Are WS-free florists really more profitable?

[Joe Mioux]

(Excuse me)

Just bumping this up for personal reasons.

Wanda

Wanda, do you have a question?

Joe

 

[Griff]

Could someone please define "excess capacity" for me? The term is always used when trying to justify filling incoming orders. If a flower shop is comprised of only an owner or designer and a part time driver who works 4 hrs a day, what do you define as EXCESS capacity? If a florist were to operate like a manufacturer and you don't have enough work to keep your assembly lines working, you may choose to reduce your work days to 6 hours per day. Most companies will choose to REDUCE their operating expenses rather than take accept sub profit margin work to absorb "excess capacity". Yet some florists seem to be willing to accept poor profit jobs in order to just keep some of their people busy, when the alternative of sending them home is never considered. Would the florist not be more profitable with less labor hours?

The same goes for using excess flowers to fill WS orders and florists telling themselves that it is better to use these flowers rather then throw them away. The smart thing might be to buy less flowers next time. If the florist's historical records show that last year they bought $1,000 worth of flowers at the same time last year and $200 worth was needed to fill incoming wire orders, could that same florist buy less flowers this year and NOT accept any incoming orders? Would that florist not be MORE profitable?

And lastly, if using Cheryl's numbers to determine how many outgoing orders you need to just BREAK EVEN with current wire service costs, does that mean that any florist with less than 30 orders out and 30 orders in is most likely LOSING money with ONE ws and anyone with two WS with 60 out and 60 in is also losing money???

Just for the record, most forget to figure that there are TWO labor costs invloved with filling incoming orders. One is the designer and the other is the driver and vehicle. The designer cost is relatively easy to calculate. The delivery cost is not so easy because it is general not controllable. Send even a $8 an hour driver out in the afternoon to go across town in traffic and see how much the round trip really costs.

As been pointed out, much depends on the size of the company and the percentage of discounted business they can absorb. I tend to agree with the man from Dayton, however, when he indicated that most florists can't absorb any of it!

 

[CHR]

Griff's back! We missed ya.

 

[MANORVILLE]

On Target..........in my humble opinion............

Could someone please define "excess capacity" for me? The term is always used when trying to justify filling incoming orders. If a flower shop is comprised of only an owner or designer and a part time driver who works 4 hrs a day, what do you define as EXCESS capacity? If a florist were to operate like a manufacturer and you don't have enough work to keep your assembly lines working, you may choose to reduce your work days to 6 hours per day. Most companies will choose to REDUCE their operating expenses rather than take accept sub profit margin work to absorb "excess capacity". Yet some florists seem to be willing to accept poor profit jobs in order to just keep some of their people busy, when the alternative of sending them home is never considered. Would the florist not be more profitable with less labor hours?

The same goes for using excess flowers to fill WS orders and florists telling themselves that it is better to use these flowers rather then throw them away. The smart thing might be to buy less flowers next time. If the florist's historical records show that last year they bought $1,000 worth of flowers at the same time last year and $200 worth was needed to fill incoming wire orders, could that same florist buy less flowers this year and NOT accept any incoming orders? Would that florist not be MORE profitable?

And lastly, if using Cheryl's numbers to determine how many outgoing orders you need to just BREAK EVEN with current wire service costs, does that mean that any florist with less than 30 orders out and 30 orders in is most likely LOSING money with ONE ws and anyone with two WS with 60 out and 60 in is also losing money???

Just for the record, most forget to figure that there are TWO labor costs invloved with filling incoming orders. One is the designer and the other is the driver and vehicle. The designer cost is relatively easy to calculate. The delivery cost is not so easy because it is general not controllable. Send even a $8 an hour driver out in the afternoon to go across town in traffic and see how much the round trip really costs.

As been pointed out, much depends on the size of the company and the percentage of discounted business they can absorb. I tend to agree with the man from Dayton, however, when he indicated that most florists can't absorb any of it!

Hello Griff

Kevin
ManorMan

 

[bloomz]

Griff's back! We missed ya.

