In the May 2008 Issue of Teleflora's Floral Finance it quotes a SAF E-Brief that says the typical flower shop receives 16% of it's sales from incoming wire orders. Is there a point where you can have too much of your business coming from incoming wire orders. We have 3 wire services and FSN now, and they are amounting to about 30% of our sales. I'm thinking of slowly peeling off the layers of wire services and taking the money I'm spending with them and put it into my internet advertising. Unfortunalty I have a FTD POS System so I can't drop them for a while. Any comments??
Too Many Wire Services ?
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lori042499
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Yes there is a point where you have too much wire in biz...30% is probably higher than most want to be...some think that any percent is too much....it all depends on how much out going you have to balance it off.
lori042499
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The better question is what percentage of your gross profit is from WS? And yes, yes, yes, put that money into internet advertising and a website.
Do the math! Industry averages are good for guidance, but your overhead is different from other shops, and like all business decisions, you need to make it rationally and based on your numbers. Just because you receive a check at the end of the month doesn't mean you're making any money. You may be surprised at how badly you're losing your shirt, or you might find that wire ins are a money maker for you.
If you don't already, keep track of all the ingredients in every arrangement you make and deliver, and ideally the time spent on each arrangement. At the end of the day (easier daily than at the end of the month), total up the COGS + labor + actual delivery fee for that arrangement, and if it exceeds 73% of the order's value, you have issues already, and you probably need to examine designer efficiency or product usage.
If you're under 73%, take the "we owe you" amount from the statement at the end of the month, and subtract the total COGS+labor+delivery for all orders for that WS. If this is negative, you have issues. At bare minimum, you should have enough to cover 30% of your shop's overhead (rent, utilities, insurance, social security contribution, etc), plus whatever fees are dedicated to that service (such as phone lines for the Merc interface).
If you're actually making money, recognize this is not a permanent decision. Every fee increase, payroll increase, tax increase, etc. needs to be factored back in.
It is very possible to increase profitability while decreasing income if you're cutting expenses by an even larger amount. Dumping TF may reduce your income by 10%, but may reduce your expenses by 15%.
If you don't already, keep track of all the ingredients in every arrangement you make and deliver, and ideally the time spent on each arrangement. At the end of the day (easier daily than at the end of the month), total up the COGS + labor + actual delivery fee for that arrangement, and if it exceeds 73% of the order's value, you have issues already, and you probably need to examine designer efficiency or product usage.
If you're under 73%, take the "we owe you" amount from the statement at the end of the month, and subtract the total COGS+labor+delivery for all orders for that WS. If this is negative, you have issues. At bare minimum, you should have enough to cover 30% of your shop's overhead (rent, utilities, insurance, social security contribution, etc), plus whatever fees are dedicated to that service (such as phone lines for the Merc interface).
If you're actually making money, recognize this is not a permanent decision. Every fee increase, payroll increase, tax increase, etc. needs to be factored back in.
It is very possible to increase profitability while decreasing income if you're cutting expenses by an even larger amount. Dumping TF may reduce your income by 10%, but may reduce your expenses by 15%.
If sending only represents 3% and incomings are 30%, you're also likely getting hit with low sending fees and reciprocity fees.
Also check your expenses for directory advertising, ASB listings, toll-free number listings and other costs above base membership fees.
RJD gives good advice about not just looking at the amount of the check you get for filling incomings. Consider all the costs to fulfill each order.
But instead of 73%, I'd use 70% to account for the receiving fee now paid on each incoming.
Also check your expenses for directory advertising, ASB listings, toll-free number listings and other costs above base membership fees.
RJD gives good advice about not just looking at the amount of the check you get for filling incomings. Consider all the costs to fulfill each order.
But instead of 73%, I'd use 70% to account for the receiving fee now paid on each incoming.
Flowerchatter03
Co-Owner and Floral Composer
Something else to keep in mind....are the orders you are filling generating new customers?
We get quite of new business from filling wire orders. I have even obtained a few weddings from filling wire orders. Specifically, we had one bride (this past March) that told me her fiancee had ordered her flowers from the internet several times while they were dating. When they got engaged, she came here because not only were her flowers beautiful but they lasted longer than from anywhere else. Her wedding was about $2000 so it was a nice sale.
