Home Forums Starting your journey how much profit should i be aiming to make?

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  • #970419
    • Total posts: 56

    hey guys,

    Im setting up a small beauty salon. I currently have no debts as ive gradually brought all the stuff i need out of savings etc.. Im in the process of re evaluating my price list before i open.. everything has been dragging out for me and at first it was frustrating but i am now using the time in waiting for my salon to be ready to re look at my pricing and everything else to make sure it is right before i start dealing with clients.

    My question is how much profit should i be aiming to make off each service and product i sell when im just starting out? also should i be factoring a wage into my pricing? at first i was adding a wage to the pricing but im not sure if this is right. eg $10 an hour so if i was to do a manicure that takes 15mins i would add $2.50 to the price of the materials.

    Im only young and still learning, im trying to get all the information i can so i am completely ready…

    • Total posts: 98

    As a quick reply for you – pricing is obviously key and one of the hardest things to pin down when starting a business. Check out your competitors and price match with them if need be. Just bear in mind one thing – customers don’t mind a drop in price – you’ll soon find out if your prices are too high – but go in too low and raising them down the line will cost you dearly. People don’t take kindly to price hikes! So have a look around at your competition and try and place yourself in the middle there. Might help to even approach your competition – you’d be amazed at how many other businesses you’re essentially competing with will get together with you and help you out.

    All the best though – the fact you’re consciously thinking about these details means there’s bound to be great success when you open the doors

    Good luck
    Scott @ alta|image

    • Total posts: 11,465

    Hi m2nb,

    You might be interested in checking out the presentation notes from the talk Julia Bickerstaff gave at Flying Solo live last month. You can download them from http://www.flyingsololive.com.au/downloads/

    Julia’s book How to bake a business also covers this in very easy-to-understand terms and could be a handy reference for you.

    Good luck,

    • Total posts: 140

    The price you set is part of your company positioning. Do you want to go for the higher end of the market, charge a higher price and give additional services/quality or go for the cheaper end of the market with a lower price.

    Where you are using your time make sure you charge enough to give you a good hourly wage. Remember you won’r be able to work every single hour of the week and will have overheads so you need to factor all this in to your pricing.

    • Total posts: 215

    Before you finalise your pricing might I suggest you consider –

    1. Is this going to be your only source of income?
    2. How much do you need each week to cover your basic living expenses?
    3. How much money do you need every week to cover the costs of your household expenses? (it amazes me that people now put ‘living expenses’ into a different category to ‘household expenses’)

    Once you know the answers to these questions – then you’ll know how much to charge and how many sales you will have to make to cover your costs.

    If you don’t add a wage or profit to your basic running costs – then how are you going to eat; drive to work; or pay your personal expenses?


    • Total posts: 61

    market research, market research, market research.

    You want to be competitive, and find out where you can add value to help you stand out from the rest. If you think you have that valued edge then mark up slightly more, but be clear on what value it is you’re offering and market that.

    Don’t sell yourself short at any time, you are a valuable, your time is valuable, your knowledge is valuable, your product is valuable.

    Start at that benchmark price (figure out who you are going to benchmark against) Make your prices same and then you have the flexibility of having promotions for your launch week where you can add something to their visit for free. Maybe 10% off their next visit, or a product (to bring them back again)?

    • Total posts: 31


    A hairdresser friend (without a salon, she works from home while setting up another business) told me that the profits in hairdressing are from product sales rather than services.

    Maybe factor this into your financial plan. Just some info I’ve come across. FYI.


    • Total posts: 625


    As was mentioned previously, your pricing is part of your positioning, and depends on who you are targetting.

    When you are just young and starting out, you may want to target the lower end of the market, but i’m worried by your example that you are really going WAY too low with your pricing.

    When you operate your own business, you will generally need to charge the client at least 2, pushing towards 3 times what you would want to be earning as a wage in order to succeed.

    The price of $10 an hour to aim as a wage may seem ok if you are young, but you will very soon outgrow the ability to live on that sort of money – i’m guessing you are around 18 right now and live at home. As you go into the adult world, you will find that you really won’t want to live on less than $20 per hour. Remember, if you are used to having a paycheck each week it’s easy to forget about the tax, but when you are your own boss you have to pay your income tax yourself from your business income, let alone GST and other factors.

    If you work full time in a job, you get paid for every hour you work, whereas in your own business you are almost guaranteed NOT to have solid clients booked for 40 hours a week – and if you do you will end up having to work another 20 just to do the bookwork etc.

    What all this means is that as well as the money earned for the time you are actually working on paid work, you also need to factor basic fixed expenses and business costs, tax, some very basic advertising, and most importantly DOWN TIME while you are waiting for clients or while they are having a chat while they pay you, while you are cleaning up, answering the phone etc.

    What this means as a really really rough formula (which will vary a lot).
    Say you want to earn $20 an hour as a wage (realistic) x 40 hours a week. However in a week you will probably be only able to “charge out” 20 hours of that week, which gives a chargeout of $40. Add another $10-$20 to cover taxes, expenses, advertising etc and you have a figure of $50-$60 per chargeable hour just to make the equivilent of $20 an hour in a normal job.

