Floral Management

[RJD]

A great article in this month's Floral Management, written by a CPA, explains how a shop can exist with wire services, and inadvertantly explains how OGs are bad for the industry:

Wire orders, when there is a balance between outgoing and incoming, ...provide enough money to help cover the same expenses and leave some left over for profit.

Excess incoming orders alone, however, cannot cover the same level of other expenses. So, you must approach incoming orders with a strict rule to ensure an excess of them won’t harm your financial health: As long as you handle excess incoming volume with
excess capacity in your shop you will be fine financially. As soon as you have to expand your facilities and increase overhead to handle the excess incoming volume, you will lose money on excess incoming volume.

Direct link: http://www.safnow.org/images/storie...08/Aug08/breaking-even with wire business.pdf

That's pretty clear that an excess of incoming orders, generated by OGs, is detrimental to the local florist. Having printed this, I wonder if we can expect SAF to take a stronger stance against order gathering than calling it "aggressive advertising".

Granted, SAF is almost totally dependent on TFTDNET, so this article has a pro-WS slant, but the information is solid and very similar to what we've discussed ad nauseum in these forums.

 

[CHR]

Paul is a well-respected CPA and he also works for Teleflora.

I have a few disagreements with his ascertion that "wire orders are just as profitable when the dollar amounts of the incomings and outgoings are in balance."

1) He assumes a service charge of $10 on every outgoing order. I don't believe most local florists are at $10 service charges since we also declare delivery fees to our customers.

2) The incoming Wire Order column lacks any recognition of the expense of delivery, and I'd say that's a hefty expense, often larger than the 10% design labor assigned in this piece.

He's using $100/order to make the math easy, but in reality the average incoming is still somewhere around $55.00 If cost per delivery is $8, then net contributing margin drops to around 15% - half the rate.

The per/order receiving fee (1.25 or so) is also unstated. On a $55 average incoming order, that's another 2% - so we're down to 13%.

So the healthy ratio would be more like only filling 50% of the level of your outgoings to acheive a balance, as theorized in the article.

To Paul's credit, rebates aren't mentioned. Rebates would further skew the contributing margin in favor of outgoings.

 

[RC in Dayton and Cincinnati]

The article is wire service propaganda. The purpose of the article is to convince florists that working for their largest, most cut-throat competitor for FREE is OK.

Let's look at a FST order as an example looking at it from a different angle.

Customer buys a $50 arrangement.
Service charge $14

Customer is charged - $64
OG receives service charge -$14
OG receives 20% - $10
OG receives rebate plus perks - $12
Wire service gets 7% plus 5% built in profit -$6

OG receives a total compensation of -$36
Wire service receives a total of -$6
Florist receives the remaining -$22 (real dollars)

Florist is expected to make a $50 arrangement and deliver it while giving a 56% discount. All the burden lies on the delivering florist, ie, something goes wrong florist doesn't get paid.

The florist is paid 34% of the total amount the customer spent.


End result:
order gatherer - lollol:bangles::bangles:

Wire service -

Florist -:tread::tread::tread::tread:

Customer -

 

[moflowers]

End result:
order gatherer - lollol:bangles::bangles:

Wire service -

Florist -:tread::tread::tread::tread:

Customer -

well said....

 

[RC in Dayton and Cincinnati]

OG gets $36
Florist gets $22

So what if the ordergatherer gets 64% more money than the florist filling and delivering the order. Do you realize how much a double-truck yellow Page ad costs them?, a hell of a lot less than the florist pays, but still a lot of money.

So what's the end result?

The OG now has $36 to steal away the florist's next customer, all paid for by the florist himself. The florist? He bends over and has his excess capacity filled.


RC

 

[LJVF]

Let's look at a FST order as an example looking at it from a different angle.

Customer buys a $50 arrangement.
Service charge $14

Customer is charged - $64
OG receives service charge -$14
OG receives 20% - $10
OG receives rebate plus perks - $12
Wire service gets 7% plus 5% built in profit -$6

OG receives a total compensation of -$36
Wire service receives a total of -$6
Florist receives the remaining -$22 (real dollars)

RC, I'm following everything except the $12 rebate plus perks part. Why is this subtracted from the from the amount the florist receives for this individual order? Aren't rebates and perks a result of a direct agreement between the OG and the WS? Is this an indirect partial allocation of monthly fees and dues being applied to this order? I'm not really challenging, just wondering.

 

[RJD]

Yeah, the article has a very pro-WS, but SAF has made themselves dependent on TFTD, so that's to be expected.

What's left unsaid is that the example RC is citing is exactly what's bad for the industry. FST is an OG, and an imbalance of incoming vs. outgoing orders, caused by the OGs, is detrimental to the real florist.

