Glow Pros Academy

Mini Module II

The course discount that costs more than it wins

The Glow Edit. Business education for the aesthetic and wellness field, written from a working clinic.

Module specification

Framework: Activity-Based Costing, Kaplan & Cooper, 1988
Field: Management accounting
Duration: 10 minutes reading, 20 minutes practical
Prerequisites: None
Strand: Pillar II, Profitability
Benchmark: National occupational standards for enterprise

On completion you will be able to

Identify the activity that actually drives cost in a treatment business
Calculate what one hour of your space costs before anyone arrives
Test any package or course against that figure and decide knowingly

In one line

A ten per cent discount on a block of six is not a ten per cent decision. It is a decision about eight hours of everything you have to sell.

Section A · The situation

She hesitates, and you knock ten per cent off

She wants the course. She is looking at the total and doing the sum on her face.

So you offer something. Ten per cent for booking the block today. Or a free top up at the end. Or you round it down because she is lovely and you would rather she said yes than walked out.

She books. You feel like you won.

And in a sense you did, because a booked course is better than an empty diary. But you have just made a decision about eight hours of your working life, and you made it in about four seconds using the only number in front of you, which was the price.

There was another number. Almost nobody in this industry has worked it out.

Section B · The theory

Cost follows the activity, not the product

In 1988 Robert Kaplan and Robin Cooper published work on why traditional costing was misleading manufacturers. Firms were spreading overheads evenly across products, which made complicated low volume products look cheap and simple high volume products look expensive. The opposite of the truth.

Their correction was to trace cost to the activity that consumes it, rather than to the product that carries it.

Ask what is being consumed, not what is being sold.

In a treatment business, almost nothing is consumed by the product. Gel, tips, wipes, a pair of gloves, a share of a needle cartridge. Pounds, not tens of pounds.

What is consumed is the hour. Your hour, in your space, with your equipment, which cannot be sold to anyone else while it is being used.

Three ways of looking at the same treatment

IConsumablesWhat you physically used. Usually under ten pounds. The view most price lists were built on.

IISessionWhat the appointment earned against what it used. Better, but still ignores how long it took.

IIIRoom hourWhat that occupied hour cost you before anyone arrived. The only view that survives a discount.

The room hour view is uncomfortable because it applies to everything equally. The three hour brow appointment, the ninety minute contouring session, the forty minute facial, the twelve week programme with six reviews in it. All of them are buying the same thing from you, which is time in your space.

What a discounted block of six actually consumes

6 sessionsSetupNotes

Treatment timeSetup and turnaroundNotes, reminders, rebooking

A block of six ninety minute sessions is nine hours of treatment. Add fifteen minutes each side for setup and turnaround and it is closer to eleven. Add the messages, the reminders, the rebooking and the notes, and eleven is generous.

Discount that block by ten per cent and you have not given away ten per cent of one session. You have given away roughly one whole hour of your total monthly capacity, permanently, to one client.

The discount is not a marketing decision. It is a capacity decision wearing a marketing decision's clothes.

Before you go on

Which single thing on your price list do you discount most often, and when did you last work out what that discount is worth in hours rather than pounds?
If a client asked why the block is cheaper per session than a single appointment, what is the honest answer? Volume, loyalty, or that you were nervous about the total?
If you could not discount at all, what would you change instead to make the same client say yes?

Section C · Mini audit

Practical

The Block Discount Audit

Work in whole pounds and do not round anything in your own favour. Take the course or package you sell most often, not the one you are proudest of.

If you do not sell courses or blocks, use your longest single appointment. The maths is identical and the finding is usually sharper.

	Line	Figure
	1. Fixed costs, one monthRent, rates, insurance, finance, software, utilities, and your own drawings		£
	2. Genuinely bookable hours, one monthNot opening hours. Hours a client could actually be in front of you		hrs
	3. Cost per available hourLine 1 divided by line 2		£
	4. Price of the block, as soldWhat they actually pay after any discount		£
	5. Hours the block occupiesTreatment time, plus setup and turnaround, plus admin		hrs
	6. What the block earns per hourLine 4 divided by line 5		£
	Line 6 minus line 3		£

NegativeThe block is subsidised. Every one you sell costs you money to deliver, and selling more of them makes the month worse rather than better. This is more common than anyone admits and it is not a reflection on you.

Zero to a third aboveCovering, not earning. The block pays for the room and very little else. It survives only while the rest of the diary carries it, which means a quiet month hurts twice.

Well aboveGenuinely profitable. Worth knowing precisely, because it tells you what you can afford to discount and where the ceiling actually sits.

Section D · The reveal

What you have just done

That was activity-based costing, applied to a service business. You identified the cost driver, traced overhead to it, and used the result to test a pricing decision.

It sits in the Profitability pillar and maps to setting and monitoring financial targets, which is a national occupational standard in its own right. It is also the exercise a level four management accounting unit spends three weeks on.

You did it with a bank statement and a diary.

Section E · Your action step

Twenty minutes this fortnight. One block, one decision.

Take the number you have just produced and choose one of three things. Do not choose all three and do not choose none.

Shorten it. A block of four at the full rate often earns more per hour than six at a discount, and finishes before enthusiasm fades.

Remove the discount and add something that costs you nothing. Priority booking, a written plan, a product sample you already stock.

Keep it exactly as it is, knowingly. A loss leader you have chosen is a strategy. A loss leader you have not noticed is a leak.

Type it here, or print the page and write it by hand.

Mini Module II at a glance

Cost follows the activity that consumes it, not the product that carries it
In a treatment business the activity is the occupied hour, not the consumables
Cost per available hour is fixed costs divided by genuinely bookable hours
A discounted block gives away capacity, not margin, and capacity does not come back
A chosen loss leader is a strategy. An unnoticed one is a leak

From the deck

Pillar IIProfitability

Card

Activity-Based Costing

· · ·

Trace the cost to what is being consumed. In a treatment room, that is almost never the product.

Financial Targets & Control

Every framework in the Glow Mastery Programme has a card. More than a hundred of them, one for each thing you learn.

The reverse carries the origin, the theory and the standards it maps to. That side comes with the deck, which arrives when you enrol.

That is two you have earned.

Reply and tell me what your block actually earns per hour.

I read every reply myself, and it decides what gets taught next.

In two weeks: Mini Module IIIWhat you keep, not what you take. Why an eight thousand pound month can leave you with nine hundred, and the number that tells you when the month starts paying you.

Amelia x

Founder, Glow Pros Academy

The Glow Edit is the fortnightly mini module from Glow Pros Academy, the business education for practitioners across the aesthetic and wellness field. Written from a working clinic, not a coaching desk. This page prints on two sides of A4 if you would rather work on paper.