Is 30% of Something better than 0% of Nothing???

[bloomz]

None of the above.

Oops! Except provide decons.

Bloomz,

How about the other part of the question?

What are you going to do differently to get more incoming wire orders?

Hang out with big senders and OG's like you and me?

 

[goldfish]

The way I see it is as follows

Many of your operating costs are fixed (they do not necessarily change dependent on your volume) these would include rent, equipment leases, utilities, etc.

Other operating costs are variable (will increase or decrease dependent on a number of factors) such as labour, delivery, etc.

So if a shop is making money their fixed costs are covered. So the margin on additional sales volume does not have to go toward paying covering these costs.

So if a shop is working on say an average 70% gross margin that breaks out as follows

30% Fixed Operating Costs
30% Variable Operating Costs
10% Profit

This means if they are already breaking even you have the first 30% Fixed Operating Costs covered already and do not necessarily have to account for those costs in your margin on additional business.

As well your Variable Operating Costs are already being covered at their current level with the business you are doing.

Lets for the sake of argument say tha when you start doing lots of incoming wires your variable costs jump by 20%.

Good point, as always.

The way I look at incoming orders is very similar, but with a little additional twist.

First the similar part: As many of us pointed out before, profitability of incoming orders critically depends on whether a shop has excess production capacity, or "idle labor" (i.e., a designer doing nothing). If the labor is at idle, letting her to fill a few extra incoming orders will not incur any additional labor expense.

A twist is this (actually there are two twists...)

1) Why not get rid of that "idle labor"?

That would be better. The question is whether we can do it or not.

In theory, it could be done in two ways. One is to pay our designers on the basis of the number of arrangements they produced, which makes 'labor' a direct cost. No order, no pay. The other is to let designers go home as soon as their job is done.

Neither option, however, is practical especially in a small shop with only one or two employees. Therefore, while it is important to minimize the "idle labor" as much as we can, no florist, big or small, can completely eliminate it.

If our highly-paid designer(s) are filling water tubes in the afternoon, filling a few wire-in orders would most likely be a more profitable way to use their labor than letting them fill water tubes.

2) Lost opportunity cost.

To fill wire-in orders, one must belong to at least one WS, which incurs additional fixed expenses. Let's say you pay $400 a month to be a member of WS.

One could argue that there is a better way of spending that $400. By choosing to spend that $400 on WS membership, this florist is forgoing many opportunities to use the same $400 on other promotions that could earn him/her more profit.

This is a valid argument. The problem, however, is that it's easier said than done. Slogan always sounds better than the reality. Where is that golden opportunity in which we can spend $400 a month and receive more profit than filling incoming orders? Do we know?

Someone will say PPC, while others will say some sort of local marketing. We probably can have the field day debating what that opportunity might be. But the bottom line? No one really knows what that is for sure. If it was easy to find that opprtunity, we would be already doing it.

Thus the lack of better alternatives, more than anything else, is driving many florists to filling incoming orders. $10 now is sweeter than possible $100 a year later.

My opinion is somewhere in between. I think that one could hedge the risk by allocating resources to various options. Instead of belonging to multiple WSs or none at all, one could belong to just one and limit the exposure to incoming orders, say, within ~20% of total revenue. Saving from not belonging to multiple WSs can then be used for riskier investment whose potential return could be higher.

 

[Chezbloom]

I'm going to ask a question - There is no right or wrong answer, except how you feel.

After looking at several other threads....the 2 hour response thing, FTD Dollar a day, and some of tht other postings......Let me ask you this.

Are the Wire Services MORE trouble, More headache, More PITA than they are worth?

For me.....Yes

 

[Erlene]

In all sincerity and honesty, I would like to hear from the folks who nominated Goldie's post in this thread for Thread of the Week.

Because he resisted the urge to continue repeating himself over and over....and quite likely did something more productive for his business in the time saved.

As Mark said, we have new members joining every day and they have not been part of these debates.

There are more than enough very recent threads rehashing the WS debate and are easily found using the search feature. In many other threads newbies and others are encouraged to use the search option to find all they want on a topic..

I'd say most views have been well covered and any that haven't can be solicited in another post.

 

[inferno63]

Yet those who are tired of the debate still keep posting.

I think views and thoughts change from thread to thread. New ideas and thoughts are brought to each new debate or discussion. I read all the new WS threads and see new, and good points made on both sides of the issue that were not in prior threads.

Free will allows us to participate in the discussion or not....

Carry on....

 

[LJVF]

goldie, nice post.

