Making sound business decisions

[Oldtimer]

Almostly weekly we get into discussions about if florists should accept additional wire service incoming orders of if a florist should join an additional wire service for a multitude of reasons. Some of the discussion within these various threads has been good thought provoking ideas and others have been something less.

I guess I just have a problem with most of the ideas expressed because they disregard one of florist's most important asset - their vehicle. As basic as this sounds, the overall cost to one's vehicle is strongly overlooked in all these discussions. You talk about wire service dues and fees and COG's and marginal profit, but no real thoughts about additonal wear and tear on your vehicle when handling incoming wire orders.

So next time that anyone bridges the subject if an additonal wire service is acceptable or if any florist should consider accepting more incoming just because some other florist just bought a new vehicle, maybe the following numbers may be the real reason that florist NEEDED a new vehicle.

Let's say that a florist is averaging 16 local deliveries a day and I emphasize AVERAGING. This florist decides for whatever reason to accept
an additional 4 incoming wire orders a day (again an average). The first thing that happens is actual driver man hours will increase. If the average delivery works out to be just 20 minutes round trip, this means that you will add about an 1 hour and 20 min. to each day and that means about 9 hrs per week and close to 470 hours per year. You can do you own calculation based on what you pay your driver.

Next is the actual mileage added because of these 4 added deliveries every day. Let's estimate an added 35-40 miles per day. Think this is out of wack? Well look at how many "also served" areas you are listed for figure what the round trip time is to the furthest points of these areas and you may find that 35-40 miles is rather conservative. Adding even 35 miles a day for 6 days a week translates to roughly an additonal 1,000 miles a month to the vehicle. This means that during a one year time your vehicle will require 3 or 4 ADDITONAL oil changes per year. Over a 5 year period for this vehicle, you will require an ADDITIONAL new set of tires over what you would have routinely needed and at least one or two new sets of brakes and rotors over what you would have needed depending on how your driver treats the vehicle. If you vehicle gets about 18 miles to the gallon in town and that's includes with the air conditioning on, then those few extra miles will add about $5 -$6 for gas per day - that's $25-$30 per week and that's close to $1600 per year in ADDITIONAL gas expense just to accomodate those 4 extra orders per day.

This all translates to shortning the life of your vehicle and doing it to transport highly discounted business instead of focusing on YOUR business. New vehicles aren't getting any cheaper and the cost to operate them isn't either. It has been pointed out by several people that the wire transfer business is declining and all of you are fully aware the the cost of delivery is increasing. Then what kind of business person wants to invest more time and money into a declining market? After really looking at ALL the expenses attached to delivery, does anyone today actually think that most incoming wires orders really have any "marginal profit" left???

 

[bloomz]

Then what kind of business person wants to invest more time and money into a declining market? After really looking at ALL the expenses attached to delivery, does anyone today actually think that most incoming wires orders really have any "marginal profit" left???

Ummm. yes -

It seems to be a fact that 30% of something is better than nothing.

Our city is about 5 miles edge to edge and we don't do ASB's. :spintongu

Thanks but no cigar from me. I guess I'm "that kind" of business person. okeball



I could be wrong - I was when I thought wire-ins were losing propositions. :dunce

I used to think they can have all the ins and I'll take all the outs - now I want all of both.lol

 

[Joe Mioux]

Bill, we have discussed the variable costs of delivery many many times during the WS discussion.

Your thoughts are based your location, Chicago. Your costs associated with WS expenses, are not necessarily the same as mid size to small sized communities.

Most WS business, for me comes in as sympathy work, followed by hospital work. There is really no additional costs for these types of deliveries, when a flower shop is going to these locations with multiple daily deliveries anyway.

and yes, if a flower shop utilizes a delivery pool or a courier service, then yes those costs need to be subtracted from price of the flowers.

If you want a good discussion about delivery costs, you need to break out the variable costs from the fixed costs and then use those numbers to determine WS profitablity.

If a flower shop knows their VC and FCs of delivery, then they can make profitable decisions to accept or reject orders.

joe

 

[Oldtimer]

Ummm. yes -

It seems to be a fact that 30% of something is better than nothing.

