Is a wire service right for my shop?

[fairfield]

If your business calls for the transfer of enough orders, you need a wire service, or a similar platform, that allows for such, and IF your business does NOT transfer enough orders...GET OUT, or DON'T get involved in the first place!!
generally speaking.......

Here is where the conversation usually goes awry. This vague statement sounds like it comes from somebody that is tired of this topic. I'm not attacking you, Mikey. Rather, I will appeal to you and the many other longtime florists on this forum to offer guidance to florists looking for real-florist advice.

This topic has been washed so many times with the same answers that I don't think florists are even paying attention to what is actually being said. They are so polarized on the subject and so opposed to other viewpoints that the infighting is now becoming a public spectacle on the www in the form of blogs and investigative reports. It seems akin to politicking and one end-result is that consumers will be turned off. I think we are already experiencing this.

So, the guidance I am looking for is simple. Before signing with any wire service, how many orders does a shop need to be sending? The answer is not evasive because the wire services have minimum fees - use those. Set an average dollar amount on the sending side for $40, $50, and $60. I would like to see 3 magic need-to-send numbers for making money with the wire service based on a 1-to-1 and 2-to-1 sending/receiving ratios. List the COGS and labor percentages used, please. Include and list anything I may have overlooked.

Actual numbers - I think this is a great first step towards resolving the issue of whether-or-not a WS will benefit my shop.

 

[Mikey the Flower Guy]

you've peaked my interest.....

are you willing to accept .63 cents on the dollar??
Simplest analogy......a bride comes in an orders a wedding for a thousand dollars...you do all the things you do, and when required, the bride hands you a check for $630.00...paid in full!!
YOU must decide whether you can, or cannot survive on that!!
Some do very well...some blow their stacks when things get tight!!
On the outgoing side....are you self controlled enough to KNOWINGLY, and consistently set aside the moneys required to PAY the WS IF you send out more than you receive??
Do you set aside moneys for your state/federal taxes??
Most florists open their wire service statements, their jaws drop, they start jumping up and down, when they OWE a wire service money (though this is where the true money is made!!)
Do you send a MINIMUM of 20 outgoing orders??,,,does your area qualify for small town wire service member fees??
Have you negotiated a rate with a wire service, and also negotiated a rate for their credit card clearings??
Percentages mean nothing...as each circumstance is as individual as you and I

 

[Joe Mioux]

Mike

You didn't factor the outgoing revenue side to your bride analogy

Yes we fill incomings at a discount, but we also send orders out and receive 20 pct back. So those discounted orders aren't really that heavily discounted.

Example: $1000 discounted to 63 pct, yields $630 sale, but add back say (plug in your own number) $1000 sales outgoing and your earn $200.

so now that $630 actually is only discounted to $830.

HTH

Joe

 

[Mikey the Flower Guy]

Mike

You didn't factor the outgoing revenue side to your bride analogy

Yes we fill incomings at a discount, but we also send orders out and receive 20 pct back. So those discounted orders aren't really that heavily discounted.

Example: $1000 discounted to 63 pct, yields $630 sale, but add back say (plug in your own number) $1000 sales outgoing and your earn $200.

so now that $630 actually is only discounted to $830.

HTH

Joe

of course I didn't factor it in Joe.....MOST FLORISTS do NOT join a wire service to "send" orders...we have pretty much established this!! Also, most florists DON'T understand that when "sending" orders, they are 'holding funds" on behalf of the filling florist & the wire service, and very little attention is paid to the clearinghouse expenses!!
Your numbers are not what you think they are!!
By the way...I AM a proud FTD member, have never swayed from it, they work for and with me, knowing full well I DO NOT jump around, and that when I receive a member incoming order, that the sending shop gets good reviews, the wire service gets good reviews, and we get good reviews, and when we DO SCREW UP, we don't try and pass the blame on.

 

[CHR]

For starters, you can perform a simple Break Even analysis on sending and receiving.

I know most florists' eyes glaze over when numbers are discussed, but it's very important to understand these figures.

Shops signing up primarily to get incomings should focus on how many orders they must fill to break even.
Fixed Expenses:
Dues X12
Electronic Network X12
Misc fees (QA, Directory, photo licensing) X12
This might also include the cost of an extra phone line (in the case of Dove)

Variable Expenses: (express these numbers as a percentage - yours may vary)
COGS (Flowers, container, foam, card, plant, etc)
Labor
Delivery
WS Commissions/Fees

Here's an example:
Dues: $150/mo = $1800
Electronic Network: $100/mo = $1200
Misc: $30/mo = $360
Total Fixed Expenses: $3360 annually

Variable Expenses (Use your actual numbers)
COGS 30%
Labor (Designer, driver, order processing) 20%
Delivery (Vehicle, Ins, Maint) 5%
WS Commissions/Fees/Receiving Charges 29%
Total Variable Expenses: 84%

Subtract the variable expense Figure from 100 and you'll have 16%.
Divide the Fixed Expense by 16% = $21,000 in Gross Incoming Orders to break even.

