Pricing for profit is crucial for the long-term sustainability and success of a business. When pricing treatments in your business it’s important to have a strategy so that you’re confident in your worth and the prices you charge. Remember to be clear and transparent with prices, know the cost of your materials, business expenses, labour (staff wages and your salary) and profit margins.
I cover this topic in depth in my Beauty Business Bootcamp, the next one will be in live starting 13 May 2024. If you’re reading this after this event, check out our events page for upcoming Masterminds.
I’ve helped many business owners price for profit, know their numbers and confidently raise their prices to industry standards. Undercharging is an injustice to you and your fellow therapists in industry. The product houses set a suggested retail price for a reason. Sell the experience you offer your clientele and know your worth. Your industry experience, education and amount of hours perfecting your craft is why you’re worth it!
Here are some reasons why it is important to price for profit.
💷 Financial viability: Pricing for profit ensures that your business is financially viable and able to cover its costs, including production, overheads and operational expenses. It also means you’ve got a buffer if the economic market changes, prices hike or some other unfathomable event occurs (think the pandemic) always keep a little aside for the unexpected!
💷 Investment and growth: Generating profit allows a business to invest in growth opportunities, such as expanding operations, improving products or services, or entering into new markets and offering new treatments and technology to your clients.
💷 Quality and innovation: Profitability provides the resources needed to maintain and improve the quality of products or services, invest in research and development for innovation, and stay competitive in the market. Our industry is continually advancing and evolving, by pricing for profit this enables you to offer these new advanced treatments.
💷 Risk management: By pricing for profit, a business can build up reserves to weather economic downturns, unexpected expenses, or other disruptions that may impact its operations. Make sure your business is insured to cover yourself, your premise and your team.
💷 Sustainability: Profitable businesses are better equipped to sustain themselves in the long run, creating job security for employees, contributing to the local economy, and supporting the overall well-being of the business ecosystem.
Knowing the equation it's much easier to price proudly, know your worth and the value you bring to clients.
When I first started in industry over twenty years ago, my Aunt used to help me with my price list - I had no clue. I knew that to keep up with inflation I needed to put my prices up annually, but I chose bi-annually and would increase a bit more every 18 - 24 months, but what I didn’t envision was the necessity to work towards the 20% increase needed when passing the VAT threshold. I’ve now realised it’s about looking at your goal and working backwards because it’s near impossible to increase prices by 20% over night, so please follow my advice and regularly increase and when starting out price including VAT so it’s not a shock when your business grows.
I share a few examples of experiences I’ve had and how having the confidence in pricing for profit helped navigate these conversations.
🧖🏻♀️ Example ~ micro needling £225
The other day I got a call from a potential client saying someone down the street charges half what you do, can you please explain your treatment. It turned out mine was an hour, not 30 minutes, included the face neck and decollate and several additional steps, products and included an aftercare package. Explaining the process and what was included demonstrated our experience, expertise and ensured trust from our clients.
💅🏼 Example ~ manicures
I set up in 2008 at the same time as a nail bar on the corner. They charged 30% less than I did but both of our businesses thrived. We were serving a different target market and client base. I used name brand nail products, and the client experience was very different. Know your worth.
When we set up the clinic in 2021 we charged 40% more than our competitors but we gave the clients their nail file and nail varnish as part of the service. They also were offered a variety of drinks and a little treat. With this luxury setting and exceptional customer service, the clients never questioned the price, they continued to book in feeling they received value for money.
👣 Example ~ the medi pedi
This was double a normal pedicure price but was a service offered by a podiatrist and finished with a beauty service - clients had their toe nails and feet concerns cared for and left with painted toe nails - no one offered this service, yes we could have charged whatever we liked but we had an equation to price for profit. The podiatrist was able to cover her costs and make the hourly rate she needed to be profitable.
Take time to review
It’s the beginning of quarter two and time to reflect on the first quarter and review your targets for the rest of the year. Are you where you want to be? Remember to look at your finances daily, weekly, monthly, quarterly and annually. Set time aside in your week to review your finances. We hosted a live masterclass in January 2024 creating our road maps to design your destiny this year. If you weren’t able to attend, you can catch it on Signature D TV or listen to our Glowgetter Beauty Entrepreneur Podcast Episode 28 about creating time blocks in your calendar.
Annual expenses
With your pricing, budget and financial management it’s important to remember and include the ‘annual expenses’ in your forecast. Some things are paid as a ‘one off’ annual fee, but these expenses still need to be factored into your monthly costs to ensure there’s money in the pot for this lump sum each year. For example your insurance premium might be an annual fee or you’re planning a new treatment launch. Set aside money each month for everything you need and want for your business so you’re never on the back foot in your finances
In summary, pricing for profit is essential for ensuring the health and growth of a business, enabling it to provide value to customers, support its employees, and thrive in the marketplace.
Thank you for reading, if this was useful please 💖 and share if it could help someone.
Book a business strategy session www.dianarichardson.uk
Thank you ~ Diana x
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