Ditto that - we need us a math whiz up in here! :kuddle:

 

[prestonway]

Could someone please define "excess capacity" for me? The term is always used when trying to justify filling incoming orders. If a flower shop is comprised of only an owner or designer and a part time driver who works 4 hrs a day, what do you define as EXCESS capacity? If a florist were to operate like a manufacturer and you don't have enough work to keep your assembly lines working, you may choose to reduce your work days to 6 hours per day. Most companies will choose to REDUCE their operating expenses rather than take accept sub profit margin work to absorb "excess capacity". Yet some florists seem to be willing to accept poor profit jobs in order to just keep some of their people busy, when the alternative of sending them home is never considered. Would the florist not be more profitable with less labor hours?

Excess capacity of both labor & flowers need to be considered on an order-by-order basis (at least to my way of thinking).

If my "assembly lines" are constantly underutilized over an extended period of time, then OF COURSE you reduce your operating expenses by reducing staff hours &/or flowers purchased.

But on any given day when an order arrives, utilizing existing flowers already in my cooler, arranged by a designer or a designer/owner doing make-work projects which have nothing to do with design...THEN YOU'VE GOT EXCESS CAPACITY!!

 

[Mikey the Flower Guy]

"excess capacity" is NOT common terminology in the traditional B&M florist shop, so, it can be a verbiage used to describe many scenarios.
Those shops that have "assembly line" design rooms, are definitely at the mercy of having sufficient order demand, and the owners compensate by increasing shop awareness, to cover the costs associated.
Historically, a shop with much flow through business, is more apt to be hurt at the bottom line, when the florist "facility" is NOT humming at near capacity at ALL times, and has only ONE choice really.....keep the work coming, or send staff home, which creates another whole can of worms!!
In smaller shops, excess capacity has little to no infringement on day to day operations, except when literally throwing product out!

 

[BOSS]

Hello Griff

Kevin
ManorMan

Kevin, you'll find that Griff...um.... **Mr. G** is always on target.

He's been absent around here for a while, but is our resident math whiz!

The dude knows numbers!

Welcome back Mr. G, I'm glad to see my old sparing partner again!

 

[BOSS]

Could someone please define "excess capacity" for me?

Excess capacity should not really exist in todays retail real floral world, you need to trim the fat if you have under utilized capacity. Send them home!

florists seem to be willing to accept poor profit jobs in order to just keep some of their people busy, when the alternative of sending them home is never considered. Would the florist not be more profitable with less labor hours?

You MUST, if you intend to remain profitable. I myself, was one who used to feel bad, and would often keep staff *sitting* around rather than sending them home. Can NOT be done! I used to keep them around, to **cover** for ME, so I could do what I WANTED TO...can NOT be done!

The same goes for using excess flowers

If you have excess flowers, you need to adjust your buying habits. This is different for every shop. Yesterday we did $4200.00 of sympathy work out of our cooler stock, not everyone can do that. Today we had to go to the wholesalers for a load to do another $2800.00 for tomorrow. We try to run out every other day.

The delivery cost is not so easy because it is general not controllable. Send even a $8 an hour driver out in the afternoon to go across town in traffic and see how much the round trip really costs.

Most florists do not realize that on even a $75.00 wire in order, delivered 25 minutes from the shop, that $8.00/hour driver is actually costing them $15.00 for the trip PLUS GAS and related vehicle expenses, lets say about $22.00 or so, and they are getting paid a whopping $54.00 total for the order, less flower and designer COGS...profit is about...oh I don't know... MINUS a buck two ninety eight?

Mr G ?

BOSS


As been pointed out, much depends on the size of the company and the percentage of discounted business they can absorb. I tend to agree with the man from Dayton, however, when he indicated that most florists can't absorb any of it!

 

[CHERYL BAKIN]

Breaking even of wire service costs

Hi Griff! Glad you are back!!

My analysis was just to get people to think about the costs associated with sending & receiving, and to quantify a way to do it.

Using my own sho as an example, with the associated costs of 1 wire service, we felt that it was not in our best interests to belong to a wire service if we were sending less than 30 orders outgoing per month.

