How did you set your prices?
If you are like most salon owners, you looked at what the salon down the street charges and matched it. Or you looked at what you charged five years ago and added a little. Or you just picked a number that felt right.
None of those are pricing strategies. They are guesses. And guessing is why you are working full days and still not building wealth.
The Real Problem: You Do Not Know Your True Cost
Most salon owners know what they charge. Very few know what it actually costs to deliver that service. And the gap between those two numbers is where your profit lives or dies.
Here is a simple example. You charge $150 for a full highlight. The color costs $15. Seems like a $135 profit, right? Wrong. Add the stylist's commission at 45 percent: that is $67.50. Add a portion of your rent, utilities, and insurance for the time that chair was occupied: maybe $20. Add product waste, laundry, and supplies: another $5. Your actual profit on that $150 service is closer to $42. Is that enough to build a 7-figure business? No.
This is exactly why so many salon owners end up fully booked but still broke. The revenue looks great. The profit is invisible.
The Fix: The Parts Plus Labor Pricing Model
Step 1: Calculate Your True Cost of Goods
For every service, calculate the exact cost of products used. Do not estimate. Measure. Track your product usage for 30 days and divide it by the number of services performed. This is your true product cost per service.
Step 2: Calculate Your True Labor Cost
Your labor cost is not just the commission you pay. It is the total cost of having that stylist in your salon, including their hourly equivalent, any benefits, and the time they spend on non-revenue activities like cleaning, meetings, and consultations.
Step 3: Calculate Your Overhead Per Service
Take your total monthly overhead (rent, utilities, insurance, software, marketing) and divide it by the total number of services performed in a month. This gives you your overhead cost per service.
Step 4: Add Your Profit Margin
Once you know your true cost, add your target profit margin. A healthy salon should target 20 to 30 percent net profit. If your true cost for a highlight is $108, and you want a 25 percent margin, your price should be $144. If you are charging $120, you are losing money on every single highlight.
Step 5: Raise Your Prices Strategically
If your current prices are below your true cost plus margin, you need to raise them. Do it in stages. A 10 percent increase every six months is far less disruptive than a sudden 30 percent jump. Communicate the increase to your clients with confidence. You do not owe anyone an apology for charging what your work is worth.
The System: The Profit-First Pricing Framework
The goal is to build a pricing structure where every service you perform contributes to your profitability. You know your numbers. You price with intention. And you review and adjust regularly.
Once your pricing is right, you will stop losing clients to cheaper salons because you will have the confidence to stand behind your prices. And you will finally be able to stop feeling overwhelmed about money because you will know exactly where every dollar is going.
Want the Exact Pricing Calculator I Use in My Salons?
Inside Level Up Academy, I have a complete service pricing calculator that does all the math for you. Join us and let's get your pricing right.
Prefer to watch? I break down financial systems like this every week on my YouTube channel.