Our city is about 5 miles edge to edge and we don't do ASB's.

I used to think they can have all the ins and I'll take all the outs - now I want all of both.

Bill, we have discussed the variable costs of delivery many many times during the WS discussion.

Your thoughts are based your location, Chicago. Your costs associated with WS expenses, are not necessarily the same as mid size to small sized communities.

Most WS business, for me comes in as sympathy work, followed by hospital work. There is really no additional costs for these types of deliveries, when a flower shop is going to these locations with multiple daily deliveries anyway.

and yes, if a flower shop utilizes a delivery pool or a courier service, then yes those costs need to be subtracted from price of the flowers.

joe

I liken the idea of how some florists play the incoming wire business as people playing bingo!. You buy a card, sit down at a table and wait for the "caller" to call out numbers and hopefully some will be on your card. Sometimes the caller doesn't call many numbers on your card and so you change cards. Some players even buy extra cards for each game hoping to improve their odds or chance to win. Some florists do the same thing. They pay their money every month and wait and hope that their number gets called to get an order and make a delivery. And just like bingo, many florists have invested every month in multiple "also serves" to increase their chances for more incoming business.

Joe. I'm fully aware of the differences of incoming business in rural areas as versus metro areas. If all florists had the same situations as you do in your areas, there probably wouldn't be discussions like we are having. It has been discussed many ways that roughly 80% of all orders being sent go to recipients within the 50 major markets in this country and the remaining 20% of wire business goes to roughly 80% of the rest of area. To put this more into perspective, many years ago FTD district 5 A and B which covered Chicago and the surrounding area was comprised of roughly 700 florist and the entire state of Ill had roughly 1,000 florist including Chicago. In FTD's hay day, their total membership was somewhere in the area of 27,000.

I listed Bloomzie's comments above for a reason. He has been trying to convince the rest of us that he now has become interested in accepting more incoming orders and feels that others should also consider the idea. Well, personally, I've known Bloomzie along time now and I'm surprised that the rest of you haven't recognized his "tell". In poker, that's what you look for to determine if your opponent is bluffing or not. Mr Bloomz indicates that he doesn't intent to deliver past his city limits and yet wishes to increase his incoming wire business. The only other way he might accomplish that is to reduce or eliminate the rejection of orders. Now there are 3 major reasons that florist reject orders. They can't fill the orders because they don't have the specific flowers available and don't wish to substitute as it may not satisfy the customer, or the order is considered unprofitable and they transfer the order to a competitor hoping they will lose money on it and lastly they don't like the sender of the order. I've always considered Bloomzie to be an ethical business person, and I mean that as a compliment and therefore he would have to change his character and become unethical to now accept orders like the ones he previously rejected. I really don't think that's going to happen - do you??

For the rest of the florists who want more incoming wire orders, you are like the bingo players sitting at the tables waiting for them to call your numbers. The problem is neither the florist or the bingo player has any control over what numbers are called and when. Because of the intense economic stress that all florists are under today, some may feel that it might be advantageous to take on additonal "also serve" areas or accept questional orders with the theory that a small profit is better than no profit or even add an additional wire service and that is the reason I expressed my original comments on this thread about the real cost of going further and further from your shop. Said a different way, if you were able to add $64,000 in additonal sales from wire business annually and at the same time also add 10,000 mileage to your delivery vehicle, would you do it??? It is understandable to want the additonal business, but at what cost.? It would be easy to want to add the $64,000 if you had a major hospital just a few blocks away from your shop and funeral homes just down the street and a small college too, and you're the only wire service florist in town. But if you knew in advance that you would have to run up 10,000 miles on your vehicle to do it, would you still want that business?

 

[bloomz]

Bill - please don't use that font - I hate to paste it into notepad to read it.

Do you think I'm lying or just incapable of making a good business decision?

I AM in that small town, only hospital about 1/2 mile, 2 funeral homes 1 is 4 blocks away and the other about 10 and my city is about 5 miles square.

