Why Giving Away Free Haircuts is a Bad Idea
By Simon Clark, Simon Clark Hairdressing, Port Elizabeth
I saw a post on social media recently asking whether it was ok to give away haircuts for free as in theory they don’t cost us anything.
As I have spent a fair amount of time looking at salon costings I thought this would be fun to look at the cost implications of doing so.
The general drift seemed to be if clients came for a color they could have the haircut for free. Leaving aside all of the ethical and emotional reasons for not doing it, lets look at this rationally from a financial point of view:
We have a hypothetical salon and they charge the following:
R200 for a cut
R300 for a wash cut and blow
R300 for Roots
R400 for a half head of foils
R600 for a full head of foils.
Let’s look at the discounts given if you give a free cut / free cut and blow with each of the color services:
Roots 40% / 50%
Half head 33% / 42%
Full head 25% / 33%
As you can see these discounts are huge. To help you see just how dangerous what you are doing is, I want you to think about the very service you are giving away, a haircut! As things stand it is the one service that our clients cannot replicate by themselves at home. It is also the one area of our industry that survives as a standalone, profitable business – barber shops.
I am willing to bet most barber shops will think twice about discounting their cuts by more than 10% never mind 30 / 40 / 50%. There is no business on this planet that can survive giving discounts like this. Why do you think you will?
It is also a myth that the haircut costs you nothing. As a hairdresser you sell your time far more than you sell your expertise. In previous articles I have explained fixed vs variable business costs and how they relate to a salon environment. For the sakes of this article I am going to say that the salon has a fixed cost per appointment of R150.00 and a variable on of R50 (I found this to apply in my last calculations) and a color cost of R40 for roots, R60 for a half head foils and R75 for a full head.
When was the last time you worked out your product costs?
From the above we can calculate that the base costs for the three specials on a free cut vs cut and blow are:
Roots R390 – 2x appointment cost + variable cost + color = loss of R90.00
Half head foils R410 – 2x appointment cost + variable cost + color = Loss of R10.00
Full head foils R575 – 3x appointment cost (it’s a much longer appointment) + variable cost + color = Profit R25.00
The reason for the double appointment cost is that every time someone sits in your chair they are renting that space from you! So if the cut is not paying the chair rental that money needs to be covered by the color fee too!
As you can see in giving your services away for free you are actually harming yourself never mind the rest of the industry. What will happen in a year’s time when the disaster is over and your clients are used to getting the service for 30 / 40 / 50% less than they should. Would you stay with someone who suddenly put their prices up by these margins?
The gold rules of business are:
Turnover is vanity, (its all very well turning over R2000 rand a day)
Profit is sanity, (but if you don’t make a profit)
Cash flow is reality. (You will in effect be loosing money)
Unless you do the maths and understand how discounts will affect your turnover, profit and thus cash flow do not give discounts on a whim. They could put you out of business!
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