Stop undercutting yourself: 6 steps to setting profitable prices in your beauty business
Struggling to price your beauty services profitably? Discover 6 steps to set sustainable salon prices, boost profit margins, and stop undercutting yourself.
If you’ve ever looked at your fully booked calendar and thought, “How am I still broke?” - you’re not alone.
In fact, it’s one of the biggest traps I see beauty business owners falling into right now. The industry is flooded with new entrants, undercutting on price is rampant, and many salon owners are unknowingly working themselves into burnout for little (or no) profit.
I call this the pricing pandemic, and if you don’t get your prices right, your business is a ticking time bomb.
The harsh reality: being fully booked doesn’t equal profit
I’ll never forget when a client came to me proudly sharing her revenue, over $700,000 a year. But when we sat down and crunched the numbers, do you know how much profit she had? Zero.
Not a cent.
She was burnt out, stressed, and essentially working for free.
And she’s not the only one. Right now, only 10% of salons make more than a 6.8% profit margin. Put simply: if you’re making $100,000 in revenue, you might only see $6,800 in profit. That’s not a business, it’s a hobby that’s costing you time, energy, and money.
Why are so many salons struggling?
There are a few big reasons:
Post-COVID pressures: rent, supplies, and living costs are up across the board.
Clients cutting back: beauty is considered a “luxury,” so when budgets tighten, services are the first to go.
Industry saturation: with cheap online courses and low barriers to entry, thousands jump in each year, often pricing themselves unsustainably.
The “race to the bottom”: instead of raising standards, many owners just discount more, slashing prices to chase clients.
The result? 10,000 hair and beauty businesses in Australia shut their doors in the last two years.
Storytime: the $50 lash set that cost a business its future
Not long ago, I saw a lash tech advertising $50 full sets. At first glance, it seemed like a bargain for clients. But here’s the reality:
The service took her 2 hours.
That’s $25 an hour before expenses.
After product costs, booking software, cleaning supplies, super, tax, and GST, she was actually losing money.
It might have filled her chair short-term, but it was unsustainable. Businesses built on discounting eventually collapse, and in the meantime, they drag down the perceived value of the whole industry.
The truth about pricing
Here’s the biggest misconception:
Test different audiences and creatives.
Use ads to amplify strategies that are already working organically.
“If I charge $100 and it costs me $16 in product, I make $84 profit.”
Wrong.
Profit isn’t just revenue minus product. You need to factor in operating costs (rent, systems, supplies), taxes, GST, wages, and superannuation. Otherwise, you’re lying to yourself, and setting your business up for failure.
6 steps to setting profitable prices
Now that we’ve uncovered the problem, let’s walk through the solution. These are the six steps I teach my clients to set profitable prices that sustain their business and pay them properly.
1. Review your profit and loss
Look at how much you’re making vs. how much you’re spending. Break down your expenses into percentages of your revenue. If 70–80% of your income is going straight to expenses, you’ll struggle to stay profitable.
2. Work out your breakeven costs
Calculate the total it costs to run your business each month, including rent, software, wages, super, tax, and GST. Divide it by your working hours to find your hourly rate, and then again by four for your 15-minute rate.
This is your baseline, it tells you the minimum you need to charge just to survive.
3. Set your financial goals
Decide your yearly revenue goal.
Break it into weekly and hourly targets.
Align your pricing with those targets.
If your prices don’t match your goals, you’ll never hit them, even if you’re fully booked.
4. Calculate your product costs
Break down every service. List the products used, work out the cost per unit, and multiply it by how much you use in that service. Add it all up to get the true product cost.
5. Price your services
Now combine it all:
Breakeven cost per service = (time taken x 15-min breakeven rate) + product cost.
Minimum recommended price = (time taken x 15-min revenue target rate) + product cost.
Aim for a 30-50% profit margin. Anything less, and you’re working for free.
6. Implement price increases (the right way)
Here’s where most salon owners go wrong: they apologize. “Sorry, we’ve had to increase prices due to the cost of living…”
Don’t do this. It sounds depressing and makes clients focus on what they’re losing.
Instead, frame it positively:
“We’re upgrading to premium products.”
“We’re expanding our team.”
“This allows us to enhance your salon experience.”
Clients will pay more when they see the added value.
The psychology of pricing
Small changes make a big difference. A jump from $51 to $57 feels smoother than $50 to $60. And rather than increasing every service at once, you can cycle through different categories over a few months to ease the transition.
Final thoughts
Undercutting your prices might fill your appointment book for now, but it won’t build a sustainable, profitable business.
If you want to grow a salon that pays you properly, funds your lifestyle, and gives you the freedom you dreamed of when you started, it starts with profitable pricing.
Stop treating your business like a hobby. Stop apologizing for charging your worth. And stop undercutting yourself.
Want to dive deeper into this?
Tune into Episode 8 of the Beauty Industry Leaders Podcast: The Pricing Pandemic: 6 Steps to Setting Profitable Prices, where I break this down in detail and share the formulas you can start using today.
