BOSS
FlowerChat Administrator
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The very thing happens every time a printer spits out jibberish! :boggles:
DOH....
The very thing happens every time a printer spits out jibberish! :boggles:
Floral Management
- Thread starter RJD
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I understand a new florist wanting to get any order they possibly can, wanting to join a ws. Ivygreen did a great post on that in another thread and made me see the point. So I would think a well-established florist would not feel they had to have those orders but I see some saying, "I'll take 'em" and some saying "Nope - they're undervalued"
The sad part is I can see both sides. Still don't know what my personal choice will be. I thought more facts and figures would bring clarity, but alas, no.
The sad part is I can see both sides. Still don't know what my personal choice will be. I thought more facts and figures would bring clarity, but alas, no.
Reciprocity fee paid by mostly filling florists. It finances at least part of the rebates giving out to big senders.
Joe Mioux
Well-Known Member
Hi Randy.
First Paragraph: yes, i know you were segregating the rebate out, however, I didn't read where you accounted for the remaining Membership Fees.
you need to assign all your WS fees don't you, not just the REbate part?
I was just attempting some clarification.
Also, how does a receiving florist know what the sending florist will receive for their Rebate? It's easier and more accurate to cost all your membership fees rather than guessing about some of the fees.
Second Paragraph: Most of my incoming business is derived from flower shops. The OG thing isn't going away, just as my Wal-Mart garden Center competition isn't going to go away.
Big retail companies are going to continue chipping away saels from small independent retailers. You're not going to change that phenomenon.
I was lending some independent, non-emotion driven observations with my friend's comment.
RE: your PS. I am not attempting to convince anyone. Every florist has to do their own math. I want to accurately assign costs to WS accounting rather than assign some costs but not all, OR incorrectly assign certain costs to WS profit analysis.
joe
Over the years, I've read - more than once - advice advocating to wait until after a codification deadline to buy popular holiday containers. There's a recognition that demand will be there from local consumers, but filling them as incomings isn't profitable (especially during holidays).
Those same shops will naturally offer the codified to their own consumers as wire outs. I doubt there's an overt recognition that the filling shops aren't generating profits on those orders, but the hypocrisy of 'do as I say, not as I do' is palpable.
Vehicle insurance is a fixed expense, but the liability of driving our vans off our lots occurs whether we're delivering local or incoming orders. It's our biggest potential liability. Period.
Paul's' article shows zero recognition for the cost of delivery. Joe, do you agree with that? If not, what delivery expense would you assign to each order?
Instead of assuming $100 orders, as Paul did, how do the numbers work out for $50 orders?
Lastly, IIRC, a substantial portion (30%?) of all wire orders occur during peak demand holiday periods. With respect to design and delivery, we are no longer dealing with fixed expenses and have moved to variables since extra staff is hired to help handle those orders, especially deliveries. Would you attribute added design & delivery costs to incomings at that point?
Those same shops will naturally offer the codified to their own consumers as wire outs. I doubt there's an overt recognition that the filling shops aren't generating profits on those orders, but the hypocrisy of 'do as I say, not as I do' is palpable.
We can slice & dice the numbers and eliminate some of the expenses attributed to delivery, but the big two today - gasoline and delivery labor - are very real costs. Yes, if you already happen to be 'going that way', the delivery labor is mostly covered by another order. But 1) you can't count on that fact and 2) we find that's rarely the case, especially when incomings seem to demand more and more timed services.Joe_Mioux said:
Vehicle insurance is a fixed expense, but the liability of driving our vans off our lots occurs whether we're delivering local or incoming orders. It's our biggest potential liability. Period.
Paul's' article shows zero recognition for the cost of delivery. Joe, do you agree with that? If not, what delivery expense would you assign to each order?
Instead of assuming $100 orders, as Paul did, how do the numbers work out for $50 orders?
Lastly, IIRC, a substantial portion (30%?) of all wire orders occur during peak demand holiday periods. With respect to design and delivery, we are no longer dealing with fixed expenses and have moved to variables since extra staff is hired to help handle those orders, especially deliveries. Would you attribute added design & delivery costs to incomings at that point?
Joe Mioux
Well-Known Member
I am not not talking about restructuring your entire Gross Sales.
When the WS business represents a small part of you business, a portion that requires no or insiginficant increases in your overhead, it is prudent to accept some additional business at a discount.
Do the math, but use accurate numbers. Not inflated or partial expenses.
Joe
Joe Mioux
Well-Known Member
I haven't read the article.
