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How to Set the Price for Your Men's Haircuts

Ivan Zoot | January 15, 2013 | 12:27 PM

Setting your men's haircut price is the first step in becoming a successful men's haircutter.

 My biggest piece of advice on this matter is this: "Do not let the last guy's first mistake become the foundation for your next mistake." Most haircutters determine the price for their men's haircut by picking up the phone and calling five or six local shops and asking how much their men's haircut costs.  They calculate an average of these prices and then price their haircut just below average.How to Set the Price for Your Men's Haircuts

This is fundamentally flawed thinking on two levels.  First, you want to be the most expensive men's haircut in the area, not the least.  Competing on price is called racing to the bottom.  There will always be another haircutter willing to shave a few nickels off the price of a haircut and undercut you.  You do not want to be THAT haircutter.

 Do you really want a client coming to you because you are cheap?  You want to build business on any of a number of strong principles like technical quality, superior service, up-to-date styles or convenient location, just to name a few.  Any of these and quite a few others is a better basis upon which to build long-term, mutually beneficial and profitable relationships with clients.

 More importantly, what the other guy charges has no relation to your cost structure, your profit margins, your desired income or the realities of your haircutting situation.

 The better way to determine men's haircut pricing is to determine your cost to deliver a men's haircut, set your expected profit margin and calculate your price.  Once you have established the price that fits your business model you can then plan to deliver a service experience that lives up to the price you have set.

 The steps to do this are simple.

 For the purposes of this example we will consider a single cutter in an independent work situation like a booth renter.  The formula can be extended to an entire salon or team as needed.

 1. Determine your capacity.  If you can deliver 3 men's haircuts per hour and work 8 hours per day you can perform 24 men's haircuts in a single day.  Multiply this by 5 days per week and 4 weeks per month and you have a monthly capacity of 480 men's haircuts.  Our industry standard has been to target 80% occupancy in your chair. Take 80% of 480 and you get to 384 men's haircuts per month as a capacity target.  BTW, if you are cutting at over 80% occupancy it is time to raise your prices, but that is a discussion for another day.

 2. Determine your cost to deliver a single haircut.  Add up ALL your monthly expenses, rent, light, phone, laundry detergent, any and all costs that go into your delivering your services.  Be sure the list is complete.  Do not skip even the smallest of monthly costs.  For the purposes of this discussion let’s assume your monthly costs total $1,300.  Divide this overhead cost by the number of men's haircuts you can deliver.  In this example $1,300 divided by 384 = $3.39.  It really costs you $3.39 to deliver a men's haircut.

 3. Determine the total amount of money you want to earn each month.  Perhaps your hope is to earn a gross annual income of $50,000.  That is a nice round number and a good one for this example.  Divide this $50,000 by 12 months and you will want to earn $4,166.00 per month in NET profits, that is to say the amount left over AFTER you subtract all your expenses for your business.  This number is $10.85.

 Combine your required profit with your real costs and you now have the minimum price for a men's haircut in YOUR situation.  You need to charge at least $14.24 for a men's haircut.

If the going rate for a men's haircut in your area is $8.00 you have some serious work to do to market a $14+ haircut to your community.  If the going rate is $22 you have a lot of room to work with to upgrade your service, your environment, your marketing, etc.

 If the going rate was $12 and you used the "phone around" method you might have set your price at $11.  You would be behind on your plan, your income and your numbers even before you cut your first head of hair.

 This simple formula will help you make better decisions for pricing your offerings and building your business.  I encourage comments on this and other strategies I share.

 Thank you,

 Ivan

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