Are you afraid to raise your fees?
Like I said in my 16th Facebook Live video, there is so much fear around the topic of raising your fees.
Let me say this first before anything else, unless you deal with your underlying fear, and feelings of not being good enough, no matter how much you charge…it will never be enough. It is this underbelly that you must deal with to ever achieve success.
To understand raising your prices, you need to understand your numbers. Here are the key factors you need to consider as you raise your fees.
Real Hours versus Potential Hours
How many hours are you scheduled to work? Keep track each day of how many you actually work, say your potential is 8 hours.
For example, at the end of Tuesday you booked 6 of your scheduled 8 hours, then your average for that day equals 75%. Industry standard is this, if your average is 50% or higher. 70% is stellar.
It’s been over a year since your last price increase, it is time to raise your prices.
Keep track daily, weekly and monthly. Track for three months and see where you are. On the average, most stylists are at 33% average real hours.
You might look at your retention rate as well. Are the majority of your clients new versus loyal clients? Get a piece of paper out. Create three columns. One for 2017, 2018, 2019..
In column one, list all the clients you served in the first three months of 2019.
Then write a check mark by the first three months of 2018 that are listed in 2019, and the same for 2017.
Total them up. Figure out the percentage of repeat clients by dividing the number of repeat clients by the total number of clients.
Truly, your success in the business depends on the following magic formula…
These are the percentages to aspire to: Existing clients 72%, new clients 33%, 80% requested, 80% booked and 70% retention.
I hope this is making sense.
It’s difficult to track what you don’t know. Start informing yourself.
Your Average Service
Most beauty professionals have a basic understanding of what an average service and retail ticket is. However, the basics are not enough. To truly earn a better living a hairstylist needs to know what their average service ticket is and how much they need to increase that average ticket to make their desired income.
For example…Carrie desires to earn an income of $50,000.00 annually. The first thing Carrie must understand is that if she is earning 50% commission then she needs to produce $100K in service revenue (50% commission on $100K = $50K).
GOAL: $50,000 x 2 = Annual Service Revenue Target
If Kendall works 4 days per week for 50 weeks (we’ll give her a two week vacation) and sees 6 clients per day then she needs to have an average ticket of $83.33 (per client) if she wants to meet that goal of earning a $50,000 income. (See calculation grid below)
Annual Target $100,000.
Weekly Sales $2,000.00
Annual Target divided by Target 50 weeks
Daily Sales $500.00
Weekly Sales divided by Target # of days you work
$83.33 Daily Sales divided by #Ticket of clients you see on average per day. This is your guide for incrementally raising your prices.
Currently her average service ticket is only $53.40. Overall you could say that Kendall is doing pretty good. But compared to the annual income goal she has some room to improve.
To truly KNOW YOUR AVERAGE TICKET you must be able to answer the following questions:
- How much money do I want to earn each week/month/year?
- What is my current average service ticket?
- Am I on track?
- What do I need to do to meet my goals?
Determining those answers will open the door to new possibilities and set you on the path to a better living.
Now, we are talking about raising your fees here, but you also must know first how much you need to earn by listing your costs and expenses, and what you would like to make.
When you are out on your own, you don’t have anybody to keep you honest about your time. So, better to begin understanding these percentages. Let the numbers ignite you to your fire, your passion for what you do.
How many of you currently track your expenses, average ticket, etc?
How Much to Raise Them
A price increase all at one time never feels good. Raising yearly is great, maybe $5 a year.
Get clients used to the gradual increase every year. Supply costs go up yearly, rent goes up.
However, if your booking rate goes up to 85% in three months, it is time for another increase.
Get used to the fact that you will always lose up to 10% of your clients from a price increase. You need to let them go and make room or those who can pay you your worth.
Refer those that don’t come along to a junior stylist or someone else. You do not need to go into detail.
You may be surprised, they may say, “Congrats! It is about time.”
How You Tell Them
Now that you’ve checked your numbers and the other details that contribute to your decision of raising your fees, on to the next step. How do you break the news to your clients? Here are some of the best ways to do it.
- A note (not on the mirror please).
- Tell them directly.
- Online. Like, an update in your Website or a Social Media post.
- A sign in a picture frame on your counter.
And of course, over deliver.
All in all, these are the factors that you need to be aligned to raise your fees:
You need to know what your current average ticket is, what your real hours are versus your potential hours, how much do you want to make, and how much do you need to make.
Also, what is your retention rate, your booking rate?
All these you need to know are essential in the decision of raising your prices and how much increase you need to reach your income goals.
This mini lesson is a preview of what I offer my coaching students to help them stay on top of their finances and to charge what they’re worth. If you need help in getting down to the nitty gritty of tracking your numbers, or other areas to grow your business– let’s talk.