If you want to include delivery and I think you can in certain instances, YEA it should be added. Just not the fixed costs of delivery Also, be careful how you account for your delivery labor.
Cathy, what should labor be and what should it represent?. If so that labor will account for your delivery labor as well, so now you have to deduct your Fixed Delivery costs AND your Delivery Labor from your Delivering Expensing of that Wire Order.
All I am saying is be careful not to double expense delivery labor, once to labor and once to delivery expenses.
Whether it's $100 or $50 doesn't make much difference, if you are using percentages to determine the number of flowers to put in an arrangement
Let's look at Holiday Wire Service business. You say it represents 30 pct of the WS business. OK, but that 30 is distributed among several holidays, mainly Christmas and Mother's Day.
This is just my observation and isn't based on any study.
Christmas starts mid Nov and runs through Dec 25, any additional wire service business is pretty watered down and doesn't impact my labor or delivery severely.
Valentines Day, for me not a big Wire order holiday
Easter, --- is that still a holidy for flowers?
Sec Day? no
Mother's Day, - Yes we do get a good number of orders incoming, but the nice thing about Mother's day is that we start delivering Thurs.
Grandparents, Bosses, Sweetest days, nope not a big volume WS day(s)
Thanksgiving: It used to be a big sending holiday, not so much anymore.
My point is, I don't see the holiday business as causing many flower shops to signficantly change their staffing. The staffing will be increased more for the local business, rather than the Wire bus.
Joe
That's because opinions are being presented as facts in many WS-related threads.
As far as I know, major facts are never in much dispute, except for a minor disagreement over specific numbers (whih actually don't matter that much).
1) Incoming orders can be profitable, primarily depending on whether your shop can fill the incoming orders without hiring an extra designer ("excess production capacity"). - Now, the question of whether it's wise to fill wire-ins just because it pays for idle labor, is a matter of opinion, not fact.
2) Incoming orders are not as profitable as outgoung orders.
Even if everyone more or less agrees with these facts, reasonable people can still disagree on whether or not we should fill wire-ins, particularly from OGs.
Incoming orders are not very profittable (I usually use a figure like 25% gross profit margin). So you could argue that, instead of working so hard to earn a little bit of money, why not use that same energy to do something more productive? These people also point out that by filling OG orders, we would be helping our competitors.
These are all valid points.
But remeber that these arguments are not about WS profitability issues per se. These arguments are more about our business strategies: how do we allocate our resources among several revenue sources, including local orders, wire-ins, etc.
In summary, when we are reading WS-related threads, readers should try to dintinguish facts from opinions, and profitability analyses from business strategies. Once we are clear on that distinction, WS debates are not that painful to read.
Joe Mioux
Well-Known Member
In summary, when we are reading WS-related threads, readers should try to dintinguish facts from opinions, and profitability analyses from business strategies. Once we are clear on that distinction, WS debates are not that painful to read.
thank you!
Um...er... it's the topic of this thread.
Here's another link to it. The author establishes a basis for his theory that if incomings and outgoings are equal, the contributing margins are each roughly 30% - and that the Break-even point for WS expenses (he uses $3000 as an annual number) is a combined sending/receiving of $10,000 ($5000 in, $5000 out).
He assigns an expense of 10% design labor to each incoming, but does not recognize any cost for delivery.
BOSS
FlowerChat Administrator
I just finally got the mag and read the article...
Cathy, your right, the numbers go hay wire when you reduce the order value to $50.00...and even worse when you reduce it to the nominal $40.00 including delivery that I would bet 75% of wire orders fall into...
I think Paul's a good accountant, I have always enjoyed his articles...but I have a feeling that delivery was intentionally left out of the INcoming equation to make the numbers balance...
When you take into account that I take $9.95 (OR MORE) off every order, it is 10% off the top of a $100.00 order, BUT...it is 20% off a $50.00 order!!!!!!!!!!!!!!!!!!
The article is skewed in favor of the wire services, as would be expected....
Cathy, your right, the numbers go hay wire when you reduce the order value to $50.00...and even worse when you reduce it to the nominal $40.00 including delivery that I would bet 75% of wire orders fall into...
I think Paul's a good accountant, I have always enjoyed his articles...but I have a feeling that delivery was intentionally left out of the INcoming equation to make the numbers balance...
When you take into account that I take $9.95 (OR MORE) off every order, it is 10% off the top of a $100.00 order, BUT...it is 20% off a $50.00 order!!!!!!!!!!!!!!!!!!
