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Solo Riff : Reasons to Keep Your Prices in Line with Inflation
68 Plays1 year ago
Join us in this episode with host Greg Robins as we explore why it's smart for salons to adjust their prices with inflation, covering everything from its impacts on your business to practical tips on making the change smoothly, all with a helping hand from the Beauty Council.
Join the BeautCouncil today. https://beautycouncil.ca/membership-account/membership-levels/
- Inflation and Its Impact on Salons:We discuss the importance of understanding inflation, which is the general rise in prices and erodes purchasing power.
It's highlighted how inflation affects not just consumer goods but also operational costs like rent, utilities, staffing, and insurance for salons. - Rationale Behind Price Increase Recommendation:We recommended a price increase of 7% for salons that haven't raised prices since the summer of 2022.
This recommendation is based on Canada's inflation rate and the increased costs of goods and services necessary for business operations. - Consequences of Not Raising Prices:Not adjusting prices in line with inflation can lead to diminished resources, affecting the ability to deliver quality service.
Salon owners might end up reducing their own remuneration, which is not sustainable in the long run. - Strategies for Implementing Price Increases:Emphasizing the importance of communication: Be transparent with clients about the reasons for the increase.
Consider adding value to services to justify the price hike, like improved service quality or complimentary perks.
Prepare for some client loss but focus on attracting clients who value and can afford the enhanced service quality. - Association Support and Services:The Beauty Council offers tools like pricing calculators and market analysis to assist with the price adjustment process.
Members can get personalized recommendations and support for implementing these changes.
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Transcript
Introduction and Price Increase Recommendation
00:00:00
Speaker
Hey everybody, today it's going to be a bit of a different show. I'm gonna do a solo riff on our recommendation to increase your prices. My name is Greg Robbins. I'm the executive director of the beauty council and I wanna get on with a little show here just to help you navigate this change.
00:00:31
Speaker
All right, so let's talk about our recommendation. The first thing we did was we recommended a few weeks ago that you consider increasing your prices. Now, if you have already done so, that's fine. This episode does contain some information for you. And if you have not, we've got some pretty good reasons why you should consider a price increase.
00:00:51
Speaker
So the story on our website essentially said, you should consider raising your prices if you haven't done so since the summer of 2022. So basically more than a year ago, when we did a survey, we saw that about 20 or 25% of people we surveyed actually had not increased their prices. So we know that there's a number of people out there who have actually not taken the step
00:01:15
Speaker
to keep up with inflation. There are people who were either planning to or have done some, and then there were actually a good chunk of people. I think the number was 43 or so percent of the people said, hey, you know what? We've already increased our prices and we are continuing to do so.
00:01:32
Speaker
So let's just talk about the reason that you may want to increase your prices or why we made this recommendation.
Understanding Inflation and Its Impact
00:01:38
Speaker
We made this recommendation to accommodate for something called inflation. If you're not, you know, we've all heard inflation and we hear it's in the news. It's everyone talks about it. And really, what is it? Well, it's basically the rate at which the general level of prices for goods and services rise and that erodes your purchasing power.
00:01:59
Speaker
And that's always expressed as a percentage. So for example, if something goes up, if inflation is 5%, that means whatever you bought last year for a dollar is now going to cost $1.05. And that's not just apples, bananas, or the price of gas. It's everything. It could be utilities, your rent, the cost of staffing, insurance, all sorts of things that you have to pay for on a regular basis.
00:02:23
Speaker
So what we do is we just make this recommendation saying, hey, you know what? If you are still offering the same kind of service and the same level of service, then you should keep up with inflation. If you don't, you have to consider what that means to your business. So let's just pause for a moment and say, okay, we're not going to raise our prices or you feel that you don't want to. Then you have to understand that the power for you to continue to
00:02:50
Speaker
deliver on the service that you're providing is going to be eroded. It's going to be diminished a little bit. And why is that? That is because you simply won't have the same resources, which is a fancy word for money, to go ahead and actually pay for what you need or pay for those staff or to purchase the right kind of insurance for your place or change your light bulbs or whatever it is you need to do. So if you do not raise your prices, then you need to be prepared to somehow
00:03:20
Speaker
take a hit on it in your business. And the worst thing that can happen is if you're an owner is to cut your own remuneration. In other words, get paid less. And many owners that we come across just feel that they'll just hold their breath for a little while. Maybe they'll hold back paying themselves this time around and pick it up next because they own the business and it's okay. But really what you're doing is just kicking the can down the road a bit.
