This is my conversation with a small business owner who isn’t ready to disclose their business’ identity for this article. This is meant to give you a fly in the wall view into the minds of how a business consultant thinks vs. how an entrepreneur thinks and operates. Any lessons you take away are your own, framed by your mind and context, and not the intention of this article.
Q: So how did you decide to open a hair salon when there are so many out there? (I know from my previous research this market is so crowded and fragmented with not even chains with >10% share of market)
A: That is what I trained for and I really enjoy beauty works. After my training I worked for others first but I guess I got tired of working for others and my husband supported me to start my own.
Q: … but how did you know people would come and the investment was going to pay off?
A: I don’t understand what you are asking. People always need haircut.
Q: How did you know this was the right thing to do?
A: You just know. I had the skills. I am very good at it. So I knew I can do this too.
Q: So about your price, how did you set it?
A: I saw how high priced the place I worked before charged. People are afraid of such high prices, most of them, mostly men, come once and they are gone.
There are too many $8-$10 places around here that give bad haircuts. So I set a price that will not look too cheap or too high.
Q: I see you have several packages, simple haircut to extras added … how did you arrive at what packages to offer and their prices? (I bet it is not based on ay conjoint analysis)
A: That is easy. Most places charge similar price for extras, you simply add for each extra and set a price.
Q: And do you know how your different packages are doing … are customers taking up these over simple haircut?
A: Mostly people come just for haircut.
Q: You have 3 other people working for you but I see them mostly idle, why?
A: People ask for me all the time for appointment. I am working non-stop. People call and book appointments weeks in advance for me. Others, they will get busy soon, if not they move on.
Q: If you are in such high demand why do you charge the same price for all 4? Shouldn’t you charge a higher price than the other 3?
A: This is crazy. How can I tell customers it is $18 for one and $23 for another. They will be confused and will not like it. They will see me as greedy.
Q: Why would they? Don’t they see more value with your skills and seek after you? You are simply charging for that value.
A: It is too complex. What if I lose business because I am too expensive?
Q: You might lose a few. But don’t you cover that from higher profit from others, from sales to your employees, more free time for you to run the business or enjoy with family?
A: I don’t know.
Q: Do you keep track of how occupied 4 of you are? Say for 50 hour week, how many hours is each one busy and what is the sales per person?
A: I think it is in the computer when we ring up. But what will I do with it?
Q: Finally, you recently raised your prices. Why and how did you know to do it?
A: I didn’t want to raise. My rents went up. I had to manage the increase. We didn’t want to be seen as greedy. I still wanted my price to be below $20 because that is the magic number. After $20 people think it is expensive. So we decided to increase to just below $20. and still cover our rent increase.