Salon, spa & fitness
Salon Package Pricing Calculator
Prices a package, where the unredeemed services are a liability rather than a windfall.
Result
Overhead and margin are taken as shares of the selling price, which is why the cost is divided rather than multiplied. Adding 15% to cost does not produce a 15% margin. Gross profit is what is left after the cost of doing the job. Overhead comes out of that: the building, the office wages, the vans, insurance, software and advertising. A healthy gross margin still loses money if overhead is larger.
Get a Free Business AuditHow the calculation works
The services included at their individual prices, less the discount offered, giving the package price and the effective discount per service. The accounting point is that money taken for services not yet delivered is deferred revenue, and it has to be recognised as the services are performed rather than when the package is sold.
What moves the number
- Discount offered against individual prices.
- Redemption rate and how long packages take to use.
- Whether the discount is covered by the retention gained.
- Any expiry terms and whether they are enforceable.
Where this one goes wrong
Treating package sales as revenue on receipt produces a business that looks profitable while carrying an obligation it has already spent the money for, and a salon with a large unredeemed balance is in a weaker position than its accounts suggest. Hold the money against the obligation. Expiry terms are also regulated in a number of states, particularly for anything resembling a gift card, so terms should be checked locally rather than assumed enforceable.
Before you quote
- Treat unredeemed package value as a liability, not revenue.
- Check local rules on expiry and prepaid service terms.
- Measure whether the discount is recovered in retention.
Questions
About this calculator
Is package revenue income when sold?
No, it is money for work not yet done, so it is deferred and recognised as the services are performed. A salon that treats it as income on receipt looks profitable while carrying an obligation it has already spent the money for.
Can packages expire?
It depends on the jurisdiction, since a number of states regulate expiry for prepaid services and anything resembling a gift card. The terms should be checked locally rather than assumed enforceable, because an unenforceable expiry is a liability that does not go away.
Are packages worth the discount?
Only if the retention gained covers it. The package is a discount in exchange for commitment, so the test is whether those clients return more often and for longer than they would have, which is measurable if anyone tracks it.
The formula
price = direct cost / (1 - overhead% - margin%)
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How to use this calculator
- Labour cost ($). Burdened: wages plus tax, insurance and the vehicle, not the hourly wage.
- Materials cost ($). Enter your own figure; the page starts at $11.
- Other direct costs ($). Permits, disposal, equipment hire, subcontractors.
- Overhead rate (%). Overhead as a share of revenue. Work it out from last year's accounts.
- Target net margin (%). Enter your own figure; the page starts at 15%.
The result updates as you type, so you can try a figure, see what it does to price to quote, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Labour cost | $34 |
| Materials cost | $11 |
| Other direct costs | $0 |
| Overhead rate | 22% |
| Target net margin | 15% |
What comes out
| Result | Value |
|---|---|
| Price to quote main result | $71.43 |
| Direct cost | $45 |
| Overhead recovered | $15.71 |
| Net profit | $10.71 |
| Gross margin | 37.0% |
| Markup on direct cost | 58.7% |
Quote $71.43 to cover $45 of direct cost, recover $15.71 of overhead and leave $10.71 of net profit. That is a 58.7% markup on cost.
How sensitive the answer is
Holding everything else steady and changing only labour cost, this is what happens to price to quote. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Labour cost ($) | Price to quote |
|---|---|
| $17 | $44.44 |
| $26 | $58.73 |
| $34 example above | $71.43 |
| $51 | $98.41 |
| $68 | $125.40 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Labour cost ($)
- Burdened: wages plus tax, insurance and the vehicle, not the hourly wage.
- Materials cost ($)
- A money amount, starting at $11.
- Other direct costs ($)
- Permits, disposal, equipment hire, subcontractors.
- Overhead rate (%)
- Overhead as a share of revenue. Work it out from last year's accounts.
- Target net margin (%)
- A percentage, between 0 and 80, starting at 15%.
What the results tell you
| Result | What it is |
|---|---|
| Price to quote | The headline result. A money figure. |
| Direct cost | A money figure. |
| Overhead recovered | A money figure. |
| Net profit | A money figure. |
| Gross margin | A percentage. |
| Markup on direct cost | A percentage. |
Estimating is the easy part
The jobs you never hear about cost more than the ones you mis-measure. BDEVY builds the marketing, systems and automation that bring them in.