00:03:46
Speaker
eventually it catches up to you you know as an owner you work hard as an independent stylist you also work hard and certainly as a commissioned hairstylist or nail technician or skincare professional you work hard as well too and you depend on your commission rate to earn money and if your prices aren't going up you too are going to suffer that as well so you'll actually have less resources and less money to do the things you want.
00:04:10
Speaker
So that's the consideration with inflation. When we talk about keep up with it, it's not really anything about price gouging or price fixing at all. We're not intending to do that. That's not what we want to do as an association. We merely want to sort of give you the permission to raise your prices. Here's the good news. You know what? You can blame us.
00:04:33
Speaker
Really, you can just say this is the advice of our association. Our association recommends that we pop up the prices this week, this amount just so that we can actually survive. I think it's really important that you feel that you don't have to bear this burden all by yourself. This is something that you could point to your association and say, this is their recommendation. And most clients would appreciate your openness on this one. So let's just talk about what we're recommending.
Recommended Price Adjustment
00:05:00
Speaker
We are recommending a 7% increase.
00:05:03
Speaker
And you may wonder how we arrived at that number. Well, if you take a look at Canada's 12-month inflation rate and then you factor in other things such as the increased cost in goods that you have to purchase for your business, we arrived at a number for 7%. Our recommendation is 7% if you have not increased your prices since last summer or summer of 2022.
00:05:25
Speaker
because 7% will make up for the lost revenue that you should have got if you were just raising prices, let's say, on a eight-week frequency or even three-month frequency. The real rate of inflation is just a little bit of math here. It's 3.80, but if you do a bunch of other math, you realize that you wouldn't have been recovering that, so you
00:05:50
Speaker
You know up till now and so you need to add a little bit more to kind of make up for the for the money that you have Perhaps lost out on if you have been raising your prices and you haven't done so let's say since about April of this year then 3.5 or so percent would do the trick just again percent means amount per hundred so 3.8 is actually like a
00:06:13
Speaker
3.8 cents out of a dollar. So if something's a dollar, then you can make it a dollar four, let's say. Now what we do is we recommend you do this on average, right? Like just not on every single service, but perhaps what you want to do is at the end, when you add up all your service revenues, you should be looking at an increase of about 7%. Again, if you haven't done it since summer 2022, or about 3.8% if you haven't done it since about springtime or so.
00:06:41
Speaker
So this is our recommendation. Part of this is just really to make sure that you are staying in business and let's just talk about money a little bit. A couple of coaches out there on Instagram and a couple of people out there on YouTube channels just saying, you know what, don't worry about money. Money will come to you, do what you love.
00:07:04
Speaker
You'll always be fine. I guess so, but really the math is really what you have to look at. You are running a business even if you are an independent stylist or skincare technician, you are in fact running a little business.
00:07:18
Speaker
And if you're a commissioned stylist or a commissioned whatever professional, then you are in fact depending on the service cost to determine your take-home pay. So you need to think about things like what is it that you want in your life? What are your financial goals? Do you want to put your kids through school? Do you have a mortgage you'd like to pay off? Do you want to save for your retirement? Are you looking to take care of elderly parents down the road? And will you need some money for that?
00:07:46
Speaker
Do you want to open a second location? Do you want to buy more education for your team? What is it that you would like that you don't want to compromise on by holding your prices down? So that is really important to think of. Our relationship with money is like a whole other topic. I could do like an entire podcast on people's relationship with money. But at the end of the day, this is just a simple business decision. So I would encourage you just
00:08:12
Speaker
you know take the emotion out of it this isn't this doesn't have to rip the heart out of your chest raising your prices is merely doing what everybody is doing everybody i mean nobody's apologizing for making.
