Whether you run a beauty salon, hair salon, laser clinic, or aesthetic business, knowing how to price your treatments is crucial to running a profitable business. The good news? You don’t need to be a math whiz to figure it out. With a few simple calculations, you can ensure you’re covering your costs and making a profit.
Let’s walk through the steps:
Step 1: Identify Your Business Costs
The first thing you need to do is figure out all the costs involved in running your business. These can be divided into two main categories:
1. Wages
This includes your own salary, as well as what you pay your staff. Don’t forget to factor in any pension contributions and Employer’s National Insurance (NI) contributions. If you’re unsure about any of these details, it’s always a good idea to consult your accountant.
2. Other Operational Costs
This includes everything else you spend money on to keep your business running, such as:
- Rent & Rates
- Utilities (Electricity, Water, etc.)
- Booking Software & Systems
- Machines & Equipment
- Credit Card Terminal Fees
- Subscriptions (e.g., software, professional memberships)
- Waste Collection & Disposal
- Insurance
- Professional Memberships
- Website Maintenance
- Telephone & Internet Costs
- Accountancy Fees
- Cleaning Supplies & Services
- Office Supplies (Stationery, Drinks, etc.)
Pro Tip: If you’re not sure where all your money is going, take a look at your bank statements. Go through every outgoing payment and make sure you’ve captured all your business costs, excluding the cost of the products you use for treatments (we’ll cover that later).
Once you’ve added everything up, you’ll have your total monthly costs. For example:
Example Total Costs: £11,000 per month
Step 2: Calculate Your Working Hours
Now, let’s work out how many hours of treatment time your business can offer.
Example:
- 2 staff members working 35 hours each per week = 70 hours
- You (the business owner) work 30 hours per week = 30 hours
Total Working Hours per Week = 100 hours
But don’t forget, there are holidays and sick days to account for. Let’s assume 5.6 weeks of annual holiday per employee and 2 sick days.
- Total number of working weeks per year = 52 weeks – 6 weeks (holidays + sick days) = 46 weeks
Now, calculate the total annual working hours:
- 100 hours per week x 46 weeks = 4,600 hours per year
Step 3: Calculate Your Business Cost Per Hour
Once you have the total working hours per year, we can calculate the cost of running your business per hour.
- Total Monthly Business Costs = £11,000
- Total Monthly Working Hours = 306.66 hours (80% of 383.33 hours per month)
Now, divide your monthly costs by the productive working hours:
- £11,000 ÷ 306.66 hours = £35.87 per hour
This is your basic business cost per hour. Note: This doesn’t include the cost of the products you use or VAT if you’re VAT-registered.
Step 4: Factor in Product Costs
Next, calculate how much the products used for each treatment cost. This will vary depending on the treatment, but make sure to include everything – from the products themselves to consumables like bedrolls, cotton wool, cotton buds, oils, wax, etc.
Add this cost to your spreadsheet and total it up for each treatment.
Step 5: Calculate Treatment Pricing
Once you know your fixed business cost per hour and the product cost for each treatment, you can start setting your prices. Below is an example spreadsheet showing how you can break down the pricing:
| Treatment | Fixed Cost (per hour) | Product Cost | Total Cost | Price | Profit |
|---|---|---|---|---|---|
| 1 Hour Facial | £35.87 | £6 | £41.87 | £50 | £8.13 |
| 1 Hour Pedicure | £35.87 | £4 | £39.87 | £40 | £0.13 |
| 1 Hour BIAB Nails | £35.87 | £3 | £38.87 | £35 | -£3.87 |
| 30 Mins Waxing | £17.94 | £3 | £20.94 | £24 | £3.16 |
This breakdown helps you understand the true cost of your treatments and determine if you’re pricing them appropriately.
Step 6: Assess Profitability
Now that you have all your costs and prices, you can clearly see whether you’re making a profit or not.
- If a treatment (like the BIAB Nails example) is causing you to lose money, it’s time to revisit the price, reduce the product costs, or stop offering it.
- If a treatment is only bringing in a small profit but also attracts clients who book more profitable treatments, you might be happy with that.
Conclusion: Price with Confidence
By following this method, you can confidently price your treatments to ensure you’re covering all your costs and making a profit. If a treatment is not profitable, it’s time to adjust either your pricing or your costs.
Want Help with Your Spreadsheet?
If you’d like a free copy of the full spreadsheet to help you calculate your costs, plus a video guide, simply email me here and I’ll send it over to you.