Intro:
Do you feel like you were meant to have a kick career as a hairstylist? Like you got into this industry to make big things happen? Maybe you’re struggling to build a solid base and want some stability. Maybe social media is important, but it feels like a waste of time because you weren’t seeing any results. Maybe you’ve already had some amazing success but are craving more. Maybe you’re ready to truly enjoy the freedom and flexibility this industry has to offer. Cutting and coloring skills will only get you so far, but to build a lifelong career as a wealthy stylist, it takes business skills and a serious marketing strategy. When you’re ready to quit just working in your business and start working on it, join us here, where we share real success stories from real stylists. I’m Brit Seva, social media and marketing strategist just for hairstylist, and this is the Thriving Stylist podcast.
Britt Seva:
What is up? And welcome back to the Thriving Stylist podcast, I’m your host, Brit Seva, and today we’re talking about a new pricing conversation that could be incredibly detrimental to a stylist’s income. This is actually not the podcast I had planned to record today, I had a couple of other podcasts ready to rumble, and then over the last 24 hours, there is a specific Instagram post, that was created by another really brilliant educator, that’s been DMed to me, I don’t know, 40 times, a lot of times, and I was like, okay, clearly this is an important conversation. The first couple of DMs, I was like, oh, okay, interesting, yeah, yeah, got it, and then when it kept coming up, I was like, oh wow, okay, this is kind of a bigger deal and bigger conversation. And the interesting thing was that the common message that was coming about this specific post was the same.
So, often, it’s not rare that a stylist or salon owner will send me a post from somebody else and say, what do you think about this? That happens all the time, every single week. It is rare that I will get the same post sent to me dozens of times, like this one happened, and that the sentiment is the same. And the sentiment on this one is, I like this concept, I’m trying to make it work, and mathematically it doesn’t work for me. Can you help me? That was the overwhelming message. So, I did the math, and I’m going to tell you exactly what the post was and all the things, but I did the math and I uncovered a lot through it, and I think this is an important conversation for all of us to have, yes, about this post, but just about thinking about pricing and money in general.
It was such a great opportunity for me to center back around the facts, not the feelings, it’s really easy, I think especially in our industry, we’re a service-based industry, to focus on the feels and the vibes, and we’re in this economic pressure cooker right now, where it’s holding onto all that we’ve got, and money as of concern, and we start to make these emotional decisions that can sometimes be really detrimental. And this was one of these where I was like, I feel like I got to get this podcast out with urgency just so that everybody takes a step back and takes a moment to check their math. That’s it. So, the post, I’m not going to say what educator this was from, because to be quite candid, I don’t know that it makes a radical difference. I will say this educator is somebody who is very innovative, is incredibly successful, has had a very positive impact on the industry.
I’ve seen other concepts from this educator before and been like, wow, that was brilliant. This is somebody who’s very smart, has built a great clientele for themselves without a shadow of a doubt, and whenever any educator talks about money and pricing, often people perk up. And I think that the reason that this specific post super took off is it felt so good. It felt like relief to hear the message that was shared. And the message that was shared was, the pricing model that I used for my clientele is basically like grandfathered in pricing, loyalty pricing, where if the price for your service when you first come in to see me is $50, it’ll be $50 or so long as you receive that service. Whether it’s now, or 10 years from now, or 20 years from now, $50 is your rate. And the idea was to lock in loyalty with this guaranteed pricing.
And this person said, and the concern is always, if you’re locking in guaranteed loyalty pricing, how will you ever make more money? Which, of course, is the concern. It’s the concern with lots of different pricing models, not just this one, but such a good question, that’s always a valid question when we’re talking about changing pricing model. And this person said, “Well, there’s a natural attrition to every clientele,” which I coach too as well. There was a little bit of a difference, so this educator said, “On average, a stylist loses 15 to 20% of their clientele every single year.” What we strive for in thrive versus society and what I coach to is 10% attrition or less. So, if you are retaining 90%, that’s very good. So, a lot of the people who were sending me this message were like, whoa, 15 to 20% loss in clientele, that’s heavy, and I said, but “No, but the thing is that’s normal, that’s why we shoot for 10% or less, because 15, 20%, 25% is very normal.”
And when we say things like that, a lot of times stylists are like, “Oh, well, I retain like 99%.” I have never, ever, ever in my life, celebrity stylist, big deal stylist, small town stylist, seen a stylist that retains at 99%, it’s essentially impossible. There’s no business that retains that high because people move, their lifestyles change, people pass away, people decide they don’t like the color of your shoes… People just get different preferences. Their kid goes to cosmetology school, they start seeing them for hair. Life just happens, you’re never going to keep your entire clientele for the entire duration of your business, that doesn’t even make any sense. So, let’s get a grip on that and understand that all of us are losing clients every single year.