Cost of delivery is not something I am going to trouble myself over. Sorry...

There are only I believe 2 SFO's I won't take orders from and that is only because they come in radically underpriced.

And, I just think out loud and like putting forth the "other view". I really don't care if other shops want incoming or not cuz I know well if they don't somebody else will (if you're referring to my outgoing business)

EDIT: you said "consider the idea" and yes, we all should consider every avenue of surviving and thriving - or not, just like we should "consider" if possible delivery charges make it prohibitive. Everybdy should learn to do the numbers and make their own decision, and not base it on something I say or the wire service haters say on a florist chat board.

Add to this I've finally found a way to get a decent number of recipients into my store, contrary to popular florist board beliefs.

Most, nearly all of the biggest and most successful florists in the country encourage incoming orders. I know this from "hanging out" with them.

I want more business - I can use help with my fixed expenses - if I get that I can give myself a raise - now how is that a bluff?

 

[goldfish]

After really looking at ALL the expenses attached to delivery, does anyone today actually think that most incoming wires orders really have any "marginal profit" left???

OT, the easiest way to answer your question is to look at the flower part and delivery part separately in each order.

For local orders, most florists make ~60% profit on the flower part and 0-30% profit on delivery part.

For incoming orders, take out 30% from each part (strictly speaking, it's 27% plus the WS transmission cost whose percentage depends on the total dollar; but that's usually about a few% for typical orders).

So in incoming orders, now you have ~30% (gross) profit on flower part and 0-30% loss on delivery part.

Example: $50 incoming order = $40 flower + $10 delivery

Flower part: you make about $12 profit (30% of $40)
Delivery part: you lose anywhere between zero and $3 (30% of $10).
So the total profit would be $9 - $12.

Caution: calculation above doesn't consider flower-arrangement labor.

 

[Joe Mioux]

Bill, I just thought of something.

Most orders I send to sTL, are hospital orders followed by sympathy work.

I know the StL florists' locations pretty well and generally get those orders sent to the florist that serves those particular venues.

Therefore, those daily deliveries to hospitals and funeral homes don't add significantly if at all to those shops' delivery costs.

as an aside, the gift shop (a TF flower shops) at Barnes Hospital in STL delivers free to the entire the Barnes-Jewish-Washington University Med center complex (BJC). Cost? I'm not sure if they have volunteers or not, but I know many hospital gift shops are manned with volunteers.

The above paragraph got me thinking a bit. We used to send all our Barnes-Jewish Hospital orders to a flower shop who made those hospital deliveries for the STL pool. When they dropped out of the WS game, we moved to a different shop. (That is when we found out the BJC gift shop delivered for free). The independent flower shop got all of our BJC hospital business, they delivered to that hospital as part of their pool deliveries, where was the cost of delivery to that shop?

joe

 

[hollyflr]

Gee Joe, Have you ever delivered to that complex? There is limited parking, north campus is three blocks from south campus connected by gerbil trails. You can pay for garage parking but getting in and out is a nightmare. The flowershop uses their paid staff to deliver, they also charge for delivery and the cut off is three PM. I have to pay extra to get someone to deliver there. I worked at both hospitals for about 35 years in my other life and know the complex fairly well, it would be almost be a full time job to deliver 10 to 15 arrangements a day there. There is your cost

Susan

 

[Joe Mioux]

Gee Joe, Have you ever delivered to that complex? There is limited parking, north campus is three blocks from south campus connected by gerbil trails. You can pay for garage parking but getting in and out is a nightmare. The flowershop uses their paid staff to deliver, they also charge for delivery and the cut off is three PM. I have to pay extra to get someone to deliver there. I worked at both hospitals for about 35 years in my other life and know the complex fairly well, it would be almost be a full time job to deliver 10 to 15 arrangements a day there. There is your cost

Susan

and that is why Dove and Mercury have REJect buttons

but guess what. Not once did that shop ever REJ our orders. In fact, when they dumped the WS's they called me and asked me to keep sending those orders to them.

