5 Questions to Ask Yourself Before Raising Your Prices

Hello, my friend. Welcome back to the Modern Hairstylist podcast. Maybe you are sitting there right now and you're thinking, "Oh my God, cost of goods have gone up so much and I have not had a price increase and my profit margin is low. I need to be charging more to make up for that."

Or maybe you're sitting here thinking, "Oh my God, the demand on my time is so crazy, I'm so overwhelmed with clients, and I do not know what the hell to do about it and I can't fit them anywhere." Or maybe you're thinking, "Oh my God, I have put so much time, labor, energy, and effort into my career and my job and the services that I'm doing on my clients and I just do not feel like I'm being properly compensated for that." Maybe you wanna make a certain amount of money every single year and you are like, "What the hell? My current prices are not gonna be able to make me that amount of money."

Totally get it, totally understand, my friend. And you might be thinking to yourself or wondering if you are truly ready to raise your prices, because there is such thing as being ready and not being ready, okay? And there's different types of price increases, and there's a lot of different factors to take in- into consideration. Because the tough news, the hard news is that your clientele determines how much you get to charge.

That's just the facts. And the reason why is because we are at the mercy of consumer behavior and the economy. We are at the mercy of how much your clientele actually perceives your services to be valued at, right? So, we can't just, and what I've been seeing a lot is like we can't just decide what our prices are or raise our prices to things that we believe that we deserve or to the price that we want to make them, right?

So like, you know, we all hear like the, "Oh, you wanna make $200,000 gross a year? Great, then you need to raise your prices to this." It's like, no. You need to raise your prices based upon what your baseline is right now and what you actually deserve and what you can afford to do, right?

You can put in the work, of course, you can always put in the work to get to that place where you wanna go, but if you are not ready for that right now, then you could really mess up your current circumstance as far as your financials go, your clientele go, and you can pull the rug out from underneath yourself. However, on the flip side, I don't want anything that I'm sharing here- here with you today to make you scared of raising your prices, because the majority of the time the answer is yes, you probably should raise your prices. However, the type of price increase that you do is going to be based upon a lot of different factors. So, we're gonna be talking about some of those factors today, um, different types of price increases today, and so much more.

So, if you're ready to get all the price increase tea from Hunty today on the Modern Hairstylist podcast, let's get into it. Let's go. What's the tea, friend? My name's Hunter Doan, industry business educator for hairstylists, but my friends just call me Hunty.

Whether it be growing your clientele, making more money, or automating and streamlining your systems, in the next 20 minutes or so, you'll be hearing realistic, actionable strategies to create a beautiful career for yourself behind the chair. So, if you're ready to get into it, welcome to the Modern Hairstylist podcast. Okay, the very first thing that we should take in consideration when we are thinking about raising our prices is what is the goal of the price increase, all right? What is the goal of the price increase?

There's two reasons, two goals that somebody could have for a price increase. The first reason is a cost of goods increase, okay? So, the cost of goods increase is a cute little $5 to $10, okay? This is something that is supposed to be carried out if you haven't had a price increase in a fair bit and you don't have a lot of demand on your time and you can't afford or you don't want to lose any clients.

I've never had any stylist come to me and say that they raised their prices $5 to $10 and say that they lost a bunch of clients, like ever, if any clients, right? So, a measly little $5 to $10 increase is not gonna do much as far as damage to your clientele goes, and it can really help balance out your cost of goods and raise your profit margin back up to a balanced, desirable place in contrast to the rising costs of goods and inflation, right? And then we have our second type of price increase, which is a price increase based upon your demand and wanting to lose some demand. And yes, you do wanna lose demand.

You want to get people off of your schedule that are taking up space, that are blocking people who would pay more to get into your book, right? So, if you are booked three, four plus weeks out solid, then your new clients' requests, your new client requests, the people who would be willing to pay a higher price with you, are now having to wait a whole entire month to get in with you, right? And you are now literally saying no to making more money. So, the second goal is to reduce your demand so that way you can make space for new clients who are willing to pay your higher prices, right?

So, those are the two types of goals or reasons why or types of price increases that you would have. Now normally, price increases that are meant to decrease demand, normally they're done with percentages and they're normally a little bit more than 5 to 10 bucks. Normally, they're like the 15, 20, 25. Hell, I've raised people's prices and my own price is $75 all within one price increase before.

So, it- it- it really just depends on your current circumstance, and that's what we will also be, um, shining more light on a- as far as what those circumstances are and what those factors are throughout the rest of this episode today. So, the first thing that you need to understand is, is what the, what the goal of your price increase is, right? Is it to reduce demand or is it to make up for some costs of, of goods, right, that have increased? And really, there's not much in between.