All of us are. So, we shoot for 10%, this educator was like, honestly, 15 to 20% attrition a year can be expected. I actually don’t disagree with that part, I think that’s a pretty good slice of the industry and an industry average, I can get down with that for sure. And so, what this educator was saying is, I have that locked in loyalty rate for my long timers, people who have been coming to see me, and then the way I make more money is I do raise my prices, but it’s only that 15 to 20% of new clientele, right? Because 15 to 20% left, or churned, or were not retained, however you want to say it, as this stylist is an educator, it’s bringing in new clients, those new clients are paying the higher rate.
So, what this educator was saying is, that’s how you increase your revenue because you have this loyalty clientele, who’s locked in at a price point that makes them want to stay, and also shows them that you care, and you’re respectful of the longevity, and all of those beautiful things, and then the way that you make more money is the new clients pay a higher rate. Now, one thing I’ll say is if you go back and listen to episode 326 of the podcast, it says, “Passive stylist, artist, or wealth builder.” I did a podcast episode a while back talking about different approaches to doing good work in this industry, and one of the things that I said openly in that episode is, “I like to coach to those who are wealth builders.”
And when I talk about wealth, it’s not just money, the wealth wheel that I coach to and all that my coaching is, is time, health, love, and money. So, when I say wealth, it’s abundance in all four of those areas. Abundance of time, abundance of love, abundance of health, and then abundance of money, all four of those things. That’s the wealthiest possible life to me, when you have all four of those in some kind of symbiotic relationship, all as well. So, that’s what I’m referring to. I do believe that this educator and stylist, one of the reasons why they are so beloved and clients do like to go to see them is they’re very heart-centered, and I do believe they want to live a beautiful wealthy life, but I think they do this, they really enjoy supporting the community, and the community that is our industry, the community that is their clientele.
I think that this person has the mindset of I want to make a really beautiful living for myself, I really want to serve my community in the deepest possible way, I want my clients to feel loved, to feel appreciated, to feel supportive, that is certainly an approach to being a stylist in the industry. Because of that mindset, I think that’s a huge part of why this pricing model they were speaking to was chosen because it aligns with that mentality. The other thing I’ll say about this educator/stylist is they have a huge following, and admittedly they even say, “Clients cross state lines to come in to see me.” So, when you have a pool like that, you can start to do some creative stuff because at that point, you’re not the average local small town stylist, bigger things are happening for you.
So, you can start to flex a little bit. I want to break down the system that was proposed and the concepts that stylists were asking me about, and I want to go through them mathematically. Now, going back to that post, there was a couple quotes in the comments I want to just address briefly. One of them said, “This strategy is the foolproof plan to make 100% more in five years or less.” So, as if you applied this loyalty based pricing, you double your income… When you say 100% more, that’s doubling your income. “You’ll double your income in five years or less,” that was one of the statements, and then somebody commented, “This is really tricky when your clients are regulars.” And the comment was, “Regulars fall off eventually.” They do, absolutely they do. That’s correct.
Attrition is a part of it, and I do agree with that. Another question that was asked is, “What if they move away for five years and then return?” And the response back was, “If a client comes back to me after moving away, they still get the same price, ultimate loyalty.” That last piece, ultimate loyalty, really showed me the heart, and I was like, see, this is the core of this pricing structure is I want my clients to know I love and care about them. And love to me is not romantic always, love can just be big, open heart, I see you, I feel you, I’m grateful for you. That can be love too. And I think that this stylist and educator is coming from that place of, I always want my clients to know how much I deeply appreciate them.
So, even if somebody leaves for five years and comes back, they still get that locked in rate. So, because so many stylists were DMing me and asking me to math this out, I did. So, this is going to be a very mathy episode, tune in, if you can’t keep up with all the numbers… If you want to keep up with all the numbers, get a pen and paper. Because the math will math on what I’m about to share with you, but it is going to feel really numbers heavy. If not, listen back to it, I’ll explain everything as simplified as I can, but I want you to know the numbers that I wrote down. So, using this pricing model, this idea that once a client comes in at a rate, they’ll always have that rate, they’ll never have a price increase done on them, only new guests will pay a higher price, that’s the methodology. Okay?