If you are sending & receiving a total of 60 per month, and belong to 2 wire services, the math gets a little harder, and I would suspect that at least 1 of those could be dropped. (you get into low sending charges, receprocity charges, etc. ....unless you are very good at keeping track of 1 roder to FTD & 1 to TF.....which most shops aren't.

You are also paying 2 sets of membership dues & fees for Dov/Mercury, etc , when the cost of the second membership could be going directly to the bottom line by belonging to 1 wire service.

Do the analysis -- your everys will be opened as to how much your bottom line is hit each & every month by belonging to 2 or more!

there was a time when you needed 2 or more wire services due to coverage issues, type of services offered by each wire service, etc. Today, IMO, they are all about the same. Fees may vary slightly, but in the end, the total $$ to belong to 1 is just about the same as the other.

Again, IMO, I see no real need today for most shops to belong to more than one wire service.....and most small shops do not need to belong to any wire service, as long as they are willing to call the orders out (by phone, with a credit card) or to use a lower priced service such as IFA.

Regarding the delivery/designer labor issue.....If you are filling a wire in order, your first substraction should be off the top, your delivery charge. Second subtraction is for the % or flat cost of design labor. Then we get into the other materials used in the arrangement.

Every shop has to do the analysis of what is profitable or not profitable for them. I was just presenting 1 example of how I did the analysis for my shop.

Regards,

Cheryl

 

[TOTO]

Welcome Back Griff!

Ditto on the WELCOME BACK GRIFF posts!

All I can add is; DANG IT GRIFF, there ya go again, confusing the question with DA FACTS!

Not withstanding the fact that, all the WSs, OGs, DOGs, and non-local phonies have perpetrated the BIG LIE for so long now and only because THEIR WORLD DEPENDS UPON FILLING FLORISTS to buy into it, I know of NO REAL FLORIST who can afford to support EXCESS CAPACITY anymore.

The only areas of our industry which might be forced to, are the FILLING STATIONS which work out of cheap industrial parks using cheap day laborer staffing and produce cookie cutter designs.

We've long since transferred over to part time/flex time help with no surprises. In other words, these folks know the program up front and we make sure that, any income they hope to derive from us is IN EXCESS TO their normal stream of revenues.

And DAT'S DA WAY IT BEE in the LAND OF OZ!

 

[DistinctiveFlorist]

I didn't have a question but didn't get through all the pages when I had to close up the computer for the time being. Funny thing though, on this message board, when you are the last one to post to a thread and then you come back, it doesn't show up under new posts. So bumping it up didn't do me any good until someone else posted. Oh well, I tried.

No biggie.
Wanda

 

[PhillyPhlorist]

Back in the "day", we USED to refer to excess capacity as "filler orders" - orders that came in, very simple, and helped "fill in the gaps" between inflows of orders via 800. We would take every wire order we could. I can clearly remember there were times in which we had three designers just makin' up stuff - ANYTHING...until the order flow resumed. Excess capacity is also used by many a Wire Service reps who want you to join their WS. Our local BloomNet rep called me the other day, and actually USED the term "good fill-in orders" for their orders. My answer: nope (I don't NEED another wire service!!!). He tried get me to bite on the spin on the rebates, total orders you get, etc. But, I quickly corrected him in that EACH order must be measured for profitability - not just the lump sum.

NOT ANYMORE. As Mark S. stated, can't do it in TODAY'S world. Costs are just too high. During the summer months, if we get a slow day, we rotate MANDATORY early leave. One designer leaves at 12 noon...everyone takes a turn - we just rotate it. Yea, it stinks if you really need the 40 hours, but it's either that or someone gets let go. Luckily, we have not had to do that in 4 years, but it is ALWAYS a possibility during the summer...

- H.

 

[RC in Dayton and Cincinnati]

Could someone please define "excess capacity" for me? The term is always used when trying to justify filling incoming orders. If a flower shop is comprised of only an owner or designer and a part time driver who works 4 hrs a day, what do you define as EXCESS capacity? If a florist were to operate like a manufacturer and you don't have enough work to keep your assembly lines working, you may choose to reduce your work days to 6 hours per day. Most companies will choose to REDUCE their operating expenses rather than take accept sub profit margin work to absorb "excess capacity". Yet some florists seem to be willing to accept poor profit jobs in order to just keep some of their people busy, when the alternative of sending them home is never considered. Would the florist not be more profitable with less labor hours?

