How to set your prices without giving your time away

You don't price by the service, you price by the hour

A price list is almost always built by looking outward: what the place down the street charges, what you saw in someone's Instagram story, what you think people are willing to pay. None of those is wrong as a reference, and none of them tells you the one thing you need to know: whether that price actually covers you.

The underlying problem is that you don't sell haircuts, or sessions, or facials. You sell hours. You have a fixed number of them each week, and every service takes a piece. Two services with the same price that take different amounts of time aren't worth the same, and until you translate everything into hours, you can't compare them.

What follows is a calculation in three steps. The numbers are examples: plug in your own, because what matters is the method.

Step 1: count the hours you can sell, not the hours you're open

Being open isn't selling. If you work Monday to Friday from 9 am to 7 pm and Saturdays from 9 am to 2 pm, your doors are open 55 hours a week. Take out lunch, the morning cleanup, closing up in the evening and the time that goes into answering messages, and you're left with about 46 hours in which you could actually have someone in the chair.

Now subtract reality. Tuesday at 3 pm doesn't sell, the first slot on Saturday doesn't either, and there's always a gap in the middle of the day. An occupancy of 65% on those 46 hours gives you about 30 billed hours a week, which comes to around 130 a month.

That 65% isn't your number: it's just there to build the example. Yours might be 45% or 85%, and as you'll see in a moment, it changes everything. If you've never looked, spend two weeks counting how many of the hours you opened ended with someone in the chair.

Step 2: add up what the month costs you, clients or no clients

Rent and building charges, electricity, water, internet, insurance, taxes and the accountant, the subscriptions you pay for, replacing towels and hair dryers, and your own salary. That last one is the one people forget most, and it's the one that makes the math worth doing: if you don't include what you need to take home each month to live on, you're not calculating a cost, you're calculating how long you can hold out.

Let's say it all comes to $10,000 a month. It doesn't matter whether that's your number: what matters is that you use yours.

Step 3: divide

$10,000 divided by 130 billed hours is about $77 an hour. That's what one chair hour costs you. It's the floor: below it, every hour you work loses you money.

And now the interesting part.

A 45-minute haircut doesn't take up 45 minutes. It takes 45 plus the ten for cleaning up, taking payment and greeting the next client. That's 55 minutes, practically the whole hour: $77 of cost. If you charge $70 for it, you're paying to work.

A 20-minute trim costs about $26 if another appointment comes in right after it. If nobody comes in, it costs the full hour, same as the haircut. And in practice, at 11 in the morning somebody comes in, and at 6:40 pm nobody does. The same service at the same price makes you money at 11 and loses you money at 6:40. That's the real reason short services hurt: it isn't the price, it's that they eat up a space you never manage to fill.

A two-and-a-half-hour color with $60 of product costs $192.50 in chair time plus $60 in product: $252.50. Charged at $300, it leaves $47.50, which works out to $19 for each hour of chair it occupies: less than a quarter of what that chair costs you. Seen that way, color is a bad deal.

But inside those two and a half hours there are 40 minutes when the client is just sitting there while the color processes. A full haircut won't fit in there (it's 55 real minutes, as we just counted), but a 20-minute trim will. And that chair is already paid for by the color, so the trim doesn't use up a new hour: almost everything you charge for it is yours. At $40, the block goes from leaving you $47.50 to leaving you $87.50 for the same amount of your time, nearly double.

Color isn't profitable because it's expensive. It's profitable because it shares the hour. And it only shares the hour if you sell the gap inside it, which doesn't happen on its own.

What almost nobody puts into the math

The time it takes to book someone. Three minutes of back-and-forth per booking. If those 130 billed hours come in as roughly 130 appointments of about an hour each, that's more than six hours a month you don't charge anyone for. The breakdown is in paper vs. digital appointment books.

No-shows. When someone doesn't turn up, you don't lose the price of the service: you lose the chair hour, which is $77 no matter what. That's why it pays to measure your no-show rate before you change anything, as explained in how to reduce no-shows.

Product you can't take back. If you mixed color for someone who never came, that's money down the drain. It's also the best argument for asking for a deposit on long services.

Slow months. January and February come around every year. If you set your prices on the billed hours of a good month, you'll come up short over the year. Use the twelve-month average, or take 10% off your best month.

When NOT to raise your prices

If your occupancy is below 50%. Raising prices with a half-empty book empties it a little more. The problem there isn't the price: it's that you're not filling the book. Fill it first.

If you've never done the math. "I think I'm undercharging" is a feeling, and sometimes that feeling comes from a slow month or a difficult client, not from the numbers.

If you're going to do it overnight, for everyone, with no warning. A client who finds out about the new price as they're reaching for their card doesn't hear about a price increase: they hear that you changed the deal on them. Give one or two weeks' notice, even if it's just a small sign by the register.

If you work with insurance or a health plan. You don't set the price, and this article stops being useful halfway through. All you have left is the other lever: how much real time each service takes, and how many of them truly fit in a day.

If the numbers don't work, you have four levers

1. Fill more hours. The cheapest lever and the slowest. Every point of occupancy you gain lowers your cost per hour without touching anyone's price.
2. Cut your fixed costs. Go through the subscriptions you pay for and don't use. It isn't glamorous, and money usually turns up.
3. Raise your prices. Fast, effective, and the riskiest of the four. It comes after the first two, not before.
4. Drop the service that doesn't add up. The lever almost nobody pulls. If a service comes out negative after this math and doesn't bring in anyone who goes on to buy something else, take it off the menu.

How often to revisit your prices

Costs creep up (rent, product, insurance), and the worst way to keep up with them is one price at a time, on impulse, because you end up with a list where the haircut has gone up three times and color not once. Pick a date (the first day of every quarter, or the same day every year) and on that day redo the chair-hour math and move everything by the same rule. Predictable beats optimal: you know when to look, and your clients know what to expect.

The summary, in one line

Your fixed monthly cost divided by your billed hours per month is what one chair hour costs you. Every service has to pay for the chair hours it takes up (the ones it really takes up, cleanup and all), plus its product, plus something on top. If you don't know that number, you're not setting prices: you're copying them.