Hey Reader,
I had a moment of clarity this week and I'd love to share it with you. It's related to business.
When it comes to running a barber business, there are 3 ways you can make more money.
Option 1: Increase Utilization Rate
Utilization in barber services is the percentage of a provider’s available time that is actually booked and spent delivering services to clients.
Let's look at utilization according to hours. You work 40 hours per week and are booked for 25 hours of appointments. You have a 62.5% utilization rate.
We can also look at utilization according to appointment slots. So, let's say you have 10 appointment slots per day and you ended up booking 8 appointments. You would have a 80% utilization rate.
So, how do you make more money? Increase your average utilization rate aka 'be fully booked'. A fully booked barber would be 100% utilized.
Option 2: Increase Average Ticket Price
Average Ticket Size is the average amount a client spends per visit (service + retail).
Some will increase their average ticket price by simply increasing their service prices. For example, you raise your haircut price from $30 to $35.
Is raising your service prices the only way to increase your average ticket price though? Nope, it's not.
Selling retail can also increase your average ticket size. So, you charge $30 for a haircut and the client buys product for $20. That product cost you $10 and so you profit $10. This would increase that ticket sale to $40.
With this option, you could increase revenue without increasing utilization. But, if you increased both average ticket price and increased utilization rate...that'd be huge!
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I actually wear SLCKR everyday in the shop. Save up to 40% off on select styles. Offer ends Monday evening. This is a crazy sale. Take advantage.
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Option 3: Increase Productivity
Productivity in barber services is how much revenue you generate compared to the time spent working.
An easy way to break this down is to calculate your hourly rate.
Let's compare 2 barbers who both work 8 hours per day. The 1st barber charges $40/haircut and the service takes 45 minutes. The 2nd barber charges $40/haircut and the haircut takes 30 minutes.
Who is more productive?
Barber 1: $40/haircut x 11 clients = $440 ($55/per hour)
Barber 2: $40/haircut x 16 clients = $640 ($80/per hour)
It's pretty simple math. Barber 2 cuts hair 15 minutes faster than Barber 1. They are more 'productive' because they have a higher hourly rate. They are more 'productive' with their time.
The Trifecta
If you're trying to do the most, you'd look to achieve a combination of the three. Focus on marketing strategies that will increase your utilization rate aka get fully booked, focus on upselling products to increase your average ticket price and focus on becoming more productive/efficient with your service by shaving off 5-10 minutes allowing yourself to fit it 1 more appointment.
Here are 3 reports that we all should be paying attention to: utilization, average ticket price and productivity.
I'm curious to ask, which strategy makes the most sense for you right now?
Alright, finished with No.103. See you next week!
P.S. If you know me, you know I love creating spreadsheets. I'm working on a new Revenue Calculator Worksheet. It'll be an interactive sheet where you input your current numbers and then it will forecast what different income scenarios could look like if you were to deploy some of these strategies.
If you want access to that calculator, reply to this email with 'Revenue' and I'll send it to you.
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Whenever you're ready, there are 3 ways I can help you:
- Monthly Income Tracker: a Google Sheets template to help you track your monthly income
- Passing Your Barber Exam: online course that helps you pass your barber exam
- Creating a business strategy: The Barbers' Playbook features 10 essential strategies to help evaluate & grow your business
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Written by: Matthew Mendoza
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