 

[RC in Dayton and Cincinnati]

RC, I'm following everything except the $12 rebate plus perks part. Why is this subtracted from the from the amount the florist receives for this individual order? Aren't rebates and perks a result of a direct agreement between the OG and the WS? Is this an indirect partial allocation of monthly fees and dues being applied to this order? I'm not really challenging, just wondering.

Good question.

The $12 is real compensation generated by that order along with the 20%, $14 service fee, and the wire service 7% transmission fee and the 5% profit.

When a wire service compensates an OG $14, while receiving only $3.50 (7%) and still makes a profit that money is coming from somewhere other than the wire service. It's coming from the florists through the many hidden fees they pay.

So, in conclusion when an ordergather gets his rebate it may be paid through the wire service, but in reality it is paid by the florists.


RC

 

[LJVF]

Good question.

The $12 is real compensation generated by that order along with the 20%, $14 service fee, and the wire service 7% transmission fee and the 5% profit.

When a wire service compensates an OG $14, while receiving only $3.50 (7%) and still makes a profit that money is coming from somewhere other than the wire service. It's coming from the florists through the many hidden fees they pay.

So, in conclusion when an ordergather gets his rebate it may be paid through the wire service, but in reality it is paid by the florists.


RC

Ok, now I'm following you. But wouldn't the $12 be dispersed amongst the all member florists? So the perhaps the actual real cost to this particular filling florist maybe less?

But I do get what you're saying, the bottom line that the rebates and perks are paid for by the florists. Which brings us back to where a florist must have a certain amount of sending to offset.

 

[RC in Dayton and Cincinnati]

Ok, now I'm following you. But wouldn't the $12 be dispersed amongst the all member florists? So the perhaps the actual real cost to this particular filling florist maybe less?

But I do get what you're saying, the bottom line that the rebates and perks are paid for by the florists. Which brings us back to where a florist must have a certain amount of sending to offset.

Yes, or just as likely, more.

When a large sender sends an order, he knows how much he is being compensated. The wire service also knows. But the florist, his compensation, or lack of it, is very cloudy. He is led to believe it is 73%, but it's not.

This is why it's good to follow the money trail on any particular order starting at how each party is being compensated.


RC

 

[bloomz]

I don't think so.....

$50 - $10 (20%) - $3.50 (7%) - 1.25 FTO = $35.25 florist gets.

$64 (customer spent) - 35.25 = $28.75

Deducting the rebate is fuzzy math - it has no part in this equation, unless you're purposely skewing figures. If that's the case I think you should likely deduct say $10 for Top members trip contribution and, oh, another say $10 for nationwide advertising costs and $8 fuel surcharge, which leaves the poor filler with 75 cents to fill a $64 order.

By the way - a $12 rebate is a very very rare animal, half of that is a high rebate. But heck the point of this is to make the order look as bad as possible so why don't we just say $20?

Where does rebate money come from? Suckers I'd venture, (card and coop ad purchasers for instance) but not at all necessarily the particular shop filling any particular order. I just don't believe that many of the largest smartest florists that readly fill incoming are those suckers.

I do agree this is really a $64 order and not a $50 order, tho many would argue that with you...(the "I charge $10 and send 100% to the florist" wire free crowd for instance)

I also agree that wire statements are built to confuse as many would sh*t themselves if they understood the real numbers.

That said, Gaylon doesn't work for a wire service and has forgotten more about florist numbers than most of us have learned, particularly me.

He tells me there is around a 30% contribution margin to be gained by filling incoming, this after careful consideration of our particular business's numbers, and we should be filling more.

So we want more to fill - a day hardly goes by when we couldn't easily fill several more orders without adding any payroll. And hardly a week goes by without us pitching some flowers that could have been used earlier. (I know buy less, but that's a different matter - we buy what we buy for other varied reasons, not the least of which is quanitity pricing)


I totally agree the balance of incoming/outgoing is a recipe for disaster. If you can't get a handle on that - well to quote a wise guitar player from the 60's - "Fall mountains, just don't fall on me."

But in my case - it simply means I need more outgoing, as well as more incoming.

I agreee with Rich, the information is solid.


But WTFDIK? :corky

Carry on with the bashing, the parade rain will now terminate.

opinions vary.....

blessings

 

[BOSS]

What would anyone expect...of course SAF and Floral Management are going to tout the *value* of filling wire service based incoming orders.... their very survival depends on keeping TFTDNET in business to fund them. While they have published some items in the last year or so regarding order gathering, deceptive marketing and here wire service accounting, they have failed miserably in telling the complete truth, in sharing the collective correct knowledge regarding the Black Hat aspects of this industry, and have in fact helped to purpotrate the fraud, simply by being quiet.

Generally the news that filters out, is the little bit of good, while the bad and the ugly are swept into a corner and a blanket thrown over it so it can not raise a sound or show it's head to warn unsuspecting victims what is really going on.