And notice I didn't say anything about necessarily making more money, right? I said something about balancing out your rent increases that you have every, every year, right, um, or every even six months sometimes, um, balancing out the cost of goods, balancing out all of, like, your expenses, right? That'll just bring you back to a normal place where you're not losing money year over year, right?But then we have the other price increase where it's like, okay, this is a time where we have to raise our prices, right?

It's supply and demand. So for example, like during the pandemic, do you remember the toilet paper, uh, fricking, uh, apocalypse, right, when everybody was like, "Holy shit. We need to stock up on toilet paper"? The cost of toilet paper when literally every single person in America wanted to, like, stock their houses with toilet paper skyrocketed.

And that's because of supply and demand. If you don't have supply to make up for all of the demand that you have, this is a basic economic principle, right? If you don't have the supply to make up and to please all the demand that you have, then you need to reduce the demand with your price, right? So those are the two price increases that we have.

Now, the second factor that you may wanna take into consideration, and it's a, it's kind of a small one, but kinda not. It depends, right? A lot of this stuff depends. Pricing is so personalized and individual to each and every person, so just know that, right?

Know that nobody's ever gonna be able to give you, like, an exact science to this stuff, and if they claim that they have an exact science, then they're lying, they're wrong, and I would not trust them. So when's the last time you increased, okay? When's the last time you increased? Was it a year ago?

Was it six months ago? Was it three months ago? Have you never even increased your price at all? If you have never increased your price, you need a price increase very soon, okay?

And depending on the demand on your time, and we'll talk about that in just a second, it could be a maybe 10-buck price increase or it could be a $50 price increase. It's really gonna depend on the current state of your business and your clientele and what you can actually afford to do. And then if you have just recently increased, right, the contrary, let's say that you increased six months ago or three months ago, right, something like that, then you wanna be really careful and you wanna p- be very conservative in the way that you then increase again, right? So the circumstances in which somebody would increase in such a short amount of time is if they've done an original price increase and, eh, that was with, with the goal or intention of decreasing their clientele or their demand, yet it didn't work.

Then double price increasing to make sure that the, that goal is actually met is normally why that happens, right? So let's say that Suzy raises her prices in, uh, July, right? And then she waits three months and she doesn't really see any dent in her, in her demand, which you could kind of think as a good thing, but also at the same time, like, you need to put a dent in that demand, and you are saying no to more money if you don't, right? So, like, let's say that Suzy raised her prices 20 bucks in July and then three months later, there was no dent in the demand.

We would then go ahead and raise again, and the three-month mark is the b- is the absolute minimum of how long you should wait until you ever consider another price increase because you won't understand the true effects of your price increase until three months later, and it gives you and your clientele enough time to balance out a little bit before you go ahead and do that. But three months, right, three months, you better have a shit ton of demand on your time. You better be able to afford, um, losing a fair bit of clients, right? And you better be a little bit more conservative in the way that you're raising your price because you already raised it, right?

But again, this is so circumstantial. It totally depends on, like, how much you raised it before and how much you're gonna raise it now and so many different things. But those are some, uh, some things that you should take int- k- into consideration. As far as a price increase for inflation goes, you should at least raise your price every single year, at least five to 10 bucks.

And by the way, that is, like, a measly price increase, okay? That is, like, a cute little drop in the bucket, and it's literally not making you any more money. It's just gonna make up for the fact that your cost of goods and cost of doing business has increased inevitably, right? So a lot of people get really scared about doing price increases that are, like, five to 10 bucks, and I'm telling you, my friend, there's literally nothing to worry about.

Your clients will not leave you. They will not even blink an eye. It does not matter. But when we're talking about you actually making more money, it requires you having a strong foundation and raising your price, like, 15 bucks, 20 bucks, 25 bucks if you want an actual substantial raise in your take-home pay, right?

So now let's talk about the, that, that strong foundation, right? Let's talk about those other, like, really specific factors that actually determine the demand on your time and give you the foundation to be able to have that substantial price increase. In order to evaluate the demand on your time, here are a couple things that you wanna look at. So the number one thing is how booked out you are, right?

Simple enough. The way that you can determine this is by two different questions, one or the other, is if I was a new client and I wanted to get in with you for my first visit for your most popular, most requested, and the service that you are most specialized in, how long would it take? How many weeks, how many days would it take me to get in there? The other way that you can determine this is how far outbooked are you, how many weeks outbooked are you in which you are 80% booked or more, right?