    Now this may seem a lot to you, but women’s beauty services are something that women are really prepared to pay money for. My wife’s hairdresser takes around 1.5 to 2 hours to do a colour and trim, and charges my wife $120. Despite the fact that seems a lot to me, she claims this is unbelievably cheap and I know a lot of her friends and her sisters pay around twice this rate elsewhere.

    In the end it all depends how you are setting yourself up. If you a going to try to be professional and do it properly but are just starting out, I would you could work out your prices based on around (costs x 1.5) + $50 per hour.
    For example, if there was $10 in costs and it took half an hour, you would charge $15 + $25 = $50.

    Hope this helps

    The Hobbit
    • Total posts: 308

    This is a method to calulate your labour costs:
    a) Total available weeks 52
    Less: Holidays 2
    Public Holidays 2
    Sick Leave 1
    Personal Development/Training 1
    Total unpaid time 6
    Available weeks 46
    b) Hours worked per week 40
    c) Available hours for sale: 40 x 46
    40 x 426 = 1,840 hours per year – (rounded to 1,900)
    Next multiply this by your productivity (hours that you will actually get paid for):
    You might aim for say 70% of your day, 50-60% is more realistically, but during the start-up period it might be as low as 30-40%. Let’s say 50% for this example. 1900 hours pa x 50% = 950 hours. If you want to earn $60,000 pa your labour has to be billed at: $60,000 divided by 950 = $63 per hour
    On top of this you need to add your fixed costs, rent, electricity, insurance etc. again calulate the annual cost and divide by 950 to get the hourly rate.
    You MUST to calculate your costs to know where you’re going, but the actual price that you set has no relationship to cost; it is determined by the market. But if you can’t make a living at the market rate there’s no point in being in that business, and you won’t know that unless you calculate your costs or just take a punt and risk your money and time blind.

    • Total posts: 56

    Thanks everyone for all your help!

    Just for the record ive just recently turned 21 and live out of home with a very supporting fiance with a good job lol but of course i want to make the right amount of money in my business to support us financially as well. I currently work casual at a childcare (another profession of mine) and once my business starts all my clients will be by appointment only so if things are really slow i still have some work to get me by.

    I probably should have explained that my salon is based in a country town. The town has 3 hairdressers that are booked out and you need to book atleast 3 weeks in advance just to get in! i have one small competitor that only opens 2 days a week and as far as i can tell no one really goes there. There is another salon/day spa that is currently getting built and theyre going to be offering botox etc so i guess theyre going to be the up market of town. The main town that offers any other beauty services is about 45kms away.

    My main selling point is that i will be using 100% natural vegan skin care products which are australian made ive also gone with australian made nail products and eventually i will be going with Australian made cosmetics. I think this will earn extra browny points with the local farmers wifes hehe and also i really like supporting other australian companys. Id like my prices to be affordable so that people will be willing to spend the money but when i add up everything im scared that the prices will be too much… Im also trying to group prices so that a basic facial, manicure or pedicure is one price then a normal facial manicure or pedicure is one price and a deluxe facial maicure or pedicure is another price (obviously going up higher in price) so that a client who is on a smaller budget could still get say a facial but just on a more basic scale if that makes sense..

    i would love opinions on what im doing wrong or right.. i just wanna make sure its right before i open

    thanks guys!! (sorry about the lengthy post)

    • Total posts: 569

    Seeing as you question was how much profit should you be aiming to make – there are some helpful comments already but like any business apart from profit, you would expect a decent ROI (Return on Investment). Let’s say you have $5,000 and you put it in the bank, without any risk you could earn about 6.5%.

    Now if you are going to go into business, and all businesses have risk, wouldn’t you think that you’d like to do a bit better than the 6.5%?

    For many people who are in “business” it’s really just providing a wage and if all things are covered and they can draw a wage they are happy. However if you wanted to have your business operating as an asset (the other thing all businesses are / should be) then ROI is important.

    ROI is calculated by net profit divided by total assets in the business brought to a percentage.

    • Total posts: 625

    Hi again,

    Just had a couple little points to consider further…..

    The fact your fiance has a good job and is supportive is definitely a help when you are starting out, as is your other work, in the sense that if it takes a while to get enough regular business to make a go of it, you will be ok.

    Where considering this in your decision making would be a massive risk is if you think this means you can get away with charging less, and that you don’t need to make as much. As someone else mentioned, you can always reduce your pricing, but increasing it dramatically later is hard.

    Not making much at the start while you build a client base is a temporary thing you can fix. Not making much because your prices are too low is a recipe for always working really hard for not enough money, and never being really successful. Opening specials, new client specials etc on the other hand are great, just make it ultra clear that they aren’t your normal prices.

    The other comment is on the vegan/aussie thing. Knowing just a tiny bit about rural/farm type people I agree most will like the Australian made angle (if you can actually get the stuff), but I’m worried the Vegan angle could work against you. Perhaps i’m wrong, but some may get the impression that you are for really “new age / hippy / ultra trendy” type people and not for “real women like them”. Maybe I’m wrong but that’s the impression I get.

    Maybe an angle would be rather than promoting it as “vegan”, you could promote it as “100% natural” or “100% organic” or something like that – provided it’s true. The word “Vegan” to me isn’t a selling point for your target market.


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