At an average order value of $55, that's 382 orders/year or around 32 orders/mo to break even.

Lower average incoming orders will increase the number you'll need to fill, higher averages will decrease it.

If dues are $200/mo, the break even point rises to about $25K. Make sure to account for your actual costs and include all the fees. 'Low senders' (hitting a pre-set ratio of incomings to outgoings) may also get hit with additional monthly charges and percentages.

------------------------------------------------------------
For stores primarily interested in joining to send, you can perform a similar analysis.

Fixed Expenses (same as above)
$3360

Variable Expenses
Sales Labor (7%)

Based on those numbers, you'll need to generate approx. $3600 in commissions/service charges/rebates to break even. Assuming no service charges, an average outgoing order of $55 (20% commission = $11) and a $3 rebate, ($14 net/order) you'd need to send approx 260 orders/year - about 22 orders/mo. If you have a $5 service charge, the break even number lowers to 190 orders. A $10 service charge drops it to about 150 orders annually or 13 orders/mo.

Of course, most shops have a mix of incomings and outgoings but IMO it's a good idea to know the costs for each 'side'.

Shops that are members of multiple wire services should take the hardest looks to see if the incomings add to the bottom line since they only need one service to send out orders.

HTH

Cathy

 

[Mikey the Flower Guy]

Cathy.....

the "variable" expenses are the true test of your skillset...often the percentages allowed for these are way off base, when you are at your highest performance rates!!

 

[Eric S]

You didn't factor the outgoing revenue side to your bride analogy Yes we fill incomings at a discount, but we also send orders out and receive 20 pct back.

Joe

Joe is there any other expense to sending orders out? Or do you really get 20% of those ordres.

A couple of years ago after one of our biggest months of sending and filling orders I fiqured outgoing was 5% and incoming was 65%. So I agree with mikey on his sharing of .63 on the dollar.

 

[Bigted]

Mike

You didn't factor the outgoing revenue side to your bride analogy

Yes we fill incomings at a discount, but we also send orders out and receive 20 pct back. So those discounted orders aren't really that heavily discounted.

Example: $1000 discounted to 63 pct, yields $630 sale, but add back say (plug in your own number) $1000 sales outgoing and your earn $200.

so now that $630 actually is only discounted to $830.

HTH

Joe

Joe, it is even more complicated than that. The reality is that this decision is a judgement call except at the very lowest level of orders. Yes, one of the biggest factors is your sending vs. receiving numbers. It's pretty clear that sending is more profitable. That's why there is so much competition for orders.
However, incoming orders can also play a profitable role in your business. It depends on things like the absolute level of your fixed expenses compared to your local sales, your ability to gain volume discounts on hardgoods and flowers as volume goes up, how much your labor is being utilized before incoming, current ability to advertise, and a variety of other factors. Answer this question. If a big funeral parlor offered you a million dollars of business a year for a 30% discount, could you make money on the business? For most shops the answer is yes. That tells me that somewhere there is a number that makes sense, if handled correctly.

 

[Eric S]

Could you make money by offering a 30% disount to your customers that walk into your store everyday?

Saying that a vender is going to send x amount of dollars every year to your business becaue your going to offer this type of discount seems to be the reason for this.

Why not do the same by offering daily customers the same opportuity for their repeat business. Wouldn't that translate into more repeat business and a steady increase of new customers that would find your offer more appealing then to order from .coms or other florst in your market?

If a vender is offering this kind of relationship I will assume that to justify the disount the vender would be covering cost of advertising to get those orders to you. But we know that advertising cost do not translate into 30% of or even 20% of sales.

Keeping to the reason for this thread how about taking your toal sales incoming and out going what is the total percentage of these sales that your shop actually gets? Taking my december statement from teleflora and adding y total sales and removing what I had to pay for recieving sending rebates anything that was part of the process my profit from the service is 34%.

This is bear bones no advertising no containers. Keep in mind cc processing will still need to be taking out of this. Is this number enough for this type of service?

One more thing my outgoing to incoming is 11 to 1

 

[Joe Mioux]

Some of you missed my point......

My prior post was not intended to be an exact example. If it was I would have been more detailed.

