Find the cost before you find the margin.
Enter what a treatment costs you and what you sell it for, and the profit comes out. What goes into that cost is set out below, item by item.
What the item costs you, excluding VAT
What you take from the customer, excluding VAT
Enter the cost and selling price; your profit appears here.
In the cost field, write what the service costs you: the product consumed, the time your staff give, and what that time costs the salon. Enter both amounts excluding VAT.
In a salon the cost is not bought, it is added up
When you buy a product and resell it, the cost is written on the invoice. A treatment has no such line: nobody sold that treatment to you, you produced it. You have to add the cost up yourself.
The items to add up are known and all of them are inside the salon. Leave one out and the margin you get does not show reality; the calculation looks right and the till does not agree.
- The amount of product consumed during the treatment
- The time a staff member gives to that treatment
- The chair or the room being occupied for that same time
- The time spent setting up and clearing away afterwards
What one chair hour costs the salon
Rent, electricity, water and subscriptions run because the salon is open, not because you performed a treatment. Rather than trying to share them out treatment by treatment, it is far easier to divide them by the hour.
You divide your monthly fixed costs by the chair hours you were open that month. The result is what one hour of one chair costs; a treatment's share is as much as its own duration.
- Chair hour cost = monthly fixed costs / open hours
- A treatment's overhead share = chair hour cost × duration
- Total cost = product + staff time + overhead share
Same margin, different duration, different earnings
Two treatments can be sold at the same margin. If one finishes in twenty minutes and the other takes two hours, what they leave the salon is not the same; margins work in percentages, chairs work in hours.
So after finding the margin one more question follows: how long did this treatment occupy the chair? Divide the profit by the duration and you can see which treatment actually frees up space.
- Profit = selling price - total cost
- Hourly earnings = profit / duration (hours)
- Margin = profit / selling price
Consumed product and shelf product are calculated separately
For a product you sell from the shelf, the cost is clear: it is the purchase price. For a product used in a treatment the cost is not the whole container, only as much as went into that treatment.
Put the two into one calculation and you go wrong in both directions. The treatment's cost comes out higher than it is, and the product sale's margin lower than it is.
- For shelf product the cost is the purchase price itself
- For consumed product the cost is the value of the amount used
- Measure once how many treatments come out of one container
- Read the product margin and the service margin separately
A package's margin comes out of the package's own price
A package sells for less than the treatments inside it added up one by one; that is why the client buys it. The package's cost, however, is not affected by the discount: every treatment inside it consumes the same product and takes the same time.
So you cannot read a package's margin from the margins of the treatments inside it. You put the package's selling price on one side and the total cost of the treatments inside on the other, and do the calculation once.
- A package's cost is the sum of the costs of the treatments inside it
- The discount lowers the sales side, not the cost side
- A package's duration is also the sum of the durations inside it
- Do the calculation before putting a thin-margin treatment into a package
When to redo the calculation
Cost is not a number you work out once and put away. As the purchase price of a product, your staff costs and your fixed costs change, the same treatment's margin quietly erodes.
When you review the price list, bring the cost alongside it. Entering the item that changed and looking again takes a few minutes; a season spent at the wrong price does not come back.
- Refresh the consumption cost when a supplier's price changes
- If a treatment's duration has grown, so has its overhead share
- When your fixed costs change, the chair hour cost changes
- Review the cost while you are updating the price list
Frequently asked
- How is the profit margin calculated in a salon?
- You subtract what the treatment costs you from its selling price and divide what remains by the selling price. In a salon the hard part is not the division, it is adding up the cost. The product consumed, the time the staff member gives and the fixed costs running during that time all go into the same calculation.
- What should I include in a treatment's cost?
- Three items: as much of the consumed product as was used, the time the staff member gave to the job, and the chair being occupied for that time. Rather than sharing out fixed costs such as rent, electricity and subscriptions treatment by treatment, you divide them by the chair hour. Then you write as much as the treatment's duration into the cost.
- The tool shows two percentages, which one is my margin?
- The one labelled margin. The margin divides the profit by the selling price, the markup by the cost; both describe the same profit, only the point of view changes. Use the same one throughout when discussing prices; swap them around and the earnings you tell yourself will not match what reaches the till.
- Can I calculate the product margin together with the service?
- You can, but the two distort each other. For shelf product the cost is the purchase price itself; for product used in a treatment it is only the value of the amount that went into it. Calculated separately, you can see what each one leaves the salon.
- Does my margin fall when I sell a package?
- The package's selling price falls, its cost does not. Every treatment inside consumes the same product and takes the same time; the discount comes off one side only. So you compare the package's own price with the total cost of the treatments inside it.
- Is a high-margin treatment always more profitable?
- Not always. The margin works in percentages, the chair in hours. A high-margin treatment that takes two hours can leave less than two low-margin treatments that finish in twenty minutes. Divide the profit by the treatment's duration and look at the hourly earnings too.
- Can I learn from this page how much to raise my prices?
- No, this page does not suggest prices. The calculator only derives the profit and the margin from the cost and price you enter; the margin you aim for is yours to set. For the effect of tax and legal obligations on your profit, consult your accountant.
This page is for information only and is not accountancy advice. The calculator derives the profit and the margin from the two amounts you enter; for the effect of tax, staff costs and other legal obligations on your profit, consult your accountant.
The calculation gets easier when the time and the price are on the card
In Bi'Salon every service's duration, price and VAT sit on its own card, and which treatments go into a package is written with their quantities. What you paid your supplier stays on the expense record. When you come to recalculate the cost, you read both sides from the record rather than from guesswork.
See the service and package list