An analogy that comes to my mind is baseball related. I'm not sure if any of you florists have ever heard of the term "manufacturing runs". In baseball, a rich, healthy team like the New York Yankees can buy a bunch of blue chip players that can mash a ton of home runs and drive in a ton of runs. Scoring and winning comes easy for them. When it comes to spending, their margin of error is much greater so they can afford to make some mistakes in experimenting with ways to make them even more powerful. There's a reason why these teams are where they are now, because they were very smart in the past and are enjoying the fruits of their labor. They deserve all the success that they've earned.

But there are some teams that can't afford the luxury of signing a bunch of all stars, (like my San Diego Padres), and have to be creative and smart in generating their runs. Walking, bunting, stealing bases, sacrifices, etc... are blue collar ways to move runners over and generate runs. With pitching, defense and the ability to "manufacture runs", sometimes the small market teams can be competitive. But these teams also have a very, very small margin of error and every move has to be very calculated. Those that don't will fail.

With my shop I can relate to the San Diego Padres in that I have to find creative ways to "manufacture" business. If I'm smart about it, I can at least put out a competitive product on the playing field and maybe plant the seeds to possibly grow into one of those home run mashing teams in the future. Using incoming orders in a calculated way is one method of "manufacturing" dollars and supplementing revenues. Yes the margin of error is very slim, but if done right it is possible. If done wrong it could mean death. I think this is why so many fail at making incoming profitable, because it IS very difficult to do.

Is it worth the headache? Maybe not for the big mashers or the faint of heart, but for the little guys who are up to the task or even the big guys who have found an efficient way to make it work, yes it can help. Is supporting the wires services good for the future of the industry as a whole? Not sure, but some of us don't have the resources and time to "save" the industry, we just make do and try and evolve using the cards that are dealt us and hopefully stumble upon a path to success.

I hope some of you can at least understand why some of us take the path that we take. We would like to be passionate about doing what many preach to be the right thing, but we have to do what we feel is right for OUR business. On the other side of the token, I understand where everyone else is coming from too and we should and need to respect the paths you have chosen as well.

I apologize if I lost some of you with the baseball analogy, what can I say, I love the game.

 

[RC in Dayton and Cincinnati]

Good point, as always.

The way I look at incoming orders is very similar, but with a little additional twist.

First the similar part: As many of us pointed out before, profitability of incoming orders critically depends on whether a shop has excess production capacity, or "idle labor" (i.e., a designer doing nothing). If the labor is at idle, letting her to fill a few extra incoming orders will not incur any additional labor expense.

A twist is this (actually there are two twists...)

1) Why not get rid of that "idle labor"?

That would be better. The question is whether we can do it or not.

In theory, it could be done in two ways. One is to pay our designers on the basis of the number of arrangements they produced, which makes 'labor' a direct cost. No order, no pay. The other is to let designers go home as soon as their job is done.

Neither option, however, is practical especially in a small shop with only one or two employees. Therefore, while it is important to minimize the "idle labor" as much as we can, no florist, big or small, can completely eliminate it.

If our highly-paid designer(s) are filling water tubes in the afternoon, filling a few wire-in orders would most likely be a more profitable way to use their labor than letting them fill water tubes.

2) Lost opportunity cost.

To fill wire-in orders, one must belong to at least one WS, which incurs additional fixed expenses. Let's say you pay $400 a month to be a member of WS.

One could argue that there is a better way of spending that $400. By choosing to spend that $400 on WS membership, this florist is forgoing many opportunities to use the same $400 on other promotions that could earn him/her more profit.

This is a valid argument. The problem, however, is that it's easier said than done. Slogan always sounds better than the reality. Where is that golden opportunity in which we can spend $400 a month and receive more profit than filling incoming orders? Do we know?

Someone will say PPC, while others will say some sort of local marketing. We probably can have the field day debating what that opportunity might be. But the bottom line? No one really knows what that is for sure. If it was easy to find that opprtunity, we would be already doing it.

Thus the lack of better alternatives, more than anything else, is driving many florists to filling incoming orders. $10 now is sweeter than possible $100 a year later.

My opinion is somewhere in between. I think that one could hedge the risk by allocating resources to various options. Instead of belonging to multiple WSs or none at all, one could belong to just one and limit the exposure to incoming orders, say, within ~20% of total revenue. Saving from not belonging to multiple WSs can then be used for riskier investment whose potential return could be higher.