So those are the two ways that you can kind of determine, quote-unquote, "how booked out" you are as a hairstylist. Now, normally, if you're looking for a substantial price increase, right, that's, like, above $10 that's actually gonna make you more money, normally you're gonna wanna look at, like, the two and a half to, like, three weeks plus booked out range. That's normally where we can afford to have a little bit more of a substantial price increase. But there's another factor that goes into this, which is going to be how many new client requests you are actually getting because if you are going to be executing a price increase in which you are trying to reduce your demand, you have to have people who are actually going to replace the people that you lose on your book, right?

So it's so important that these two things are taken into consideration because they work in tandem because if you are considering losing clients with your new prices, which is a healthy and important and good, okay thing, if you're ready for it, then you're gonna need people to replace that and fill those gaps. So l- if you are, let's say, two and a half to three-plus weeks booked out and you're getting about five client requests a month, I think that that's a really nice, healthy place where you can have, like, a $15, $20 price increase.Now, if you're anything a little bit below that, it depends on a lot of factors, but normally, you don't wanna be going too crazy with your s- with your price increase, and you, you can look at more of, like, a $5 to $10 price increase. Again, I'm gonna say it a million times, this is so circumstantial.

Pricing is so individualized, and it is so dependent on so many different things. So, these are just general guidelines from a general perspective of somebody who's seen, like, hundreds of stylist businesses. I'm kind of averaging it all out. Because I've had circumstances where, like, these numbers and these things were the case, but then we determined otherwise, contradicting what I'm actually saying here.

But this is what it looks like the majority of the time for most stylists, okay? And something, another factor that a lot of people don't think about, but I think that you should absolutely take it into consideration, is how many of the people that are, you are booked out with are actually unique people? So, for example, let's say that I have clients that are normally coming back and seeing me every four weeks. I could go ahead and I could tell you that I'm three months booked out, right?

I am three months booked out. But if you go ahead and you actually break down how many of those people in that three months are unique people versus people who have multiple appointments with you within that range, then that can differ how we actually evaluate the demand on your time. So, if you are three months booked out solid, but the majority of your clients are actually on that, in that three months three times, then that's going to be a different type of conversation than if you are three months booked solid and the majority of those clients are actually all unique clients that only have one appointment with you. Because the more, the more people that you have, the more unique people that you have within that range, is going to allow you to raise your prices a lot higher, right?

Because you have a lot more people to dip into and you have a lesser percentage of people who will actually leave you with your price increase. Versus when you have less people to pull from, you have a much higher, greater chance and risk of people, of you losing your foundation. So, we can run around and we can brag and we can talk about price increases all we want because we have three months booked solid, right? But three months booked solid doesn't really mean much if those are all the same people within that same range.

Does that make sense? I hope that makes sense. A lot of people don't take that in consideration, and I think it's super important to take into consideration. Another thing, too, is somebody who's coming to see you every four weeks, maybe even a weekly standing appointment, a price increase is going to be a lot more substantial and more noticeable in their perspective to th- that person.

Versus if somebody's coming and seeing you maybe two times, four times a year, then a price increase, a lot of the time, doesn't even matter to them. They don't even think about it because they're not spending this money with you super consistently. So, again, there's so many factors to take into consideration, and there's even more than what I just listed here, which could include, like, your competition. So, like, how do you compare to other salons and stylists in your area?

And yes, that is something that you should take into consideration when it comes to a price increase. It's basic economics. That's what Harvard Business School will tell you. That's what any Fortune 500 company will tell you, as far as how they price in their markets.

It's what you should take into consideration. It's not how you should set your prices, but it is h- what you should take into consideration for your price increase. And so many other things, like are you a specialized stylist? How and, and how often are your clients coming back to see you?

So many factors, which is why I love, within my programs, we have so much on-hand support and live group coaching calls included in enrollment in which we can have these conversations. I can hear all of your spec- specific circumstances, and then I can give you a very customized and personalized recommendation based upon your exact situation. If you're passionate about working with hundreds of other stylists and working with me to grow your business to the next level, to be in a space where you can have crazy substantial price increases, or you have the confidence to increase your price and you need the accountability, the strategy, the tools, and the encouragement to move forward and reach your goals, I would love to work with you You can go to hunterdonia.com to figure out how to do that and what all I have to offer, and I hope that you enjoyed this episode of The Modern Hair Stylist podcast.

So much love to you. Peace out, girl scout. Bye bye.

End of transcript. © 2023 Hunter Donia LLC.