My point is that you can not ignore the outgoing (income) WS side when discussing the incoming (discounted ) WS side of this issue. The two are not mutually exclusive.


Mike, It appears I upset you.... sorry... That was not my intent.

Joe

 

[Mikey the Flower Guy]

this thread is fantastic.....

and very revealing.....it has much to offer those florists that are not totally familiar with all the current complications of being both a wire service shop, and a NON ws service shop!!
As you referred to us "old timers"....we remember a gentler time, when a wire transfer was INDEED a "service" you offered as part of your shop model, and your goal was to evenly distribute your outgoing AND incoming, amongst several wire services that you subscribed to, BECAUSE YOU COULD!!
Those days are no longer viable.....though this does NOT MEAN that having a wire service is in anyway considered "evil", or described as "sleeping with the devil:fdevil: ".
You know, all florists are in the same predicament, BUT, NOT ALL FLORISTS are capable of making decisons necessary to further their business successes, and often are driven by "panic solutions", and the wire services KNOWINGLY rely on this fact, and are very good at soothing your fears, just NOT SO GOOD AT exposing all the hidden fees, & fine print....THAT IS UP TO THE FLORIST!!

 

[Mikey the Flower Guy]

Mike, It appears I upset you.... sorry... That was not my intent.

Joe

No Joe......there is NO UPSET!!
We MUST revisit these subjects, time and again, because we have MANY NEW MEMBERS looking for answers, need advice, and as "old timers" WE MUST NOT assume that other florists know what YOU KNOW!!
In fact, IF I admire ANYONE on this board, or in this biz, it's you...especially from some of the chore descriptions you let us in on, once in a while!!
Fairfield is looking for answers...directly AND indirectly, and we cannot, and MUST NOT overpower any shops needs for answers, to complex questions, about this crazy biz.
we understood fully your earlier statement!!

 

[fairfield]

Answer this question. If a big funeral parlor offered you a million dollars of business a year for a 30% discount, could you make money on the business? For most shops the answer is yes. That tells me that somewhere there is a number that makes sense, if handled correctly.

When you know the end result you can plan accordingly. That is the big difference with a seasonal business - no promises. If a florist is just above the threshold of making money in a WS, the slow summer can severely damage the shop's cash flow. Remember, when business slows the bills don't and $60.00 per month late fees just twist the knife.

 

[fairfield]

This is from my experience with TF.
This is essentially what I was looking for:

SENDING ONLY FLORIST:
wire service expenses (minimum):
$150 per month membership fee
$20 per month quality assurance fee

wire service expense total (minimum):
$170 per month total = $2040 per year

monthly dollar amount required to cover wire service expenses:
$850 worth of orders per month minimum

number of orders needed to be sent to cover wire service expenses:
$40 orders = 20 orders
$800 in orders and $60 in rebates (assuming you have paid on time to get your rebate)

$50 orders = 17 orders
$850 in order value and no rebate (20 order minimum)
more orders will be required here to cover the optional low sending fee

$60 orders = 15 orders
$900 in order value and no rebate (20 order minimum)
more orders may be required here to cover the optional low sending fee

Is there something wrong with my example?

These are minimum numbers with fixed dollar amounts. Just examples to give an idea or a ballpark figure.

 

[Mikey the Flower Guy]

This is from my experience with TF.
This is essentially what I was looking for:

SENDING ONLY FLORIST:
wire service expenses (minimum):
$150 per month membership fee
$20 per month quality assurance fee

wire service expense total (minimum):
$170 per month total = $2040 per year

monthly dollar amount required to cover wire service expenses:
$850 worth of orders per month minimum

number of orders needed to be sent to cover wire service expenses:
$40 orders = 20 orders
$800 in orders and $60 in rebates (assuming you have paid on time to get your rebate)

$50 orders = 17 orders
$850 in order value and no rebate (20 order minimum)
more orders will be required here to cover the optional low sending fee

$60 orders = 15 orders
$900 in order value and no rebate (20 order minimum)
more orders may be required here to cover the optional low sending fee

Is there something wrong with my example?

