How To Price Services for Maximum Revenue
Whether you just graduated, are starting your own business or just wondering if you are leaving money on the table, setting service menu prices for waxing is worth spending some time on. It’s a smart business strategy that should be one of the first things you look at when evaluating your business. Setting the right pricing ensures that your margins are healthy, that you are competitive in your market, and also show true value for the service that you provide your clients. There are many ways to set yourself apart from your competition that may enable you to charge a slightly higher price and increase your profits.
Understanding Your Costs
This can often be a pain point, but it is the most important place to start. Understanding every expense for each wax service you provide is critical and should be based on your actual usage and costs. While every wax brand may provide their own cost-of-service estimates, only you know if those are the costs you are incurring.
First, keep track of how much wax you are using with each service. You can either use the guidelines of the brand you use if you are comfortable they are accurate, or you can measure yourself. It’s a little easier with hard wax beads where you can measure the amount suggested by the manufacturer before you put them in your warmer, and see if you are able to do the service using that amount of wax. If not, you need to adjust your cost-of-service calculations. Alternatively, you can see how many services it takes for you to go through one can of soft wax, one bottle of pre wax cleanser, etc., and then average out with the number and type of waxing services you did. This may not be completely accurate if the services were a combination of facial and body waxing, but will give you a rough idea. If you have staff doing waxing services, it’s also important to understand if their usage is vastly different than yours.
Don’t forget to count the number of applicator sticks and strips you use for each service.
Once you have some numbers, gather your invoices for all your wax supplies – hard wax and/or soft wax, applicator sticks, wax strips, pre and post-wax products. Divide the cost of each item by the number of services. Don’t forget to include your shipping costs when doing this calculation. Shipping costs can often be a hidden source of profit erosion. It may be worth ordering that extra bag of hard wax beads to get to the manufacturers free shipping threshold versus paying the ship cost.
COST OF PRODUCT (divided by) NUMBER OF SERVICES (Same Type) = COST PER SERVICE
Do this for each product used to get the total product cost per service.
Once you have that, it’s time to add in your labor and overhead cost.
- Labor Cost = Number of Minutes per service (divided by) 60 (times) Hourly Rate
- Overhead Cost = Total monthly costs for Rent, Utilities, Insurance, Technology and Marketing (divided by) Average number of monthly appointments
Formula for Profitable Pricing
1. Determine Cost per service (CPS)
2. Determine target profit margin % (TPM)
3. Calculation: CPS (divided by) (1-TPM %) = Target Service Menu Price
Here’s an example for a Bikini Waxing Service using Hard Wax where we want to achieve 60% profit:
Cost of Product = $2.54
Labor Cost = $7.50 (15 minute service @ $30/hr)
Overhead Cost = $10.00
Total Cost per Service = $20.04
$20.04 / 40% = $50.10 is our Target Service Menu Price
Competitive Benchmarking
Next, check that your proposed menu price is in line with the competitors in your area. Check out pricing for at least five competitor salons. Pay attention to their target and positioning (budget, mid-range or luxury) and if they offer any value-added services. Larger cities will command higher rates. Setting the right price will take into account what the local market expects but also reflects your unique positioning – be it more highly trained and skilled staff, a better client experience, convenient location or other variables specific to you and your location.
Don’t Devalue Your Service
It can sometimes be easy to underprice thinking that may bring in more clients. The reality is that this is not a viable strategy and may actually hurt you in the long run. It minimizes your value, puts financial strain on the business and will likely cause frustration and burn-out. You can justify premium pricing by ensuring you and/or your staff are well trained and maybe even have advanced certifications and also offer a superior client experience by using high-quality products and also adding small extra touches that your clients will appreciate.
Look For Bulk Buy Discounts
It’s always a good idea to work with brands who offer bulk pricing discounts if you buy a full case of wax, or offer hard wax beads in bulk sizes. The cost per can or cost per pound of wax is an important metric to keep in mind. If the brand you’re using doesn’t promote bulk buy offers, ask for it! If they aren’t willing to work with you, then maybe it’s time to shop around. NaturaverdePro offers bulk discounts on most of our products.
Final Thoughts for Waxing Professionals
Knowing your costs will help you manage your business more effectively and ensure you are profitable. Keeping an eye on product usage and knowing what is typical is critical as hidden costs can add up over time. Having this knowledge helps you recognize anomalies in product usage, wasteful practices and to identify areas of improvement.
Honor yourself and your staff by setting your pricing to honor skills and expertise, enable usage of higher quality materials and to offer your clients the best experience. Clients do notice a difference when a higher quality wax with skin-loving ingredients and premium rosins is used versus a lower quality, lower priced wax, so choose wisely.
Set your pricing to not only cover costs and generate profit, but strive to elevate local standards, and highlight the value of your skills and expertise.