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Old 03-07-2006, 12:26 PM   #1 (permalink)
 
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Unlimited tanning blues

Am I missing something or are most of you underpricing your unlimited monthly plans?

I know everyone is different, but I figure the average salon probably spends from $3-$6 to provide a tan

Total Tans
-------------------- = Cost per tan
Total Expenses

So if company X spends $10k to provide 2k in tans, then that's about $5 a tan. If company X has an unlimited month for like $25 then even if the customer comes only 5 times then you're not making anything! And we all know we have lots of customers who just LOOOOVE to come in 20 times in a month. That would end up costing a whole lot more than the mere $25 in revenue. How do you all calculate your unlimited tanning pricing so it's profitable?
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Old 03-07-2006, 12:27 PM   #2 (permalink)
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Re: Unlimited tanning blues

well mine starts at $50 a month... and some of them come almost every single day
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Old 03-07-2006, 12:28 PM   #3 (permalink)
 
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Re: Unlimited tanning blues

How much does it cost you per tan?
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Old 03-07-2006, 12:31 PM   #4 (permalink)
 
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Re: Unlimited tanning blues

mIne starts at $55 and may soon go to $60
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Old 03-07-2006, 12:33 PM   #5 (permalink)
 
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Re: Unlimited tanning blues

Year round average cost $0.98 per tan at my salon.
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Old 03-07-2006, 12:37 PM   #6 (permalink)
 
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Re: Unlimited tanning blues

$.98 a tan? That includes the cost of the machine itself, labor, electricity, and everything? Wow. I'm impressed. I think we spend about $.98 just for our electricity.
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Old 03-07-2006, 01:03 PM   #7 (permalink)
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Re: Unlimited tanning blues

Sun Splash -- I see your thinking, but here is the problem with your logic.....


If my yearly expenses are $100,000 -- and I only provide 1 tan during the year -- the "cost" of the tan was $100K? Of course not. It still only generated it's fair share of electricty, lamp useage and wear & tear on the beds. I just didn't sell NEARLY enough tans!! And of course - I can't charge $100K for the one I DID sell.

At the same time, if my expenses are $100,000 and I tan 1,000,000 people in a year, should I only be charging 10cents per tan? Nope -- It still costs the same amount as for the first example to run the bed. It's just in this case I have a lot of "left over" money that does NOT go to expenses -- it is the profit.

The key is that expenses are, generally, mostly fixed. The only things that vary, a little, are how many lamps you go through and how much electricity. Sure, payroll may bump slightly if you have to double staff. But the bed payment, and rent each month and phone bill and internet charge are the same -- if you are tanning 1 or 1,000,000.

Each salon should know their YEARLY COST OF DOING BUSINESS. The fixed number and the "approximate" on the variable numbers.

In addition, you have calculated a "competitive" rate that you can charge to get the number of tanners you want. It's just like groceries. If I charge $4/gal for milk, I won't sell as many, but I'll make more profit per gallon. If I charge $2/gal, people may stock up and I'll sell a lot more -- at a reduced profit per gallon. Which is actually "better" depends on where the breakeven actually falls.

Sometimes charging a little less, can actually spur them to BUY MORE! When milk is cheap, I not only buy white, but stock up on chocolate. My kids love chocolate - they drink it for snack or dessert. We drink a lot more milk that week than we normally do because "it is such a great deal". And - while I'm there picking up that great deal, I probably do the rest of my shopping too -- "win" for the grocery store offering that promotion.

If your tanning is a bit cheaper, they may actually tan MORE months of the year or more visits (it seems more "affordable"). Do the upgrade beds. Buy some lotion or other accessories. You make MORE by charging less!

But - you have to make sure you are at LEAST covering the variable costs (lamps, electricity). And getting enough traffic that it is covering the fixed costs -- plus some profit.

Bottom line - the key is less in how you price it, but how well you sell it! Anytime your bed sits empty -- that is "lost inventory" that you can never get back! So you have to find that price point that keeps the beds optimally full all the time -- that is the "right" price to charge. Charge more than that --- less demand, and the beds sit empty. Charge less than that and you are losing money.

It all goes back to the supply and demand charts from Econ class that everyone hated!! :-)
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Old 03-07-2006, 01:07 PM   #8 (permalink)
 
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Re: Unlimited tanning blues

you are assuming that people took an economics class. Not good. You'd be surprised how many people have no idea what a supply and demand curve is.
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Old 03-07-2006, 01:08 PM   #9 (permalink)
 
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Re: Unlimited tanning blues

Breakeven is approximately $4500 per month divided by 30 days = $150 /day.

$150 / day divided by 153 average tans per day = $0.98

This is salon average, so regular beds are less, premium beds are more.
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Old 03-07-2006, 01:24 PM   #10 (permalink)
 
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Re: Unlimited tanning blues

sunsally,

I understand that some expenses are fixed, though as a whole the more tans I put out, the more it's going to cost. I'll need another person to clean beds, I may need more machines, I will need to buy more towels, I'll likely have to spend more on marketing to attract the new people, more electricity, etc. Assuming I have the capacity, rent is one of the major fixed expenses that may not change. Otherwise, it varies quite a bit based on volume. The cost per tan does go down (to a point) as volume increases and this cost is going to move from month to month, but for us the higher the volume the more it costs.

I know my example is simplistic, but I still have a difficult time understanding how some offer unlimited tanning at, say, $29 a month unless that company is banking on the knowledge that some customers will hardly come at all and they will help subsidize the extra burden placed on the salon from those who come every-single-day. A person that costs me money who tans more months out of the year is still going to cost me money whether she comes in for 1 month of 6 months. I think that same econ class also suggested I shouldn't sell my inventory at a loss just to move it out the door. :)

Last edited by SunSplash-HI; 03-07-2006 at 01:26 PM.
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