How to Price Salon Services: A Cost-per-Minute Method for Any Salon

Most salon price lists start as a copy of the salon down the road, then get nudged up every couple of years. That tells you what clients will tolerate, not what a service costs you, and a busy salon can lose money on its most popular services without anyone noticing. This guide gives you a method that starts from your own costs: the cost of one chair-minute.

Figures are in US dollars; the maths is the same in any currency.

#What is the cost-per-minute method?

The cost-per-minute method prices every service from what one minute of a working chair costs you, plus the product the service uses. Time is what a salon sells. A two-hour colour uses four times the chair of a 30-minute men's cut, so it must carry four times the rent, wages and power.

Four formulas do the work:

• Cost per chair-minute = monthly fixed costs ÷ chair-minutes you actually sell in a month
• Service cost = (service minutes × cost per chair-minute) + product cost
• Break-even price (before tax) = service cost ÷ (1 − commission % − card fee %)
• Target price (before tax) = service cost ÷ (1 − commission % − card fee % − target margin %)

The break-even price is your floor: below it, every one of those services loses money. The target price is what you should charge.

#How do you work out your cost per chair-minute?

Add up every monthly cost that doesn't change with the number of clients, then divide by the chair-minutes you actually sell. Use the minutes clients are in the chair, not the minutes you are open, because empty minutes still have to be paid for by full ones.

Pay yourself in this sum. An owner's salary left out of the costs turns into a salon that "makes a profit" while the owner works for free.

Utilisation moves this number more than anything else. At 60% booked, the same salon's cost per minute falls to $0.83. At 40% it rises to $1.25. Before you raise a price, check whether the real problem is empty chairs; our guide to salon KPIs to track shows how to watch utilisation week by week.

If you have more chairs than stylists, use stylist-minutes instead of chair-minutes, because the scarcer of the two limits what you can sell.

#How do you work out product cost per service?

Product cost per service is the quantity used multiplied by the cost per millilitre or gram, including any tax you can't reclaim. Measure it once for each service, the way your stylists actually do it, not the way the brand's leaflet says.

Write the quantities on a service recipe card and weigh colour on a scale. Product that isn't measured drifts upwards, and nobody notices until the month's purchases look heavy.

#Why short services cost more than they look

Every client also takes changeover time: the greeting, the consultation, gowning, cleaning the station, the walk to the desk. It varies little between a 10-minute brow wax and a three-hour keratin, so it weighs far more on short services. The simple method spreads changeover evenly over every minute sold, which flatters short services and overcharges long ones.

If more than a third of your bills are for services under 20 minutes, cost them this way, or move them to a separate brow and wax station so they never hold up a styling chair.

#Worked example: a full price list from cost

Here is the same salon's price list, with 10% stylist commission on top of base pay, card fees averaging 3% of the bill and a 20% target margin. The divisors are 0.87 for break-even (1 − 0.10 − 0.03) and 0.67 for target (0.87 − 0.20).

Round the target up to a clean menu figure, then compare it with what nearby salons charge. If your price is far above theirs, the answer is rarely to cut it below cost. Look instead at the minutes (can the service be done faster without losing quality?), the product (is the quantity right?) or the empty chairs.

#How does commission-only pay change your prices?

If your stylists are paid commission only, take their pay out of fixed costs and put the full commission rate into the formula. Your cost per minute falls, but the divisors shrink sharply, and the services that use the most product need the biggest rise.

Take the same salon with stylists on 40% commission and no base pay. Fixed costs drop by $12,000 to $18,000, so a chair-minute costs $0.60. With 3% card fees and a 20% margin, the target divisor is 1 − 0.40 − 0.03 − 0.20 = 0.37.

#How should you price by hair length?

Price colour, smoothing and treatments in length bands, because product and minutes both grow with length while a single price doesn't. One "all-over colour" price either overcharges short hair or loses money on long hair, and the stylist knows which before the client does.