So, I first started off with very simple math. I said, what if there was a stylist and their average ticket was $100? So, whenever we’re looking at an average ticket kind of math equation, you have to figure half the clients are paying more than 100 and half are paying less. Some of you are right in that wheelhouse, some of you are making way more than that. Don’t worry, we’ll do math for those who are making way more than that. But let’s keep it simple for a moment, $100 average ticket, for any given stylist, okay? And let’s say that the average client is in that stylist’s chair for 75 minutes at a time.
So, some clients are 45, some clients are 60, some are going to be 90, some are going to be two hours… But let’s say on average it’s 75 minutes. That would mean on average this specific stylist could see 6.4 clients a day, if they worked an eight-hour day, and on average they’d make $640 in a day. That would be their average production rate in any given day. So, $640 a day, assume they work five days a week, that’s an average of 20 working days a month, that’s $12,800 in average monthly revenue, top line, for somewhere around $153,000 a year. Now, I will say, whenever I do math like that, I always figure stylists are going to take a few vacation days, whatever, so it’s not exactly precise, 52 working weeks, it’s more based on 50 working weeks, assuming that a stylist is going to take a little bit of time off.
So, $640 a day, working an average of five days a week, they’re going to bring in somewhere around $153,000 a year, $153,600 to be specific. Okay? So, now that’s the income, so seeing 6.4 guests working 20 days a month means you’d see 128 clients in a month. Okay? 128 guests over those 20 days worked. Now, generally, this is a really standard math equation, if anybody’s ever trying to guess how many clients are in their book of business, you can do a manual accurate count, that’s my favorite, but if we’re trying to guess, and we’re making an assumption, the average clientele is generally riding around 2.5 times the size of the number of guests you see in a month. So, if you see 128 guests in a month, we multiply that by 2.5, which gives us 350 clients in the clientele. Why do we do it by 2.5, does anybody know?
Because the average guest frequency ranges between six and 12 weeks. You have some people who are the high maintenance root touch-ups, they come close to four/six sometimes, and then you have the lived in blondes, who are more like 12/16 sometimes. So, what we assume is that on average every two and a half months, a guest will come in to see you, so you can assume that if you take the amount of guests that see you in any given month and multiply it by 2.5, that’s more or less your book of business. It’s not precise, like I said, if you actually went in and counted all of your clients who were regulars, you’d get a more accurate number, but for simple math, this is what we go with. And honestly, even if it were off by, I don’t know, 50, 60, 70 clients it’s not going to make that much of a difference when you hear how the math goes.
So, this educator said, “My average retention loss is 15 to 20% of clients a year,” which again, I think is pretty close to what industry average is right now, like I said, in Thrivers, our goal is 10%, but also in some specialties, higher attrition is normal. If you are a color correction specialist, if you do have clients flying in from out of state to see you, they might not come in every 6, 8, 12 weeks, they might come in once a year, or once in their lifetime. So, that’s going to affect that as well. So, knowing that we see 120 guests a month on average, if we are losing 15% of our clientele in any given year, that means 52 clients a year are leaving. We had 350 clients in our clientele overall, 15% are going to move on in a year… That is on the low end, 15%, so that means 52 guests have left our business over the course of a year.
We are seeking to sustain our demand, so still seeing the 128 clients a month, but now 122 of them are returning guests, and we can assume six would be at the new price point. Because we’ve lost some guests, 15 to 20% of our clientele has been lost, we’re going to need to see six new clients every single month simply to sustain our books, simply to sustain that 128 clients a month goal. Okay? So, remember, this was a stylist who we said their average service ticket was $100. Let’s say we follow this model and we decide to raise prices by 10%. So, meaning, now, it’s on average $110 to see us, but only the new clients pay that. So, 122 of the clients, meaning those who had been in the books for a while, are still paying the $100 they were paying before, and these six new clients we’re seeing this month are now paying $110.
So, just those new guests are paying the price increase. How does that math? Well, the monthly income before was $12,800. Now it’s $12,860. So, the income increased by $60 a month, so you did a 10% price increase, but it only affected your new clients, so overall, your income will increase by about 1% for the year. Annual income before this raise was $153,600, after this raise, it’s $154,320. Your annual income increases by around $800. So, actually, that’s half a percent, your income for the year would not even increase by 1%. So, yikes, let’s scale it up, because maybe it only doesn’t work for those at a lower price point, so let’s scale it up. So, same math, but let’s say that this stylist has an average ticket of $300. This is a higher ticket stylist, let’s say that clients are still in their chair for an average of 75 minutes, let’s keep all the other math the same, but let’s say that this stylist charges more.