Looking at Goldfish's situation,
If he dropped wire service membership he could lower his prices by a whopping $6.34 on every single bouquet that leaves his shop, or he could add a whopping $6.34 worth of flowers to every bouquet that leaves his shop!

Now this move does not come without risks. He could lower his prices or increase the amount he gives and still not produce any additional sales, but contrary to most, I'm a firm believer that giving a better value to the consumer is a good strategy.

Of course this is not a short-term strategy. It does take time, but instead of hedging his bets for short term stability with incoming wire orders, he would be giving himself an advantage over his competition and providing himself potential long term growth.

Where did I come up with the $6.34?

In effect he is paying $400 a month in membership fees for the possibility of buying orders that will be discounted by another 27%.

If his sales are $200,000 a year and his annual membership fees are $4800 a year and commissions he pays on 20% of his sales as incoming wires are $10,800 a year, he is paying a total of $15,600 a year in membership fees and discounts on $40,000 worth of orders.

If his shop's average order is $65 his business generated 2,462 orders on its own for the year. That $15,600 equates to $6.34 per every order his shop creates.


"If you are unwilling to separate yourself from the pack, you should never expect to be anything more than average." RC

 

[bloomz]

and that would be the RC philosophy, unquestionably the best one of all.

"Provide value and they will come."

It's just that it's a leap to try to get there from here and a scary proposition to get your customers used to receiving that much more - you know we've discussed this at length.

But I do know you're right.

 

[CHR]

Because he resisted the urge to continue repeating himself over and over....and quite likely did something more productive for his business in the time saved.

Wouldn't it have save ALL of us had the made-to-bait thread never been started in the first place?

I'd say most views have been well covered and any that haven't can be solicited in another post.

But once a thread is started, then

When a post is created to rehash the same, much, much, debated topic, are the rest of us just supposed to shut up?

and let newbies rely on forum search?

 

[CHR]

Here's an idea instead of the incoming wire order method. He could lower his prices on every single bouquet that leaves his shop by a whopping $6.34, or he could add a whopping $6.34 worth of flowers to every bouquet that leaves his shop!

Where did I come up with the $6.34?

In effect he is paying $400 a month in membership fees for the possibility of buying orders that will be discounted by another 27%.

If his sales are $200,000 a year and his annual membership fees are $4800 a year and commissions he pays on 20% of his sales as incoming wires are $10,800 a year, he is paying a total of $15,600 a year in membership fees and discounts on $40,000 worth of orders.

If his shop's average order is $65 his business generated 2,462 orders on its own for the year. That $15,600 equates to $6.34 per every order his shop creates.


"If you are unwilling to separate yourself from the pack, you should never expect to be anything more than average." RC

Well said, Randy.

It also follows that if prices are set to be competitive for local delivery customers, they're not generally going to get filled for those prices, or in as full a fashion by other shops as incomings.

I've seen attempts at blended strategies (two prices - 1 for local, 1 for out-of-town) but believe 'local' customers are generally unwilling to pay significantly higher prices online for the same items delivered out of town.

 

[bloomz]

Wouldn't it have save ALL of us had the made-to-bait thread never been started in the first place? But once a thread is started, then and let newbies rely on forum search?

Made to bait or made to make some think and question Flowerchat status quo?

There aren't enough new "wire services suck" threads for them?

About every week a new one crops up - maybe every week the other side of the coin bears repeating as well.


Sorry y'all, I made you think

Do I go need to write something on the blackboard 500 times?


I think you can count on one hand the number of vocal posters that know how to make money from incoming wires.

Given the most members here are ws members - I think it really could be vital that they hear that message regularly.

I'm sure you wish I wouldn't post thought provoking stuff like that.....("never been started in the first place"), but.....

OK what do I write on the blackboard?

Don't forget everybody....very important point -

opinions vary

 

[RC in Dayton and Cincinnati]

Looking at Goldfish's situation,
If he dropped wire service membership he could lower his prices by a whopping $6.34 on every single bouquet that leaves his shop, or he could add a whopping $6.34 worth of flowers to every bouquet that leaves his shop!

Now this move does not come without risks. He could lower his prices or increase the amount he gives and still not produce any additional sales, but contrary to most, I'm a firm believer that giving a better value to the consumer is a good strategy.

Of course this is not a short-term strategy. It does take time, but instead of hedging his bets for short term stability with incoming wire orders, he would be giving himself an advantage over his competition and providing himself potential long term growth.

Another way of looking at it, Goldfish is taxing his local customers $6.34 on every order they place. He doesn't realize it, but he is. This is so he can subsidize his lack of volume by filling incoming wire orders.

