New research has found that more salons are adopting a time-based pricing model.
The study, carried out by salon software provider Vish, revealed that traditional all-inclusive pricing, where clients pay a set price regardless of differing hair needs, was leaving salons vulnerable to unpredictable profit margins, while a time-based pricing model offered greater stability.
“The time-based pricing system is gaining popularity, acceptance and appeal among owners, stylists and clients globally,” said Stacy Soble, editor of Salon Today and leader of the Data-Driven Salon Summit.
But what is time-based pricing? And is it the right move for your salon?
Time-based pricing is an all-inclusive hourly rate for services that covers all overheads within the price and can be scaled up depending on the talent, skill level and experience of the stylist.
Things to consider before adopting time-based pricing:
- Time-based elements – such as stylist hourly rates, typical length of service, booking rate and profit targets.
- The actual salon cost for a single hour – including salon operating costs, service hours sold and how many income-generating service hours are available.
- Price per hour – this needs to be based on the cost for a single hour of service and the profit margins set for the business.
- Price increments – Use the hourly rate to set price increments for services longer or shorter than an hour. Work out the cost per minute and 15-minute increments.
Pros of time-based pricing:
- Simple and easy to implement.
- Ensures that, regardless of service, the stylist is fairly compensated for their time.
- It offers a framework for stylists’ value, helping owners to identify challenges and set goals while providing productivity data that can help stylists negotiate pay increases.
- Makes it easy for salons to offer gender-neutral services, charging for time instead of service and removing the stigma attached to certain services.
Cons of time-based pricing:
- It can be hard to determine costs.
- It may expose the salon to profit variability.
Salons that require a minimum of one-hour per service may experience a decline in grooming and shorter services.
Struggling with your beauty business’s finances? Beauty Books can help. Call us on 020 7183 8241 or drop us an email [email protected] to see how we can help.