.
ASHLEY: That’s fabulous. I love reading these at the end. They just always, no matter the topic, help us end on a positive note. As always, you can follow us and comment on recent episodes on Instagram at @outgrowthpodcast.
JAIME: And make sure to visit our website, Outgrowthpodcast.com, to see all of our episodes in one place, plus show notes and transcripts.
ASHLEY: Until next week, be safe.
JAIME: Do some math.
ASHLEY: Be smart.