Now the real trick is he needs more volume. He needs to generate enough revenue and business to keep his designers busy and pay his overhead. He does this by filling wire orders, but at the same time he is taxing his local customers and limiting his potential growth. He's in a catch 22.

 

[sandytf]

Erlene, with all due respect, I don't think newbies can get all the same information from old threads. It leaves out one important part of the equation, and that is the ability to join in the conversation if they choose to do so.

Goldie, I agree there is no "golden opportunity" for those who invest in their business in a way other than the wire service. If it was that easy, we'd all be rolling in green. I think we all know there is no simple formula to follow. I do think that some shops are lulled into thinking that the wire service is "good" for them because they see sales when in fact it may be dragging them down. (Notice I said "some".) It is no easier to use the wire services to advance your business than many other investment options-it just might SEEM easier. In some cases, when used correctly, it is the right decision.

Darrel, I love your baseball analogy. Although I don't know much about baseball, I could easily understand what you were saying-and I think you're right. Ultimately, each individual business needs to make their own decision based on their own situation. I believe that's what Bloomz has been saying all along.

I think this thread HAS been different than many others that I've read regarding the wire services. I think everyone has finally said (or wrote) out loud that their way isn't the only way. Now maybe we can move to a new level in the discussion and start to figure out when and how a wire service can or cannot work for us in different situations. In fact, RC has already started that discussion.

 

[lori042499]

Do I smell progress???


OMG??? What now does armegeddon happen??

 

[goldfish]

Where did I come up with the $6.34?

In effect he is paying $400 a month in membership fees for the possibility of buying orders that will be discounted by another 27%.

If his sales are $200,000 a year and his annual membership fees are $4800 a year and commissions he pays on 20% of his sales as incoming wires are $10,800 a year, he is paying a total of $15,600 a year in membership fees and discounts on $40,000 worth of orders.

Correct. Just so that readers follow RC's logic...

$40K wire-ins (20% of $200,000)
discount = $10.8K
membership fee = $4,8K
Total WS expense = $10.8K + $4,8K = $15.6K​

Note that these are NOT the number of our shop, obviously. They are presented as just an illustrative example for a typical micro florist (we aren't that small).

If his shop's average order is $65 his business generated 2,462 orders on its own for the year.

Explanation: $160K local order, divided by $65 average order = 2,462 orders

That $15,600 equates to $6.34 per every order his shop creates.

RC's argument is that, instead of spending $15.6K on acquiring wire-in orders, this owner should have passed that $15.6K to 2,462 local orders, in order to provide a better value to these orders. The rate would be $6.34 per order = $15.6K / 2,462, equivalent to several more stems per arrangement.

I have two answers to that.

One, Randy, we are already doing exactly what you are advocating. We've been doing this for 3 years now. To be precise, we offer approximately 33% more value than our local competitors. That's how I designed the pricing structure.

It's just that the fund is not coming from dropping WS; it's coming from reducing the owner's income and other fixed expenses, particularly the labor.

Two, now that we are already doing this, the question becomes: what if we drop the WS (we are FTD). Would that make things easier?

No, it won't. Dropping WS will make it more, not less, difficult to continue our efforts. Here's why. I don't want to discuss our numbers, so let me just use your example to make a point....

In the illustrative example RC bought up, this shop is making a profit from incoming operation - I estimate the earning from wire-ins to be approximately $10K a year*.

* = 40K total - $15.6K discount+membership fee - ~$15K variable expenses​

If this shop dropped the WS, they would lose this $10K without any compensating increase of profit in a short term. Their earning will immediately decrease by $10K.

With the WS operation intact, even if this shop invested the $15.6K a year on local orders, part of it would be covered by the $10K earning from WS.

Again, like any other shop owner, I do NOT have unlimited fund to finance the change I've been trying to make, which ahppens to be exactly the same as yours. I can also tell you that, with the shop size like ours, it's a lot more difficult to offer the kind of value your shop is offering. Most small shops simply give up.

With that said, for all the practical reasons, I do need to find a little bit of income source here and there, in order to keep funding my operation.

To be honest with you, to me, it doesn't matter at all where the money comes from. If selling tofu is good and as easy as filling incoming orders, I would switch to tofu in a heart beat. The point is that I need some kind of guaranteed income to fund the change of local operation.

Finally, I will say this.

For the majority of shops who quit WS, they quit for various reasons. Fine. The question is, now that they aren't spending ~$5,000 on membership fees, where are they investing the money on?

