Inflation is a word that we are hearing daily but some don’t understand the impact it has on their personal life and salon businesses. Hopefully this short article will give you information that can positively impact your salon business.

Inflation is the rise in the cost of goods and services so that the same amount of money buys less. Please notice that not only do goods increase in price, but so do services. The current round of inflation is based on the increase in fuel costs that hits most sectors of the economy. When there is a time of significant inflation manufacturers and suppliers are forced to increase prices due to their costs of raw materials increasing. I think most businesses “absorb” as much inflationary cost as possible before increasing the cost of their products to their customers. Where does that relate to the salon industry?

As we all have seen the manufacturers and utilities have been passing along their increased costs over the last year. With this increase in the cost of goods, service businesses need to pass along the cost increase to their consumers also. Salons (or independent stylists) need to recognize when a price increase is appropriate. There are 3 main ways that salon businesses handle price increases:

Annual price increase – Many salon businesses make an annual price increase on their service prices. This is probably the best way to cover the increased costs without losing income. Also, this allows the customer to become accustomed to the need for service price increases on a routine basis. The annual price increase is a “proactive” way to keep up with inflation.

Reactive price increase – Others will wait and increase service prices only when their costs have increased to a noticeable level. Increasing prices once costs have increased causes a loss of income or profit during the period of increasing costs.

Do nothing – Some within our industry prefer not to have the potentially uncomfortable conversation with their customers. I will be the first to say this is a mistake that could soon lead to financial failure for the business and the employees.

Please understand that income (profit) is not a bad word. We all need to realize that we work for income or profit. Since we know our customers personally in this industry it can make for more of an uncomfortable discussion. Believe it or not, most customers will understand the need for service price increases, especially now in the current economic climate. You can always relate your price increase to your customer’s line of work. If your customer works at a car dealership they continually increase the cost of new vehicles. If that customer wants the salon or stylist to be able to afford a new car to support their livelihood then they should understand that your service price increase is as unavoidable as other types of price inflation.

Hopefully, this quick and basic article has given you the information you need to keep your service prices up with the inflation rate. At the least please reach out to any of our salon consultants to discuss this further. They should be able to help you make the best decision to help your business stay up with the rate of inflation of products.