In the ever-evolving world of the salon industry, staying ahead of the curve is vital to ensuring profitability. With rising costs and changing customer expectations, owners need to rely on data-driven insights to make informed decisions. One key area where data plays a pivotal role is in understanding and optimising your hair colour profit margin. Let’s explore three ways how harnessing your colour data can help you map a more profitable future for your salon.
1. Cost of Goods and Pricing Strategy:
In the hair industry, the cost of colour products typically go up year over year. It’s essential to assess whether you’re incorporating the cost of colour into the service price or charging customers separately for colour used during service, like in a parts and labour model. Like most in the industry, SJ Forbes had across-the-board rises for all services. But after owner Hayley Gibson-Forbes and her husband/business partner, Sean J McElhill, brought on Vish, they were able to introduce additional colour charges, making it easy to alter the product costs and pass any manufacturer’s increases on to the client.
“I’m horrified to admit, [before Vish] we’d have probably said to the client: ‘Call it £20.’ This particular service ended up costing £117 more in colour. The total charge was £167. That’s why so many salons run at a loss. They have no idea how much colour they are really using and so don’t charge accurately for it.”
2. Gross Profit Margins Defined:
Gross profit margins are a key metric for any business and represent the percentage of revenue that remains after accounting for the direct costs of providing a service. Price of service, minus cost of products used to deliver the service. This can vary tremendously based on the service, and also based on who is performing the service. One stylist can use £1.38 to complete a half head, while another stylist would dispense over £9 for the same service. Preserving your margin is about both maximising revenue and minimising costs at the same time. Setting acceptable levels of product included in each service is a vital step in both protecting your bottom-line as well as coaching your team. Over application is not only wasteful, it is bad for the hair and scalp.
3. Maximising Revenue through Targeted Pricing:
To boost profitability, look beyond cost control and actively seek ways to increase revenue per service. This can be achieved by automating charges for additional colour used, setting rules for what is included in certain services, and managing your markup for charges on colour. The key aspect is automating the rules that make sense for you, so there is no room for error. When the front desk knows you allow a certain amount of product for a half head of highlights, you can set triggers and train the team to recognise when that half head becomes more of full head. While this may only amount to a few extra dollars per service, cumulatively, it can translate into thousands of pounds in increased revenue for your salon. Additionally, this approach can provide a well-deserved pay increase for your stylists without bringing up commission levels.
Take Simon Tuckwell, owner of Tuckwell & Co. in Nottingham and Derby, as an example. In the first six months of implementing Vish, his team captured £22,300 simply by charging for additional colour based on rules that made sense for their pricing model and business. The average cost per application decreased by 48%, the average color ticket grew significantly, and generally the awareness of how colour services were being charged improved.
“Toners have changed massively in the last ten years and our understanding needed to change; it isn’t just about putting a small amount of colour over some highlights to blend, they are pretty much full colour services and needed to be treated as such. With the correct education and knowledge, our team can charge correctly for the beautiful work they produce.”
Ready to take control of your salon’s profitability? Start by harnessing the power of your colour data with Vish and map out a brighter future for your business.