Now, how does that jive with discounted hospital orders NOT being profitable?

joe

 

[RWK]

For purposes of clarification.....Let's split this up.

FILLING FLORISTS and SENDING FLORISTS

Is it more profitable to be a primary SENDER OR a primary FILLER?

The example Joe gave about the difficult delivery hospital - Joe was NOT the FILLING FLORIST nor the DELIVERING FLORIST. Presumably the filling and delivering shop knows how easy or difficult that area is.

I would like to see a WS debate on just the FILLING side and another one on just the SENDING side.

I am going to start two threads with just that.....ONE THREAD devoted to issues with FILLING and one devoted to issue with SENDING.

 

[goldfish]

FILLING FLORISTS and SENDING FLORISTS

Is it more profitable to be a primary SENDER OR a primary FILLER?

That depends on how much it costs to gather orders. If the cost is small, sending orders would be more profitable than filling orders by the amount of rebates.

 

[RWK]

Ok - perhaps I did not phrase the question properly. There are many sides to the WS debate, I and many other get confused about which side is being talked about by a poster.

Think about it.

You have pro-senders, You have pro-fillers, You have con-senders, You have con-fillers,
You have people who go after sending and disregard filling, You have people who want filling and not sending, You have people who want neither and people who want both.

I'm just trying to get some clarification about just who is in favor of what or not?

Makes it easier to follow a good ws thread.

 

[Oldtimer]

I see that we are getting off subject again, so I'll try to make this as short as possible.

Bloomzie, I'm not calling anyone a liar. I made reference to "bluffing" which can apply to poker or business. It's not against the law or the rules of poker or business and considered just part of the game. If you honestly think that accepting more incoming orders can really help your business, then please have at it. If anyone will really take the time to read what I originally wrote, you will find that I was referring to excess mileage such as also serve areas and not intown miles. If anyone is unclear to this point, please note that at least two florists in Corvallis also deliver to Albany, Lebanon, Lewisburg, Philomath and Tanget. These look to be small towns over a relative spread out area. This is the excess mileage I'm referring to. If all incoming was only to local hospitals and funeral homes, none of these discussions would ever happen. Unfortunately for many florists, however, that isn't the case.

And Joe, I'm not an authority on city delivery pools, but can relate that some florists that were part of district 5 A and B and also part of the Chicago pool indicated that they would have to drive as far as 30 to 40 miles round trip a day just to get to the pool and and return. This was more than acceptable when gas was $1.50 and the volumn of business to and from the pool was high, but when the volumn is small and the gas is as high as it is, it is much more difficult on some of those florists to cover costs. Just remember, that if someone in any pool is giving FREE delivery, it really isn't FREE. Someone has to pay!

As for the hospitals, I again can't respond for all of them. Most around here have their own flower shops and they are considered revenue sources for the hospitals and also a FREE delivery service for the patients and guests. Hospital volunteers are used. Can't beat free labor!

And finally, the $64,000 question. Outside of Goldie, no one seemed to even want to take a stab at it. Well, if you again look at my original comments to start this thread, I talked about adding just 4 orders a day of wired incoming (if that's possible) and those orders were between $45-50 each, that would amount to about $64,000. However, because it is discounted business, it translates to about $45,500. If you believe Goldies numbers on this thread and you accept the 10,000 extra miles, hopefully you will begin to understand that the further you have to go for delivery on a daily basis, the higher your maintenance costs will be. And I'll say this again. The further you go, it is less likely that a traditional florist will make any profit on wired incoming orders.

 

[Joe Mioux]

Bill,

Here I will take a stab at answering your question.

Most orders come in and go out from my shop as sympathy or hospital orders.

Those orders do not significantly add, if anything, to my cost of delivery.

and in my original post in this thread, I mentioned that in order to have an accurate conversation, you need to look at the variable costs of delivery and not total costs, i.e. VC and fixed costs (insurance, depreciation, etc)

The fixed costs will remain whether or not that delivery vehicle is making deliveries or setting in a flower shop's parking lot.