Two rules make banding work at the desk. Decide the band in the consultation, in front of a mirror, before any product is mixed, and write it on the booking. And add a density note ("thick hair, one band up") rather than arguing about it at checkout.

#Should your menu prices include tax?

Start with your local rule. Depending on where you are, the law may decide whether prices shown to consumers must include VAT, GST or sales tax, and whether your services are taxed at all, so confirm both with your accountant. Every figure in this guide is before tax, so you can add the right rate for your market on top.

If your prices include tax, your revenue is the price divided by one plus the rate. At a 20% rate, a $120 price is $100 of revenue; at 5%, it is $114.29. Price from the revenue figure, never from the number on the menu.

The tax you pay matters too. If you can't reclaim the tax on your rent, products and equipment (your accountant will tell you whether you can), it is a cost like any other. Rent of $6,000 plus 20% tax you can't reclaim is $7,200 in your fixed costs, not $6,000.

#How should you price junior, senior and expert stylists?

Price each level so it covers its own cost, then charge a premium for the levels clients ask for by name. A junior is paid less but usually works more slowly, so cost alone doesn't justify a big junior discount. An expert's time is scarce, so their premium is mostly margin.

Work out a cost per minute for each level: shared costs per booked minute, plus that stylist's own base pay per booked minute. In the salon above, shared costs (everything except stylist base pay) come to $18,000 ÷ 30,000 = $0.60 a minute, and each of the five stylists (one junior, three seniors, one expert) sells about 6,000 minutes a month.

Three rules come out of this:

• A junior's price must clear the junior's own break-even, which is higher than you'd expect because of the extra minutes. A thin junior margin is fine while they train.
• Set the expert premium by demand, not by cost. If an expert's book is full two weeks ahead, the premium is too low. Raise it until their book fills a few days ahead.
• Promote on evidence. Move a stylist up a level when clients rebook them by name and their book stays full, not on years of service alone.

Salos's services catalogue keeps a price per stylist and a member price against every service, so the front desk bills the right level without looking it up.

#How should you set member prices?

Set member prices as a fixed discount, then check every service against its break-even. A member discount can never be larger than the margin you built in. With a 20% target margin, 10% commission and 3% card fees, the most you can take off the target price before you lose money is 0.20 ÷ 0.87, about 23%.

Our guide to salon membership programs covers how to design memberships so they bring in steady cash without eating your margin.

#Why does discounting hurt a salon so much?

A discount comes straight out of your margin while your costs stay the same. On a service priced for a 20% margin, a 10% discount cuts the profit on each service by almost half, and you need about 77% more of that service just to stand still.

Assumes 10% commission and 3% card fees on the discounted price.

There is one honest exception. The time cost in your price assumes the chair would otherwise earn its share of fixed costs. A slot that would sit empty on a Tuesday morning costs you only product, commission and fees, so a discount aimed at slots that would otherwise go empty can make sense. A blanket "20% off everything" mostly gives money to clients who would have come anyway.

Discounts also train clients. A salon that runs the same big sale every January teaches its regulars to wait for it, and the bookings that would have come at full price in December arrive at a discount a month later. If you discount, change the form each time (an add-on one season, a series the next) so there is no date worth waiting for. Raising the average ticket through add-ons and retail is usually a better lever; see how to increase your salon's average ticket.

#When and how should you raise salon prices?

Raise prices when your cost per minute has risen, when a service sits below its target price, or when a stylist's book is full well ahead. Review all three every six months. Rent reviews, pay rises and supplier price lists all push costs up, and a price list that never moves loses a little margin every month.

Not every client will stay, and some who leave were the most price-driven clients you had. Watch the numbers that matter, rebooking and revenue per chair-hour, rather than the number of complaints in the first week.

The awkward cases in a price rise

When a senior stylist leaves, their clients were booked at that level's price, and the new stylist may sit at a different level. Don't quietly charge the old price or the new one; ask.