Pricing a color service so it still pays after commission and product

Written for owners of hair salons, barbershops, beauty, nail, lash and brow businesses, spas and massage, tanning, tattoo and piercing studios and med spas in the United States.

The short version

1. Start from product cost and service time.Add product cost to the provider's cost per hour times the service time.
2. Divide by one minus the share you keep.That share pays for rent, front desk and profit. For example, to keep half, divide by 0.5.
3. Check what commission and product leave you.Take both off the price to see what you keep. Review prices again before any state minimum wage change or commission plan change.

In a salon you sell hours of a provider's book. A price that looks healthy on the menu can leave very little once commission and product come out, and an empty hour earns nothing. Price from time and cost, then check it against what you actually keep, comparing like with like: the same period, available or booked hours, never a mix, and prices before sales tax and tips.

The numbers to track

• Utilization: booked service hours divided by available hours.
• Service sales per available hour: service revenue divided by available hours.
• Rebook rate: clients leaving with the next appointment booked, divided by clients served.

For example, a stylist available 40 hours and booked 30 is at 75% utilization. At $75 a booked hour that is $2,250 a week of service sales, or $56.25 per available hour.

1. Start from cost and time.Add product cost to the provider's cost per hour multiplied by the service time.
2. Divide by what your target leaves.Divide by one minus your target contribution. A target of, say, 50% means dividing by 0.5.
3. Check what commission leaves.A tiered plan, with the higher rate only on service sales above a threshold, beats one flat percentage. For example, at 45% commission and 8% product cost, each $1 of service revenue leaves $0.47 for rent, front desk and profit.
4. Time it before wage changes.Review prices before each state minimum wage change (January 1 in California and New York, September 30 in Florida) and before any change to the commission plan.

A deduction that takes pay below the minimum wage in any workweek breaks federal wage law (29 C.F.R. 531.35).

Price from your own POS reports. Do not use ticket sizes, booth rents or margins that have no named, dated source.

Asked in Greymill

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Paste this into Greymill with your own figures, and Cash & Profit works it through for your business.

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