So, now, this stylist is doing $38,400 a month in services. Damn, that’s so good, right? When people are like, oh, there’s no stylist who breaks $300,000, yes, there are. So, this stylist would do $38,000 a month in services. They’d be still seeing the same 128 guests, and let’s say we do that same 10% increase, but just for the new clients, right? 122 clients will still play the $300 they’ve always been paying, but the six new clients will now pay $330. Like, wow, that feels a little bit more significant. Your monthly income will now be $38,580 instead of $38,400, meaning your monthly income increases by $180. Annually by $2,160. So, even at a higher price point… Now, we did get a 1% income increase on that, the price point doubled, so did the increase, but we’re still at 1%.
So, with the cost of inflation and the cost of literally everything, I’ve always coached to, we want to strive for an income increase of at least 10% a year, at minimum. 15% usually is an increase that you feel, 20% feels real good. But for us to sustain our lifestyle, not even improve our lifestyle, literally sustain, knowing that the cost of everything is going up all the time, at least a 10% increase in revenue is really important. And we’re hovering right around 1%. Okay, so let’s shake up the math a little bit, like I was bound and determined to make this work. I’m so down for new innovative ideas, and I was like, if this strategy works, it’s so brilliant. You get to be heart-centered and make more money too? Double your income in five years? I was like, I’m all about this.
So, I ran the math a bunch of different ways. Let’s go back to that initial variation, so the $100 average ticket, 75 minutes in the chair on average, 128 clients a month, all that, let’s go back to that simple math, because we proved, even with a high ticket, it didn’t move the needle very much. So, let’s go back to the simple $100 average ticket. So, let’s do the same exercise, but instead of assuming there was a 15% loss of base clientele, let’s say a 25% loss of base clientele. Because maybe it’s like, you know what? You need to lose more to gain more. If this stylist were seeing more clients at the higher price point, then maybe the math maths, and I was like, okay, let’s try it. So, let’s say this stylist was losing 25% of their clientele every single year.
So, they’d lose 90 clients, 90 regulars a year, so on average, we’d want to be seeing about 10 new clients a month to sustain. So, you’re seeing 118 regulars at that initial $100 price point, and then 10 new clients at the $110 price point. We’re seeing 10 new clients at that price point instead of six, maybe that’s going to make a big difference. Nope. So, before, it increased our income by $60 a month, now it increases our income by $100 a month over a year, it’s still less than 1%. Okay, so then let’s get aggressive. So, maybe a 10% price increase is the problem, maybe with this model, you need to do a big fat price increase. So, let’s say this stylist says, okay, my existing clients are going to pay $100, but my new guests are going to pay $130.
I’m going to do a 30% increase on my forward-facing price point, which is a higher increase than I believe is tolerable in most markets, but I wanted to play it out. Let’s just give it a shot. So, what was once $100 is now $130, and you can’t do that over time, you have to do it at one shot because we’re trying to increase our income by at least 10% in a year. So, it’s not like, oh, well, you could work your way up to it. You could work your way up to it, but you’d be chipping away at it at that 1% growth rate, it doesn’t work. So, we need to grow more aggressively. So, assuming we do that 30% increase, we’ve got the 118 clients paying $100, average service ticket, but then 10 new people are now paying $130 instead of just $110.
So, now, we’ve increased our monthly service revenue by $300 a month, $3,600 a year. 2% revenue increase in a year. You have raised your price by 30% and increased your annual revenue by 2%. 2%, okay? So, then again, I’m bound and determined to make this work, and I was like, okay, what if you saw 50% new clients and 50% clients at the old price point? So, 64 clients are paying that initial $100 and 64 new guests are paying the $130. Half of your clientele is paying that new 30% increased rate and just half is paying the $100. Okay, so when you look at it like that, we’re like damn, so you’re seeing 50% new clients, every single month You’re seeing 64 new guests, that’s a really high volume of new guests. But let’s say you’re pulling it off, because that’s how your demand is there.
Okay, so now we’re getting somewhere. Now we’ve increased our income by $1,920 a month, or $23,000 in a year, that’s a 15% income increase. So, if you are literally 50/50, and half of your clients were paying the lower rate, and then half were paying the higher rate, at 30% higher than that original rate or more, then you start making it work. Three challenges here. One, I thought the whole point of this method of price point was loyalty, give back, and client appreciation. So, if we’re losing 50% of our regulars every single year, I just wonder if it’s actually giving loyalty. I don’t know that part, because obviously the point of this is loyalty, so then you wouldn’t want to be losing 50% of your clientele every year. And by the way, the stylist and educator didn’t say that they were, so I’m not assuming that they are, but I had to get to a point of 50% client attrition a year to have the math work?