In my personal opinion, nothing beats actually getting in the door of a local potential customer quite like your work in hand. Not that other means of advertising aren't effective, however, you can put a face to the name of the flower shop that filled the order.
We get quite of new business from filling wire orders. I have even obtained a few weddings from filling wire orders. Specifically, we had one bride (this past March) that told me her fiancee had ordered her flowers from the internet several times while they were dating. When they got engaged, she came here because not only were her flowers beautiful but they lasted longer than from anywhere else. Her wedding was about $2000 so it was a nice sale.
In my personal opinion, nothing beats actually getting in the door of a local potential customer quite like your work in hand. Not that other means of advertising aren't effective, however, you can put a face to the name of the flower shop that filled the order.
There have been several threads recently discussing converting wire-in recipients to customers. Experienced florists (and previous studies done by FTD when it was member owned) peg that number at around 5%. Not exactly a stellar result when considering the cost per new customer acquisition.
RC in Dayton and Cincinnati
New Member
Terry,
With only 3% of your sales coming from outgoing wires it is obviously not much benefit in belonging to one wire service to send, let alone four.
So here's how I'd figure how much you're actually getting paid for each incoming order received. Take your total wire service expenses (after subtracting outgoings and any hard goods you may have purchased from them) and divide that number by your gross incoming sales. This will give you the percentage you are paying to receive an order.
For example if your combined wire expenses are $1,000 and your gross incoming sales are $1,500 you are paying 67 cents on the dollar to receive an order, or you are being paid 33 cents on the dollar for all your incoming orders.
My bet is you are being paid about 33 cents on the dollar after you figure all your expenses.
Let us know what you come up with.
RC
Joe Mioux
Well-Known Member
TOTO
New Member
I'll keep it simple TERRY.
Why do you want, or feel you need a wire service and what are your expectations from that WS based on the dues and fees which you pay them.
If you can answer that question for me, I can help you cut to the quick and help you make the right business decisions for your shop.
Why do you want, or feel you need a wire service and what are your expectations from that WS based on the dues and fees which you pay them.
If you can answer that question for me, I can help you cut to the quick and help you make the right business decisions for your shop.
Yes. Calculate the contribution margin for wire-in orders. I.e., calculate how many cents you are making from filling one-dollar incoming order.
From that number, you can calculate how much you are making from each WS service per month after paying the fixed monthly fee. If the result shows you are losing money, then there's no reason to keep it.
If it's a positive number, you might want to keep it. You can still drop it, if you believe that the profit is too little for what is essentially a service for your competitors.
BOSS
FlowerChat Administrator
OUCH....that suX.......
I'd bet more than 50% of florists nationwide fall into this same area....:hammer:
Joe Mioux
Well-Known Member
Payroll. There are alot of issues with attributing payroll to an individual order.
Does payroll account for the designer or does payroll account for the designer AND the support staff?
Good (and I know this is relative, but it works for me) labor management says no designer (employee or employer) should earn more than 10 pct of Gross Sales. If you plug 10 pct into that calculator, you will get a more profitable ( not necessarily profitable as in the black, just more profitable) than you would if you plug in say 30 or 40 or whatever your percent of labor is to Gross Sales.
Also, if a shop is doing 30 pct of its sales to WS business, then chances are that design labor could be considered variable to each and every incoming wire service sale.
HOWEVER!!!!
If a shop is doing say..... 10-15 pct incoming WS bus as a pct of GS THEN labor could and SHOULD be considered a fixed cost and therefore not be added to the calculator.
Hope this helps.
Joe.
Joe -
I kow you've said that before, but I respectfully disagree.
Copying takes more time than actually designing. When the world was filled with orders sent by general description, labor was a much smaller factor. Now with so many incomings being 'by-the-book', and 'no sub' the design/fulfillment time factor has increased.
There are plenty of other jobs to be done in our shop when designers aren't 'designing' orders. Filling the cooler, merchandising, display, new product development, silks, etc... Those jobs all need to get done so it's not like anyone is standing around after the orders are filled.