The article is skewed in favor of the wire services, as would be expected....
RC in Dayton and Cincinnati
New Member
Goldfish,
What exactly is your definition of profitable?
For example, I need one gardenia but have to buy a box of three, use the one and sell the other two at 25 cents each:
Do you define selling the two at a severe loss as a profitable sale?
Or am I simply cutting my losses on the remaining two gardenias?
RC
RC in Dayton and Cincinnati
New Member
Also Goldfish,
How is it that filling wire orders can be profitable for your shop but unprofitable for my shop, assuming I purchase better and operate more efficiently?
RC
BOSS
FlowerChat Administrator
LJVF
Well-Known Member
Well the fact is, you should not have idle labor in the first place
I think a good example of idle labor is a shop owner whom is also a designer. It's common that an owner would work regardless if it is slow or busy, therefore his/her labor should be considered fixed.
Money-in exceeding money-out.
"Money-in" is straightforward to calculate.
"Money-out" is trickier to calculate, because it contains direct cost (flowers, gas, etc) and indirect cost (such as personell expense, rent, utilities, WS monthly fees, etc, etc). To be precise, we have to agree on which indirect cost(s) should be included in the profitability analysis. That's where confusion comes in IMO.
My personal preference, which no one has to agree with, is that I ignore all the indirect expenses, except WS monthly fees.
According to this definition, an incoming order is "profitable" if the gross profit from this order (sales value - commissions - COGS - delivery) exceeds the corresponding WS monthly fee (= total fees / # of orders). It does in our case.
This definition is of course approximation. In fact, a little bit of utility is being used to process incoming orders, which I ignore. And I also ignore labor cost, too. I have only one FT designer, who will be paid even if she has nothing to do.
As long as # of incoming orders is not overwhelming (in our case about 10-15% of revenue), this approximation works fine to us.
I would think you are just cutting the loss.
I see your points. The difference is that cost for each Gardenia is a direct cost. Even though the two remanining Gardenias were "already paid for", I wouldn't ignore this direct cost in my analysis.
Again, all I (and some other people) are ignoring is a certain indirect cost (i.e., labor).
Joe Mioux
Well-Known Member
Mark Smith,
What is the $9.95? Delivery Fee?
If so can you break down the costs that go into the $9.95?
how much is labor, how much is gas, maintenance, etc and how much is insurance, depreciation and personal propert taxes, if applicable and any profit?
thanks
joe
What is the $9.95? Delivery Fee?
If so can you break down the costs that go into the $9.95?
how much is labor, how much is gas, maintenance, etc and how much is insurance, depreciation and personal propert taxes, if applicable and any profit?
thanks
joe
Well the fact is, you should not have idle labor in the first place
I know, but the reality is I do have idle labor. Besides I have only one FT designer. I can't cut her into two pieces. I did reduce the work hours of 2 PTer's during summer though.
You answered it by yourself already. You are operating more efficiently than we are, that's why.
You don't have as much "excess production capacity" (euphemism for "idle labor" i.e., "a designer who is picking noses while sweeping floor") as we do.
If you have idle labor, any order is "profitable", or better than doing nothing - let's put it that way.
BOSS
FlowerChat Administrator
Dang fine question Sir! Yes, the $9.95 that comes off the top is taken for delivery, but it can range upwards of $20.00 or more, as I am the only shop that services some areas of the county...
Assuming that the driver (mine are pretty dang good) can average 4 per hour this time of year (spread out, non-holiday), and is covering less than 30 miles doing so, total for the 4 would be $39.80, with about $16.00 of that as break even on the labor...(1 hour, including taxes), 30 miles equals about 1.5 gallons of gas, so at $3.75 that's $5.62 and so far we're up to $21.62/4 deliveries.
Insurance costs me about $3.00 per day so that's a non issue (to me) but based on an average of 30 deliveries per day it's $0.10 per delivery, so add $0.40 for a running total of $22.02...
Property taxes..?? On the vehicles?... I have no idea, it's all rolled into one with the building, computers etc...and depreciation is based on a yearly figure, but is about $22.00/day across the business so maybe a buck a day??...running total $23.02
Maintenance:...ooooh that's a tuffy....no pun intended...Lets say $1.00/delivery...running total $27.02....leaving a gross profit of $12.78 for the 4 deliveries...minus of course, overhead, my salary and whatever else...
Please shoot holes in this "theory"... I'm looking to "adjust" some stuff in August....
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