Have you ever wondered when you should raise your prices or if/when it’s best to hire a new team member? These are common questions for every salon owner. Unfortunately, many go with their gut when making these decisions. But in order to maintain a profitable business, you need good, hard numbers—and one in particular that will let you know when it’s time to hire or raise your prices. It’s called productivity.
Most successful owners track their salon’s productivity because these numbers help you to make better business decisions. But before I go any further, I want to warn you: We are going to get a little “mathy” here. I know most beauty professionals suffer from math PTSD, but I promise there won’t be any algebra or geometry discussed; just a simple formula to help you figure out some important information that will help your business grow.
What is Productivity?
The first step is to understand how busy your business is, and, since being “busy” is kind of subjective, there is a mathematical way to track this. I’ve had people tell me that they see 10 people a week and are “slammed,” and other people have told me they “only” see 25 people a week, but could be busier. The idea here is to get out of the subjective (i.e., feelings) and make decisions based on objective numbers and facts.
To figure out your productivity, start by adding up all of the hours you had available to sell in a month. Then, add up all of the hours where you had paying clients. Once you have those two numbers, take your total paid hours and divide them by the total hours available, and you will get a number that tells you what percentage of hours you had available for sale that were sold. The equation looks like this:
Let’s be clear, when I say add up the total hours available to sell in a month, I mean, add up the hours you are willing to take clients. I know some of you probably don’t track how many hours you make available, so this might be a good time to set some boundaries and decide what days and hours you’re going to work. Just working whenever you can get a client is a hard way to run a business, and having no boundaries can lead to burnout. But let’s say you take clients from 9 a.m. to 3 p.m. on a Monday, then you have six hours to sell. So figure out how many hours each day you plan to work, add them up for four weeks and you’ll get the total hours that you have available to sell in that month.
To figure out how many hours are sold, you need to look at how many hours you worked on paying clients. An example: Let’s say this past month you had 100 hours available. Then, you add up the hours you worked on clients and you can see you sold 80 hours. Note: These are hours where you were paid to do lashes. Don’t add in hours following up with clients, cleaning or anything else you do to run your business. You just want to know the hours where you were getting paid to do lashes.
Now that you know you had 100 hours to sell and that you sold 80 of those hours, it’s easy to figure out how “productive” you were last month. You take 80 and divide it by 100 and you’ll get 80 percent. That’s a good productivity rate! Most industry experts agree if you’re 80- to 90-percent productive, you’re killing it. You don’t want to be 100-percent productive, as that means your schedule will be very inflexible; you’ll have no space to move people around, and you won’t have any space for new clients.
Make the Most of It
Once you know your productivity rate, you can then decide if you need to raise prices or hire more staff. If you’re running at 70 percent productivity, that means for every 10 hours you have for sale, you still have three hours available to sell. That’s a lot of time being left unsold; you still have room to grow your following. But once you get up around 90 percent or higher, you’ll notice that your books are full most days. If this continues for two to three months, it’s safe to assume that this has become the new normal, and it’s time to do one of two things: hire some help or raise your prices.
The goal is to grow your business and make it more profitable. So, if you decide to hire a new team member, your productivity will drop a lot since you are essentially adding more hours to sell. Let’s say you hire a new person to work 100 hours per month. With this added help, you no longer will be selling 90 hours out of 100, but rather 90 hours out of 200. Don’t panic: Your productivity will temporarily go down while you work to bring in new clients to fill up the newly available time, but for an in-demand business, this should be short-lived.
Another option is to raise your prices. Let’s say you are charging $80 per hour and you are 90-percent productive. This means that you can charge more, lower your productivity rate and still make more money—cool idea! To do this, you’d probably need to raise your prices by at least $10, and up to $90 per hour. This will give you a nice bump in income. While you will likely lose a few clients when you raise your prices, don’t worry: This is what you want. You’ll lose a few clients—we lose about 3 to 7 percent of our business when raising prices—but you’ll also find new clients who will be willing to pay your higher prices. As long as you provide top quality services, you’ll be able to charge more and grow your business.
Afraid that’s too much of a loss? Let me show you in real numbers how you can work a little less, but make more. Let’s say in one month your salon was 90-percent productive and you charge $80 per hour for lash services: Sold 90 hours x $80/hr = $7,200 income. Then, let’s say you raise your prices by $10 and lost 7 percent of your clientele. Here’s what you’d be making: Sold 83 hours x $90/hr = $7,470 income.
While you lost 7 percent of your business, you made an additional $270. Even if you lost 10 percent of your business, you’d still be making the same salary just not working as hard for it.
I often hear people say that you should raise your prices because “you’re worth it.” While that might be true, if you’re only 30-percent productive, you’re not very busy and it could be a poor business decision to make any major moves. If you raised your prices, you’d see your productivity go backward, and you’re not in a position to
lose business. Wait until you’re 85-percent productive or more before raising your prices.
Tracking productivity is essential for a successful business and it will let you know when to hire, when to let go of staff and if and when it’s time to raise prices. I encourage you to take a moment to go over your numbers and figure out how many hours you have available to sell in a month. Then, go back and see how many hours you sold last month. Once you have those two numbers, you’ll finally be able to track your productivity. After all, tracking your productivity will help you get a better handle on where you currently stand and give you an idea of where you want to be in the coming year.
Time to Cut Back
While it’s fun to talk about how to make the most of your productivity, unfortunately it’s not always a positive experience. If after doing these calculations for your business you see that your productivity is only at 50 percent—and you have three staff members—sadly, it’s time to cut down the hours you have for sale. If you’re only selling 150 out of 300 hours, it’s tough to be profitable. You simply aren’t busy enough to sustain three lash artists. In this case, you’d have to make a hard decision (welcome to leadership) and let go of a team member. With less hours to sell, you should see your productivity go up in the subsequent months, selling closer to 150 out of 200 hours. This will make you and your salon much more profitable.
– by Paul Leubbers
Paul Leubbers oversees business operations at Integrity Lash and cohosts the LashCast Podcast, aimed at educating lash stylists. Integrity Lash has been named the Best Lash Salon in Southern California by Los Angeles Magazine, Vanity Fair, Pasadena Magazine and Brides.com, among others.
[Image: Getty Images]