Now, I believe my scenario is more the norm rather than the exception for most shops. I could be wrong. These are my observation of flower shops as I make and have made wholesale holiday plant deliveries to various flower shops over the past 20 years.

In addition, all those sympathy and hospital deliveries are actually money makers because of the multiple orders going to the same location at the same time. That revenue can be viewed as offsetting some incoming wire orders that go to homes and businesses. It's not much different than my local non wire deliveries subsidizing the rural and surrounding communities' deliveries. Some of my rural deliveries, when costed-out total $20 plus. So those deliveries could be viewed as being subsidized by some of the local profitable delivery charges.

The above paragraph is just another way of looking at the issue.

just thought of something else. yes I lose 27 pct of the delivery fees paid on incoming, however, I also gain back 20 pct of those very same fees on outgoing, so if a shop is closed to a 1:1 ratio of incoming v outgoing, they are losing only 7 cents on every delivery-dollar given them on the incoming side, or only 70 cents per $10 delivery. This is a pretty important point that we should discuss in your thread. Is 70 cents a deal breaker?

joe

 

[BOSS]

In fact, when they dumped the WS's they called me and asked me to keep sending those orders to them.

Now, how does that jive with discounted hospital orders NOT being profitable?

joe

In "theory" hospital orders have a lower COD (cost of delivery) because you may already be going there anyway, spreading the cost across more orders.

Added: I see Joe already mentioned this... I should have read the whole thread before replying...

 

[4thgenflorist]

Joe. I'll take all the St. Louis deliveries you can send! Like my dad used to say " Fast nickels are better than slow dimes"

 

[Joe Mioux]

Joe. I'll take all the St. Louis deliveries you can send! Like my dad used to say " Fast nickels are better than slow dimes"

Claire, how long does it take you to delivery over to Barnes? what about St Mary's? I know you are close to St Mary's. Do you have to deliver to the rooms or just to the gift shop/volunteer desk?

thanks joe

 

[Oldtimer]

Bill,

In addition, all those sympathy and hospital deliveries are actually money makers because of the multiple orders going to the same location at the same time. That revenue can be viewed as offsetting some incoming wire orders that go to homes and businesses. It's not much different than my local non wire deliveries subsidizing the rural and surrounding communities' deliveries. Some of my rural deliveries, when costed-out total $20 plus. So those deliveries could be viewed as being subsidized by some of the local profitable delivery charges.

joe

Joe, if you don't mind me asking, how much do you charge for intown delivery and how much for rural and how far will you travel for the maximum delivery charge?

 

[TexasFlowerGuy]

What were you smoking......

Ummm. yes -

It seems to be a fact that 30% of something is better than nothing.

Our city is about 5 miles edge to edge and we don't do ASB's. :spintongu

Thanks but no cigar from me. I guess I'm "that kind" of business person. okeball



I could be wrong - I was when I thought wire-ins were losing propositions. :dunce

I used to think they can have all the ins and I'll take all the outs - now I want all of both.lol

You are right....30% of a losing proposition is more!!!! More losing!!! Enjoy!!!

All the best

 

[Joe Mioux]

Joe, if you don't mind me asking, how much do you charge for intown delivery and how much for rural and how far will you travel for the maximum delivery charge?

anywhere from $4 to $12. On the rural deliveries it comes out to around .50 per mile. Website reads $6 local delivery.

Would I like to earn more on delivery? yes, but I also need to be aware of competitors delivery fees. One local craft/silk store advertises free local delivery.

Maximum delivery charge? I don't have one. Here are a couple examples of long distance deliveries.

On Father's Day Sunday, we charged a local funeral home $30 to delivery family flowers over to an O'Fallon, IL church. The trip was about 30 miles one way. I think we had a couple of other pieces that went along for the ride, I think we got an extra $10 out of those two orders. So, that delivery earned $40, which was probably break even on mileage costs, but nothing for my time.

We also charge $100 to deliver centerpieces to the Collinsville convention center. Normally two people go. Cville is about 40 miles away.

In summary, it comes out to about .50 cents per mile.

joe