This industry, outside of the local market, local customers and ethical RealFlorists is an embarrasment to my family heritage, and something I am very sure was not even on the horizon when FTD was begun in 1910.

If, and until RealFlorists decide to stand together, refuse to fill for the very companies helping to not only take away their customer base, but to make them slaves to the incoming, discounted work nothing will change except on a local one store at a time level. Many wish other florists in their markets would go out of business, thinking that this will fix their problems and increase their biz. While this is true to a point, it will not float the boat completely by itself. A better answer would be to cut off the flow at the top, by eliminating wire service discounted work. I'm not saying to stop transfering orders, but that until all orders are once again *RealFlorist* generated nothing good will really happen on a wide scale.

This system worked for decades and generations, up to and until the majority of orders were given to the OG's and removed from the balance that florists traditionally could count on to balance thier businesses. Those days are done, and unless something is done to return to something similar we will continue to see more and more consumer dissatisfaction with "florists" and a decline in flower sales on a National level, with a few local florists doing well....

I'll stop for now....this is post 9,999 for me, and I'm working on 10,000 for later today and don't want to use up my whole rant here....

More to follow.......

 

[bill schodowski]

congrats on the milestone, boss

don't waste it on a wire service thread.

 

[vghstaffer]

When I started by business almost a year ago. I decided I absolutely was not going to feed the wire services my hard earned cash. I also wanted to make sure that any florist receiving an order from me got ALL their money. Therefore, my customers get what they pay for.
Though I don't have a year under my belt yet to give myself an exact idea, I do know that the 30 incoming orders I had last month were from referrals or those who found me on the internet.
I do charge a fee to send an outgoing order ($10.00). They seem happy to pay it for my trouble. They are amazed when I say I will locate a florist and GIVE them a phone number to call direct.......many run to my cooler and pick out a bouquet to thank me for my help. It all feels good. Customer is happy, I have no headaches and no bookwork.
You can bet if I have an order to your city, I will be calling you direct.

 

[Chezbloom]

I wonder how many florists are like us, we really don't transfer orders, ever. We rarely get customers asking to wire out. Maybe 3 in the last 6 months. We give them numbers/sites that we find from locateaflorist or from elsewhere on the internet. No one has ever insisted we wire out and they are happy for the info. I know it sounds weird but I don't want to be the middleman for any sale. If something goes wrong on the filling end, I don't want to be involved or take responsibility. Maybe thats a cop out but it works for us.
*I know I said I would never post another WS related post, but clearly, I lied.:jester

 

[RC in Dayton and Cincinnati]

I don't think so.....

$50 - $10 (20%) - $3.50 (7%) - 1.25 FTO = $35.25 florist gets.

$64 (customer spent) - 35.25 = $28.75

Deducting the rebate is fuzzy math - it has no part in this equation, unless you're purposely skewing figures. If that's the case I think you should likely deduct say $10 for Top members trip contribution and, oh, another say $10 for nationwide advertising costs and $8 fuel surcharge, which leaves the poor filler with 75 cents to fill a $64 order.

By the way - a $12 rebate is a very very rare animal, half of that is a high rebate. But heck the point of this is to make the order look as bad as possible so why don't we just say $20?

Where does rebate money come from? Suckers I'd venture, (card and coop ad purchasers for instance) but not at all necessarily the particular shop filling any particular order. I just don't believe that many of the largest smartest florists that readly fill incoming are those suckers.

I do agree this is really a $64 order and not a $50 order, tho many would argue that with you...(the "I charge $10 and send 100% to the florist" wire free crowd for instance)

I also agree that wire statements are built to confuse as many would sh*t themselves if they understood the real numbers.

That said, Gaylon doesn't work for a wire service and has forgotten more about florist numbers than most of us have learned, particularly me.

He tells me there is around a 30% contribution margin to be gained by filling incoming, this after careful consideration of our particular business's numbers, and we should be filling more.

So we want more to fill - a day hardly goes by when we couldn't easily fill several more orders without adding any payroll. And hardly a week goes by without us pitching some flowers that could have been used earlier. (I know buy less, but that's a different matter - we buy what we buy for other varied reasons, not the least of which is quanitity pricing)


I totally agree the balance of incoming/outgoing is a recipe for disaster. If you can't get a handle on that - well to quote a wise guitar player from the 60's - "Fall mountains, just don't fall on me."

But in my case - it simply means I need more outgoing, as well as more incoming.

I agreee with Rich, the information is solid.


But WTFDIK? :corky

Carry on with the bashing, the parade rain will now terminate.

opinions vary.....

blessings

Gaylon started in this industry in 1988 as a business instructor for FTD.
My bet is he hasn't updated his program in 20 years. Maybe, when he finally runs out of his printed teaching material he can jump out of the the big hair eighties and into the present Internet age. The industry is much different now.