The driver's time also costs.
I also don't think florists consider all the other time (labor) it takes to deal with incomings - verification of address/time information on the front end, reporting, accounting and reconciliation on the back end. Add the time it takes to deal with mis-reported, duplicates and other errors (that seem to be growing grow monthly) and 20% labor may be too low.
Unfortunately, I think many, many florists run incomings of greater than 20% of gross sales.
We'll have to agree to disagree on this one.
I kow you've said that before, but I respectfully disagree.
Copying takes more time than actually designing. When the world was filled with orders sent by general description, labor was a much smaller factor. Now with so many incomings being 'by-the-book', and 'no sub' the design/fulfillment time factor has increased.
There are plenty of other jobs to be done in our shop when designers aren't 'designing' orders. Filling the cooler, merchandising, display, new product development, silks, etc... Those jobs all need to get done so it's not like anyone is standing around after the orders are filled.
The driver's time also costs.
I also don't think florists consider all the other time (labor) it takes to deal with incomings - verification of address/time information on the front end, reporting, accounting and reconciliation on the back end. Add the time it takes to deal with mis-reported, duplicates and other errors (that seem to be growing grow monthly) and 20% labor may be too low.
Unfortunately, I think many, many florists run incomings of greater than 20% of gross sales.
We'll have to agree to disagree on this one.
Joe Mioux
Well-Known Member
Re read and think about what I typed, Cathy
I have laid out a couple of different issues.
Issue number 1 you have to account for labor of that order. Your calculator doesn't evaluate enough labor information (design time is variable, your designers' time spent on merchandising etc isn't part of that sale, but rather should be considered a fixed cost) on a per order basis.
Issue number 2: If a flower shop is receiving 30 pct or more of its Gross Sales from WS incoming, then that design labor is definitely variable and should be accounted for on a per order basis.
However, I doubt there are many shops out there that can lay claim to 30 pct of their business being WS incoming derived. If there are some shops out there that do 30pct WS/GS, fine., Then yes consider 100pct of that design labor as part of that variable expense for any particular order. What should that number be? How much should you expense to the WS calculator? What part comprises your designer's total pay and support staff?
NOW, if you are only deriving say 10 pct from WS incoming business, then your design staff is doing something else the other 90 pct of the day. If its merchandising, designing, selling then there is one undisputable fact. and that fact is that you can not cost out 100 pct of that designers labor to a WS order because they are doing more than just filling WS orders for 8 hours a day.
joe
I have laid out a couple of different issues.
Issue number 1 you have to account for labor of that order. Your calculator doesn't evaluate enough labor information (design time is variable, your designers' time spent on merchandising etc isn't part of that sale, but rather should be considered a fixed cost) on a per order basis.
Issue number 2: If a flower shop is receiving 30 pct or more of its Gross Sales from WS incoming, then that design labor is definitely variable and should be accounted for on a per order basis.
However, I doubt there are many shops out there that can lay claim to 30 pct of their business being WS incoming derived. If there are some shops out there that do 30pct WS/GS, fine., Then yes consider 100pct of that design labor as part of that variable expense for any particular order. What should that number be? How much should you expense to the WS calculator? What part comprises your designer's total pay and support staff?
NOW, if you are only deriving say 10 pct from WS incoming business, then your design staff is doing something else the other 90 pct of the day. If its merchandising, designing, selling then there is one undisputable fact. and that fact is that you can not cost out 100 pct of that designers labor to a WS order because they are doing more than just filling WS orders for 8 hours a day.
joe
Joe Mioux
Well-Known Member
But those jobs should not be costed out based on incoming Wire business. That is a totally different product and should be costed out elsewhere.
I have no qualms expensing some delivery costs to a WS order as a variable cost, but your calculator doesn't provide that function. That is a flaw and that is why I typed my orginal query.
I don't have a problem with that either.
Can you verify that claim? or is that speculation? I don't know the answer.
This isn't an argument, I see some flaws in the calculator and since we are dealing with numbers, we are not dealing with opinions.
joe
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