My feeling, based on the numerous posts I've read in FC, is that most of the time, they are not re-investing on anything. $5,000 is a big chunk of money and, if they are so adamant that this shouldn't be spent on WS, then where exactly are they spending?

 

[goldfish]

Another way of looking at it, Goldfish is taxing his local customers $6.34 on every order they place. He doesn't realize it, but he is. This is so he can subsidize his lack of volume by filling incoming wire orders.

Now the real trick is he needs more volume. He needs to generate enough revenue and business to keep his designers busy and pay his overhead. He does this by filling wire orders, but at the same time he is taxing his local customers and limiting his potential growth. He's in a catch 22.

Randy, please be careful when you say "his local customers" etc. The number you are referring to is the number you made up.

Anyway, I see your point and even agree on it in principle.

But the detail of your logic is a bit faulty.

If a business has a positive income from a certain operation, whether it's filling incoming orders or selling teddy bears or renting tuxedo, the business would lose that money if they quit that particular operation.

It's not that complicated.

If a florist is earning money, as we do, from filling incoming orders, this florist would lose that income if they quit, obviously.

If this shop wants to increase the value to their local customers, they do need that income to support their operation.

I don't know whether your shop is selling bears (we call them "stupid bears"). But if you do and the sale is giving your shop a little bit of money, I wouldn't quit selling it.

 

[BOSS]

Sorry y'all, I made you think

Sorry dude.... you're not that powerful.

 

[bloomz]

Another way of looking at it, Goldfish is taxing his local customers $6.34 on every order they place. He doesn't realize it, but he is. This is so he can subsidize his lack of volume by filling incoming wire orders.

Can't exactly put my finger on it, but somehow that smacks of some very creative "number fiddlin'"...

Anyway, I see your point and even agree on it in principle.

But the detail of your logic is a bit faulty.

If a business has a positive income from a certain operation, whether it's filling incoming orders or selling teddy bears or renting tuxedo, the business would lose that money if they quit that particular operation.

It's not that complicated.

If a florist is earning money, as we do, from filling incoming orders, this florist would lose that income if they quit, obviously.

If this shop wants to increase the value to their local customers, they do need that income to support their operation.

I don't know whether your shop is selling bears (we call them "stupid bears"). But if you do and the sale is giving your shop a little bit of money, I wouldn't quit selling it.

I think that one goes to the Goldfish man.

Sorry dude.... you're not that powerful.

and boy howdy do I stand corrected.okeball Beam me up, Scottie.

 

[HeatherTuckey]

Really great thread everyone. One point we've discussed before, but not mentioned yet in this thread, even if your on the fence in the WS profitability game (minimal profits), you have increased your buying power, thus enabling your company to get far better pricing and employed a larger core staff (we hope a very qualified core staff). Sometimes we cut our labor so thin that we are completely reliant on just a couple very productive and experienced employeees. That scares the hell out of me if these two or three people decide to leave, get injured, or just call out sick at a holiday or big event week.

IMO I would rather increase my business even at lesser margins and have a more secure, properly run business that is NOT reliant upon myself or my brother 24/7. Why are we in this biz if we're afraid to be able to say F it once in a while and go on well deserved vacations or take the day off to do whatever???!!! Having WS biz in the 15-20% range, supports a few extra staff members in my business and allows me to relax and know that they can handle busy days with or without me (or my brother) there.

Also these core people are necessary to train the temps at the holidays. You will quickly reach capacity, if you can only bring in as many temps as you have core employees. For example, with 6 designers and another 6 well trained sales staff, I can easily bring in 5 design temps and 5 sales temps if my increase in sales warrants that much in increased labor (buddy them up - one temp to one regular staff). I wish I had a pool that large to pull from, but I like to know I have the experienced team and have the space to do that.

 

[goldfish]

Can't exactly put my finger on it, but somehow that smacks of some very creative "number fiddlin'"...

"Fiddling" part is that he included $10.8K discount my shop is supposed to be giving to WS+OG, into his calculation of what I could be giving to my local clients.

Obviously, this is not correct. The correct amount that I could be giving to my local clients is just the WS monthly fees, without discounts.

So it's not like I could give $6.34, but more like $2.

But hey, to be fair to him, the actual dollar amount is not the issue.... The issue is whether a WS member could use the money they are currently spending on WS for a better use or not.

His position is that we should. My position is that, if a shop is earning money from WS operation, it would be hard to quit it just to reallocate the resource.... UNLESS, shifting the money to something else would immediately produce the same amount of profit.