I s your appointment book full and is your team offering back-to-back treatments – but your bank account not reflecting this? Being busy doesn’t necessarily equal being profitable. Let’s break down why this might be happening...
ABOUT RICHARD MCCABE
Richard McCabe is a salon owner turned coach, dedicated to transforming time-poor business owners into confident, profitable leaders. After building successful salons in the UK and Australia, he began sharing the systems that supported this growth. This evolved into the launch of his brand, Lifestyle Salon Coach. More recently, Richard created SAAM (Salon AI Automated Management Machine), ‘a digital manager for salons’.
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1. You’re underestimating the real cost of labour.
The UK minimum wage for workers aged 21 and above is going up to £12.71 per hour from April. But don’t be fooled: that’s not the real cost of labour, it’s just the starting figure.
As a salon owner, you’re also responsible for:
• Employer National Insurance (15% on earnings above £5,000).
• Workplace pension contributions (at least 3%).
• Annual holiday pay (5.6 times the number of days worked per week).
All this adds up. If you’re paying an employee £12.71 per hour, they’re probably costing you £16 to £18 per hour once all extras are factored in. If your pricing is based on your team’s wages, you’re losing money every time a client walks in the door.
2. Some services aren’t worthwhile.
Let’s look at two examples: Facial treatment (1 hour) Service price: £60. Labour cost: approximately £18. Your target price should be three times the cost of labour, which equals £54 in this case. Here, profit is being made.
Builder gel manicure (1 hour)
Service price: £30. Labour cost: approximately £18. Again, your target price should be £54 (three times the cost of labour). This means that money is being lost every time this treatment is carried out.
If you’re filling your books with services that don’t cover your costs, you’re filling it with loss-making activity.
3. Treatments are running over.
Let’s say you’ve booked eight builder gel services in a day, expecting them to last one hour each – but in reality, they take one and a half hours. Instead of eight clients, you can only fit in five or six.
If you’re charging £30 per treatment as in the example, that’s £60 to £90 lost each day just from running over time. In one week, this will amount to £300 to £600 per team member, and in one month, this will cause a loss of £1,200 to £2,400. Even small overruns can equal big financial losses.
How to turn it around
1. Audit your services:Work out the real cost of every treatment, factoring in wages, National Insurance, pension and holiday pay costs.
2. Price properly: Make sure you’re charging at least three times your labour cost for every treatment.
3. Track timing: Use a stopwatch to time services from start to finish. Within this, include time taken to set up, carry out the treatment and clean up. Don’t guess service times on your treatment menu.
4. Tighten up appointment times: Don’t pad out columns in case a service overruns. Stick to booked times and ensure your team works to them.
5. Review your price list: Costs and demands change. Update your pricing accordingly and review at least every six months.
If you want to make these numbers work without stress or spreadsheets, scan the QR code to watch my training video on how to make profit.