That part was tricky for me. The other thing is, when clients catch wind that you’ve increased your price significantly, and you do have a loyalty program, and they are incentivized by it, honey, they’re going to stay. And I get it, because initially that was what we said, was like the point is for clients to stay, the point is to reduce churn. But we just did the math, and if the bulk of your clientele is paying the lower price point, you end up in a bind. So, do you start working more hours or do you start firing clients? Or how do you thin enough of that clientele who truly wants to hang on to ensure that you’re seeing enough of the volume of those at the higher price point unless you have significant demand? Which goes back to what I said 20 minutes ago, of like, if you are somebody with a huge following, huge demand, people are crossing state lines to come to see you, I get it, because you probably do command that kind of level of demand.
But for the average stylist in a small community, where they’re working on word of mouth, and referrals, and the social media following that they have, and people are not crossing even county lines to come see them, I don’t know if the demand would be there. Maybe, I’m just not sure. And then, lastly, we had to increase our rate by 30% and lose 40 to 50% of our clientele to hit a 15% average annual revenue growth. That 30% increase that we did, where a ticket went from on average, $100 a client to $130 a client, that’s a really massive increase. You could very well price yourself out of your own market in the name of making the 15%, which to me takes us right back to the biggest pricing mistake I’ve ever seen our industry make, which is the cost of goods increase.
We watched stylists coast to coast, for the past three years, do these cost of goods increases, and now they’re in a bind because as the economy shifts, and inflation is still high, they’re like, dang it, I needed to do that because I needed to cover my expenses and make more money, but now clients are having pushback, or I’m not retaining, or I’m not growing as fast because now you’re priced above market. And I understand why you did it, and I can show you how to undo it, but it puts you in a tough position. Your perceived value would need to be exceptionally high basically, to pull that off. And for some stylists, they are, but this is just not for everybody. You’d have to be exceptionally high perceived value to pull that off. So, if instead we take that clientele of 128 guests a month and just increase our price over overall by 5%, so meaning that the average ticket is now $105 instead of $100, that gives us next additional $7,680 a year, and a 5% increase in our overall revenue, like 5% equals 5%.
So, yes, now your entire clientele is paying $5 more, but your income or your revenue has increased by 5% as well, instead of just 1%, and now you’re not managing a bunch of different price points either, that seems to make more sense. I think that this loyalty model could work if you’re a traveling stylist, or at least 50% of your clientele is one-timers, specialty services, big, fat color corrections, huge makeovers… Then I think this works really, really well. You just have to have the demand for it. For the average stylist, I’m not sure how we would use this to double our income in five years guaranteed. I can’t make it work, I can’t make the demand get there. So, going back to our original number, to double the $153,600 in annual revenue to 300K, which would be the doubling, with the same 128 guests a month, we’re not double shifting, or expanding our schedule, you’d need to be doing over $1,200 a day instead of $640… Which only makes sense, we’re trying to double our income, so our daily service total would have to double.
So, that means our average ticket would have to be $200, again, that only makes sense. We’d need 50% of our clients to be at the $100 rate, and the other 50% to be at a $300 rate to make a $200 average ticket. Now, maybe you can pull off $300 for the average 75-minute service in your city, or whatever specialty you’re in, and you’re losing 50% of your clients annually, so you could double your income because the turnover is so high, and you’re able to charge a really high rate for those new guests, but you’d have to triple your new guest rate to double your income, to meet in the middle at that higher average service ticket.
So, just be mindful of that, and like I mentioned, I loved the initial concept on this, the idea that, what if there could be locked in loyalty pricing? It really got my wheels turning. As these DMs were coming to me, I was like, I feel like we could make this work, and I just… I couldn’t. And maybe I have a blind spot in the math, and I’ll always own up to that if I do, and if somebody wants to run the math a different way and send it to me and we can talk about that, I’m totally here for it. I just could not figure out how to make this profit for the average stylist.
So, if you are thinking about shifting to this loyalty model, my advice to you is run the math. Run it out, think of all the different scenarios, how you’d pull it off, look at how many new guests you see on average in a year, look at how much your cost of living has gone up in the last five years, can you pull this off? Just get curious. As I always like to say, so much love, happy business building, and I’ll see you on the next one.
