Pricing your services for PROFIT
Are you having trouble seeing the profit from your business? There are MANY factors that affect profit, but one you have direct control over are your services. By simply looking at things from a slightly different perspective, we can easily make changes that will do wonders for your bottom line.
How we all began
Most spas out there do a simple comparison of what other spas charge …and then charge less. Why? Just human nature I guess, to be a little below average, a little better value. We did it too when we started way back when. Guess what. We raised our prices (we couldn’t make it with what we were charging) and got busier! But there’s more at stake than that. Our prices define us and help with our reputation. So what do we want to be, an average spa in town or the best? The best spa in town certainly won’t have average pricing. And even the smallest place can be the best. It’s not about the location or the size of your facility; it’s about your service. Do you work on creating a REALationship with your clients? Do you go the extra mile to completely WOW them? If so, you can easily be the best and should charge accordingly.
Believe it or not, a study recently showed that the perceptions of higher prices (i.e. higher quality) actually infulences peoples experiences. They gave testors the same wine, but told them bottle A was $5/bottle and bottle B was $45. Even though both bottles were the same wine, people said the $45 one tasted better!
By the numbers
Once we know how we want to be perceived, we should probably look at our business plan. How many clients are we seeing a day (ARE we seeing, not COULD we see)? What’s the cost of the caregiver (hopefully hourly, not a percent)? Product? Rent? Credit charges? Receptionist? Advertising? Now how much are you paying yourself? What about a return on your investment?
If you know your expenses, you can work backwards and figure out where your pricing NEEDS to be to make a profit. Personally, I’ve always believed an owner who’s got everything at risk shouldn’t be making less hourly than a caregiver.
Once you’ve got your basic services priced, what can you enhance? Create a lavender aromatherapy massage for $10 or $20 more than your regular one. Combo services together to make one “kitchen sink” super service and charge top dollar for it. A quick and easy way to make more is to lower your expenses. The TRICK is how can you do a simple, inexpensive upgrade and create an exciting new service that you can charge top dollar for.
Remember, people buy from who they like. Price isn’t everything to them. With every market, there are those who only want the best. Do you think a Mercedes man would ever be seen in a Yugo dealership? Of course not. By pricing yourself at the top end you’ll attract those types of clients. If you price yourself average, why should people come to you? There are hundreds of average spas to choose from. It’s the coupon-clipper/price-shopper clients (the ones that are always a pain and never satisfied) that you’ll attract by being the cheapest. Who would you rather have for a client, Coupon-Clipper Carrie or Ivanna Trump?
Now, get your menu, get your pnl statement and get to work on it. At least price yourself profitably, if not rock-star! You can make a change immediately and be better off for it.