The same goes for using excess flowers to fill WS orders and florists telling themselves that it is better to use these flowers rather then throw them away. The smart thing might be to buy less flowers next time. If the florist's historical records show that last year they bought $1,000 worth of flowers at the same time last year and $200 worth was needed to fill incoming wire orders, could that same florist buy less flowers this year and NOT accept any incoming orders? Would that florist not be MORE profitable?

And lastly, if using Cheryl's numbers to determine how many outgoing orders you need to just BREAK EVEN with current wire service costs, does that mean that any florist with less than 30 orders out and 30 orders in is most likely LOSING money with ONE ws and anyone with two WS with 60 out and 60 in is also losing money???

Just for the record, most forget to figure that there are TWO labor costs invloved with filling incoming orders. One is the designer and the other is the driver and vehicle. The designer cost is relatively easy to calculate. The delivery cost is not so easy because it is general not controllable. Send even a $8 an hour driver out in the afternoon to go across town in traffic and see how much the round trip really costs.

As been pointed out, much depends on the size of the company and the percentage of discounted business they can absorb. I tend to agree with the man from Dayton, however, when he indicated that most florists can't absorb any of it!

Griff,

No one can give you a good definition for excess capacity because it’s a bullship term to rationalize bad business decisions.


Analyzing through incoming orders alone, lets say membership and related fees are $5,000 a year and the florist receives 500 orders a year. He gets paid 53% on every order, not 73%. The percentages can get pretty low depending on fees and the number of order received, and best-case scenario never can reach 73%. Without really knowing, I suspect most florists are getting paid well under 50% on every order received, the more wire services they belong to the lower the percentage usually is. In my opinion receiving incoming wire orders is nearly always a loser.

Analyzing through outgoing orders alone, let’s say membership and related fees are $5,000 a year and the florist sends 500 orders a year. With a 20% commission he earns $5,000, just enough to cover his membership and related fees. For the risk taking and sending $25,000 worth of outgoing orders through the wire service he earns nothing with the exception of a rebate he may receive. If the florist sends 1,000 orders he earns 10% or $5,000 for his efforts. This is still not a good deal taking into consideration 150 labor hours are involved, credit card clearing charges are involved, rent and utilities and other fixed costs have to be paid.

Combining the two, incoming and outgoing, a shop sending 1,000 orders might want to belong to one wire service provided he doesn’t receive too many incoming wire orders and he keeps his membership and related fees at a minimum. For every order less than 1,000 orders sent the probability of losing money on wire business increases.

My guess is 98% of all florists send fewer than 1,000 orders a year and probably would be better off being wire service free.


The man from Dayton

 

[Joe Mioux]

Griff,

No one can give you a good definition for excess capacity because it’s a bullship term to rationalize bad business decisions.

I can.

Here is a test for everyone that believes the above mentioned quote is true. For the next 5 days, observe your design staff, hour by hour. Make each designer record their start and stop times for each arrangement. I bet their design time will not add up to their punch in/out time.

What does this mean? It means that each designer probably could have made one or two more arrangements each day.

On a day to day labor observation basis, you will find excess labor capacity. If you have labor over 20 pct of Gross Sales for more than a month or two, then you have excess labor. Search you souls, that excess labor maybe YOU! (by "you" i didn't mean you, Randy, but the plural form of you, meaning flower shop owners and managers)

Getting back on a different but same directioned track.....


I can give you the definition of reverse.

I have been living that life since last October.

Until you consistently work a minimum of 12 hour days you won't know what inadequate labor capacity is. Back in 1993, I was working 80 hours a week for 9 months. Finally capitulated and gave in and hired someone to relieve my work load. This is how each one of us learns what we and our staff are capable of doing in the course of a day. We have to live under that pressure first.

Continuing.... To put this in terms of over capacity. Last fall, I had a great conversation with one of the owners of a large STL wholesale house regarding this very issue of labor overcapicity.