These are minimum numbers with fixed dollar amounts. Just examples to give an idea or a ballpark figure.

have you considered the clearinghouse fees, the technology costs, the incoming fee charges and the extra phone line for the bird terminal??
Your description is somewhat simplistic, BUT, with your "experiences" with TF, I wouldn't be fooling you, IF I SAID, that you MUST determine your "cost per order" for incoming, and the same for outgoing, and measure the relative difference between the two!!
Numbers can be manipulated to prove or disprove ANY theory of profitability, or the opposite, and percentages are not even guidelines anymore, because, YOU HAVE NO WAY of determining, in real time, your cost per year to belong to a wire service!!
let's look at this in a different perspective.....convenience stores sell their milk for $3.99 for a 4 litre jug (Canaspeak)....they PAY $3.79 for the same jug, and must store, refrigerate, and handle the same product, with NO REAL profit "margin"...however, people will RARELY walk out of same said store with JUST a jug of milk!!
Applied to having a wire service, it's a perishable expense to offer this "convenience" to your customers!
I think this thread would clearly indicate that there is NO REAL PROFIT to be had from being IN a wire service, but, there ARE tangible benefits to having such membership!!

 

[Bigted]

I think this thread would clearly indicate that there is NO REAL PROFIT to be had from being IN a wire service, but, there ARE tangible benefits to having such membership!!

Mikey, I think about a different way. I believe that a flower shop can make a profit on wire services IF THE SHOP IS ALREADY PROFITABLE. If a flower shop is not making a profit, joining a W/S will only make things worse.

It's all about the concept of incremental profit margin, but that's a discussion for a different day.

 

[fairfield]

have you considered the clearinghouse fees, the technology costs, the incoming fee charges and the extra phone line for the bird terminal??
Your description is somewhat simplistic, BUT, with your "experiences" with TF, I wouldn't be fooling you, IF I SAID, that you MUST determine your "cost per order" for incoming, and the same for outgoing, and measure the relative difference between the two!!

The examples are simplistic for a reason. When customers go to a store to compare products, they want details condensed into "layman's terms". These are simple, bottom-line numbers to help florists determine if further investigation into a wire-service is right for them. These are numbers that you will not likely get from a wire-service rep before signing.

EXAMPLE #2
SENDING ONLY FLORIST:
wire service expenses (adding just dove system):
$150 per month membership fee
$20 per month quality assurance fee
$80 per month dove fee *note: this does not take into account the initial cost of setup (I don't know what it costs)

wire service expense total (minimum):
$250 per month total = $3000 per year

monthly dollar amount required to cover wire service expenses:
$1250 worth of sent orders per month minimum

number of orders needed to be sent to cover wire service expenses:
$40 orders = 30 orders
$1200 in orders and $90 in rebates (assuming you have paid on time to get your rebate)

$50 orders = 24 orders
$1200 in order value and $72 in rebates (assuming you have paid on time to get your rebate)

$60 orders = 20 orders
$1200 in order value and $60 in rebates (assuming you have paid on time to get your rebate)


And yes, don't forget to add a minimum of 1 sent order + rebate to these totals to cover the dedicated phone line as required by the WS.

Remember, we haven't even touched on the receiving side yet. Still working on minimum sending requirments to break even.

Any objections so far?

Numbers can be manipulated to prove or disprove ANY theory of profitability, or the opposite, and percentages are not even guidelines anymore, because, YOU HAVE NO WAY of determining, in real time, your cost per year to belong to a wire service!!

Can't detailed accounting accomplish this? You could say that you have no way of dropping a WS in real time. That occurs in WS time.

I think this thread would clearly indicate that there is NO REAL PROFIT to be had from being IN a wire service, but, there ARE tangible benefits to having such membership!!

Other than the high-volume oriented sending mechanism, what tangible benefits are offered?

 

[Eric S]

Fairfield You Have Outlined It Very Well.

The problem is no one wants to give the correct answers or offer real solutions concerning any Wire Service because they have figured it out on there own.

Your examples are perfect for any new shop owner looking for real answers. To show them not just how many orders but how much the orders need to equal just to cover the cost of doing business with any wire service.

Thank you..

 

[Joe Mioux]

You know....


We can all come up with examples, but nothing will beat trial and error.

Rule 1: Get a good accountant who can help you interpret P & L. especially as it relates to WS business.

Rule 2: Join a WS and if after a year you made less money than year prior to you being a WS affiliate, drop it.

Rule 3: Funerals rule the WS business. Monitor the number of funerals you have each years and pay attention to the WS business derived from said bus.

Rule 4: Mothers Day and Christmas are the only two remaining Major holidays that impact a Real-Live Florist's gross sales. Easter and thanksgiving have diminished into a non WS event. Sec Day and V day are basically on the same scale ..... NON WS event.

Rule 5: Go home and enjoy your family

Joe

 

[Mikey the Flower Guy]

You know....

Rule 5: Go home and enjoy your family

Joe

Joe....<gulp>...thanks!!..I've been told where to go EVERYWHERE today!!
Finally, a destination that means something to us all!!