There's no fuzzy math at all in including the rebate and perks into the filling florists' cost.

In my example the OG is being compensated $36. The wire service receives an estimated $6. That leaves $22 left. To suggest the florist got more you have to ask where'd the money come from. Only a total of $65 was collected.

Of course these are averages. The money actually is pooled by the wire services, flowing in from many peripheral fees and charges, but it is collected from the florists by the wire services, and it is really fuzzy math when you choose to ignore those costs.



RC

 

[bloomz]

I have a great deal of respect for Gaylon's talent and expertise. He did work for the FTDA, quite different I have heard from FTDI.

I don't take every single thing he says as gospel. I have half a brain.

But I still don't believe the senders rebate gets deducted from your incoming wire percentage, and I really don't believe you believe it either.

I get wire service statements, and I have learned how to read them, and nowhere do I see deductions for senders rebates on incoming wires.

Until someone can point to me exactly where that senders rebate is deducted from incoming orders - I'm gonna stick by my statement that it has no place on the fillers side of the equation.

But you know that and you're just having some fun with it.

flowing in from many peripheral fees and charges

I do see a lot of blank places for sucker fees, but mine usually show 0's in those columns.

We're hysterical enough around here about wire services without inflating numbers.

Wolf! Wolf! Wolf!!!

arf arf

lol

bloomz - out

 

[Joe Mioux]

Rebates should not be subtracted from the costing out analysis of an incoming order.

Why? Two reasons.

First reason is you don't know what the sending florist/OG is receiving as Rebate compensation if any at all.

Two and most importantly, If you cost out your member fees per each order, you are also taking into account your (you the filling florist) portion of the Rebate fees that are taken from your account and given to the sending florist/OG

In other words, you are double expensing your orders if you deduct the Rebate from each order.

While I was am on the subject, lets dig into Delivery fees. Some here choose to just insist that all delivery fees associated with an order should be costed to an incoming wire order.

They need to strip out the fixed costs of delivery. Insurance, Depreciation and some maintenance need to be treated as a fixed cost. How do you do this? simple. added up your yearly insurance, plus your yearly depreciation, if you lease use your lease payment and total it up and divide that number by the average annual deliveries made. This will give you your fixed cost/per delivery charge. DON"T INCLUDE THAT NUMBER IN YOUR WS COSTING ANALYSIS!

Also, many of you do not consider the ocaision, hospital, funerals are two biggies. If you are going to the hospital or the funeral home anyway, your additional cost for an WS order is virtually zero. Now for residential deliveries this doesn't apply. For me, my zip code is enormous, I will cancel orders based on distance, if I don't receive enough money for the order.

I had a great conversation with a good friend of mine Sunday (he holds a Masters Degree in Economics). I explained this perennial debate to him.

His analysis is: "You can have 60 pct (commissions and member fees subtracted) of $50 (wire in order) or you can have 100 pct of $0. He said, its a no brainer!"

I explained labor, delivery, etc that you all are concerned with about these orders so he had a good idea of the costs.

Labor? you can't use 30pct, maybe 10pct which would represent your designer (or whatever your design labor is) and even that is questionable. Why? because most flower shops don't hire design labor or staff that is dedicated to 100 pct order fullfillment or WS clerical work.

You all owe it to yourselves, your businesses and your staff to take the emotion out of your WS business decisions and start thinking objectively.

Joe

 

[RC in Dayton and Cincinnati]

Two and most importantly, If you cost out your member fees per each order, you are also taking into account your (you the filling florist) portion of the Rebate fees that are taken from your account and given to the sending florist/OG

In other words, you are double expensing your orders if you deduct the Rebate from each order.

Joe

Joe,

Maybe you didn't read my post. I never costed out the membership fees. I simply looked at how the money was being distributed on a particular order.

If a customer came into your shop and said he was only willing to pay you $25 for a $50 arrangement made to his specifications. You would probably turn down the request, so why would you be willing to do it for your BIGGEST competitors?

Ask that question to your friend who holds a masters degree in economics. His analysis should be: "You can have 50% of $50 or you can have 100% of $0. He will say, it's a no brainer!"


RC

PS: I find it humorous how you and bloomz is borrowing authority from "so called experts", the industry floral consultant, and friend who holds a masters degree in economics. Who are you trying to convince?

 

[RC in Dayton and Cincinnati]

I do see a lot of blank places for sucker fees, but mine usually show 0's in those columns.


Wolf! Wolf! Wolf!!!

arf arf

lol

bloomz - out

Ha ha Bloomz,

The joke may be on you because I have yet to meet a florist who didn't claim the same as you, but the numbers don't add up that way.

I know how much money I'm being compensated on every single wire order I send, and I know FTD makes a profit on them as well, and I know there is not much left over for the filling florist.


RC