Suffice it to say, the conversation came down to this. If your staff is complaining about being overworked during the non-holiday season, chances are you are staffed properly.

Joe

 

[Mikey the Flower Guy]

to "add" something to this "mix".....
I vividly remember many days where EVERYONE has worked like a dog, contributed, put pressure on each other to produce, and lower waste, and at the end of the day, the daily sales sheet didn't produce a particularly healthy income stream, yet, OTHER days, we casually attack each order, have a chat, discuss the weather, chase each other from the coolers, to the design benches, to the wrap stations, to the phones, DON'T work up a sweat, and have absolutely FANTASTIC days......
Griff has nailed it......the days WE make money, AND lose the sweat, are on days with few incoming WS orders!
I have some very good nearby friends, also florists, that to this day, cannot figure out WHY they work so hard, and WHY they cannot make ends meet, and WHY they cannot say NO to incoming WS orders!!
I have some very excellent friends, that are plain dumb business people!!

 

[prestonway]

Griff,

No one can give you a good definition for excess capacity because it’s a bullship term to rationalize bad business decisions.

I guess no one can ever give YOU a good definition of excess capacity RC, 'cause you would never use bullship terms of give out bullship advice...or would you?

Hmmm...try this out for size...

http://moneycentral.msn.com/content/P85429.asp

But then again, I guess an editor from MSN Money doesn't know what he's talking about either?

Nah, we'll just blindly listen to what you tell us to do based on the gospel according to RC.

98% of us will just dump the WS & we won't have excess capacity...just too many flowers, too many designers, and stores that are too big!

And if we don't respond IMMEDIATELY with RADICAL changes to our business, I guess we'll just call it bullship, or better yet...A BAD BUSINESS DECISION.

But then again, I always did rationalize my bad business decisions with bullship terms...

 

[Mikey the Flower Guy]

Hmmm...try this out for size...

http://moneycentral.msn.com/content/P85429.asp

Just love this phraseology....
Parenthetically, I note that a dead-fish analyst associated with the House of Thundering Hooves is no longer clueless about Intel's inventory problem.
Ironically, from a Contrarian point of view, FLORISTS products shelf life is much shorter than that of chip makers', though I've often paralleled the two together.
Costa Rica, currently home to the TWO largest Intel plants in the world, is nervously containing it's concerns over Intel's optimistic production overview, and the introduction of Vista MIGHT BE the ONLY bright light in chip makers' futures.
A significant difference between these, and our industry, is that "shortages" of chip products drive retail/wholesale prices UPWARDS, yet, in OUR industry, we are many times forced to "absorb" the wholesale increases so as NOT to offend the consumer.
In ANY case, wire services MUST redefine themselves as either inter-industry services suppliers, or direct marketers, and CANNOT continue funding direct competition, with member's funds, or the "excess capacity" of orders, will have NO HOME to land in to be filled competently!!

 

[Tracy D'Amico]

I have nothing to contribute, other than another "welcome back" to Griff.
Glad to see you here.

tracy

 

[BOSS]

wire services MUST redefine themselves as either inter-industry services suppliers, or direct marketers, and CANNOT continue funding direct competition, with member's funds, or the "excess capacity" [wire service, order gatherer, direct seller orders]of orders, will have NO HOME to land in to be filled competently!!

My edit in bold above.

This is spot on! As we move forward into the next decade, leaving behind the one where retail florists could absorb the discounted work, because they were generating good margins on their own in-house work, as well as being the majority leaders in the sending category helping to offset the loss sustained on the filling side, we will once again see a shift in mindset.

Gone are the days of filling at a [good] profit, and many like myself are now only filling for other true florists. We fill yours so you will fill ours. This is something we must continue to do. These orders are not used as fill in work, but rather accounted into the daily operations of shops, based on a need to continue the chain of florist to florist business.

We can no longer afford to fill for those that are in fact killing the retail side of the industry, by removing the profit margin form a huge bulk of orders and not returning monies into the industry by buying containers, hard goods, stems and technology. The industry, like Iran is headed for a crash, simply based on greed from those that are the very ones removing aforementioned profits.