Communicating Price Changes Effectively
00:08:25
Speaker
Milk and oranges and bananas cost more or the gas station attendant is apologizing for the price of gas.
00:08:31
Speaker
This is just the new reality and we have to keep pace with the rest of society because we are part of society. I think the other piece that you can take a look at when you communicate this to your clients
00:08:44
Speaker
don't apologize, there's no need to apologize. But communication is key, especially if you've got clients who are perhaps spending either a lot of money with you and a 7% would be very noticeable or those clients who you know are kind of saving up their money to come in and get their services done by you. And it means a lot, money is not easy for them. So what you can do in that case is rather than apologize, just say, hey, quick heads up, next visit, our prices are going up just a little bit so your color is gonna go from
00:09:14
Speaker
150 to 162 or whatever it works out to be. And you can perhaps take that opportunity to see if you could perhaps sell a bundle or to give them the next service if they book right there on the spot at the same price and then the following will be the new price. You don't have to drop this on everybody all at the same time, but if you're able to and you're flexible enough and you can somehow work it into your system, you could sort of gradually bring these prices in.
00:09:42
Speaker
Then down the road you may want to do more of an incremental price increase as time goes along so that it's a little less obvious and it just becomes part of who you are and what you do.
Enhancing Service Value
00:09:52
Speaker
The second piece is you could also add more value. So if you are adding more dollars to your service prices, then consider enhancing the perceived value of your service.
00:10:06
Speaker
So it could be improved service quality. For example, take that shampoo and instead of three minutes, make it four. An additional complimentary service, whatever that may be. Or just little small perks like a free product sample or anything else. Refer a friend.
00:10:24
Speaker
Anything that you can come up with that would fit into your service that wouldn't cost you a ton of money, but would increase the perceived value. A lot of people don't mind paying a little bit more if they feel they're getting a better or a more comprehensive service. So take advantage of that. A really good example of that is if you're flying and you fly like premium economy, there's really no great big huge difference. It's not like your
00:10:52
Speaker
airplane seat turns into a bed or anything basically you get a little bit of orange juice you get a little bit more legroom but you're paying quite a bit more you know you got a baggage checked on for free so again it's that it's that trick that marketers know and people who are kind of in the business of selling things as their profession they they understand the value of taking taking what you would normally
00:11:19
Speaker
Enjoy as a service or even a product, adding a little bit to it and being able to increase the price tag because there's a bigger perception of value. Look around and see how it is you can add those value propositions to your services and then you'll see a little less friction if it does come up.
00:11:58
Speaker
to come to you based on price as opposed to your expertise
Clientele Shifts and Support from the Association
00:12:01
Speaker
from your clients.
00:12:01
Speaker
and your training and the results you're giving them. So this is another reason we do recommend 7% just to make sure that you have that little buffer in there to do the marketing that's needed to capture the new set of clients who are perfectly happy.
00:12:14
Speaker
to pay your new prices don't forget anybody will pay anything for any service there's a lid for every pot out there and as your prices begin to just match inflation and be where they should be you'll find that your clientele will change a little bit it will it will
00:12:32
Speaker
Always fall to the people who can afford the service. So just be ready to perhaps lose a small chunk of your business, but then replace it with the people who would be happy to pay for your rates and your services.
00:12:48
Speaker
So I hope this helps you out. There's a lot more to talk about here. Love to really do a deep dive into this. If you're a member of the association, we do offer to help you with this pricing change process. We've got some calculators we can do. In fact, you could even send us your price list. We will return it as long as it's in a certain format when you send it to us. We will return it with recommendations. We could do a little bit of marketing analysis on it, run it through our systems, and send it back to you.
00:13:18
Speaker
If you want any help with this or you have any specific questions and you're a member, an active member, please reach out to us. So there you go. Find the story on our site.
Encouragement for Financial Health
00:13:27
Speaker
I hope you've enjoyed this little solo riff for today and look forward to seeing everybody out there reach their financial goals and operate a healthy, great business so that they can retire with dignity and do the things they want. Thanks.
00:14:08
Speaker
You gotta make it happen