Too Many Wire Services ?

[BOSS]

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.

joe

Joe, help me out here. I agree design time is variable, hence my position that it should be accounted for as a % of each design (I agree it is a fixed cost, but it must be recouped).

My designers do not do merchandising. They design, answer the phones, and meet with brides...thats it.

 

[RC in Dayton and Cincinnati]

Why even look at it that way at all?

If you were looking at pay-per-clicks you'd measure how much it costs to acquire an order. The same should be true for incoming wire orders.

Add up ALL your wire service expenses (associated with incoming) and compare it to the amount of revenue received. You then will know how much it is costing you to acquire an order.


We can argue till the cows come home on whether an incoming wire order can be profitable, but the question remains what kind of florist do you want to strive to be. I'm convinced any florist claiming he's making money on incoming wire orders is slowly pricing himself into oblivion. If you don't believe me open your eyes and look around.


RC

 

[Chezbloom]

Oh Great R. C.,

Now that creepy man faced dog is blinking at us.

thanks....

 

[TOTO]

That's it in a NUTSHELL Randy!

Why even look at it that way at all?

If you were looking at pay-per-clicks you'd measure how much it costs to acquire an order. The same should be true for incoming wire orders.

Add up ALL your wire service expenses (associated with incoming) and compare it to the amount of revenue received. You then will know how much it is costing you to acquire an order.


We can argue till the cows come home on whether an incoming wire order can be profitable, but the question remains what kind of florist do you want to strive to be. I'm convinced any florist claiming he's making money on incoming wire orders is slowly pricing himself into oblivion. If you don't believe me open your eyes and look around.


RC

Too many shops fail to take the time to add up all of the dues, fees, and other ancillary charges, they pay to their WS on an annual basis and turn that into the additional per incoming order acquisition costs and factor that an additional discount percentage.

For simplicty, I suggested this type of scenario:

$30,000.00 WS incoming per year.
(-$9,000.00) Discount at 30% (-27%-Order Transmission Costs)
$21,000.00 Net to filler on the Surface
(-$3,6000) Annual WS costs
$17,400.00 Actual Net to Florist after Annual WS costs

$17,400.00 divided by $30,000.00 = 58%

In effect, shops falling into that category are filling all of those incoming orders at fifty eight cents on the dollar.

With COGS (cost of goods) at 30% and COL (labor) at 25% and COD (cost of delivery) at 20% for a total per order cost of 75%, those shops are loosing (-17%) on every order they fill.

Even when the argument is made that, LABOR is a variable expense, there is still NO WAY that any incoming orders are profitable.

The ONLY WAY TO DEFRAY the losses on the incoming side are to cost shift the REBATES earned on the sending side, over to the filling side of your spreadsheet.

As you've suggested in the past, and when a shop decides to eliminate a WS, they must also cut their labor costs as well, and in order to derive the benefits associated with that decision, which will improve their shop's profitability.

 

[terryhmason]

Wow! Thanks for all the input. We are continuing with our leaving TF. I sent the letter a couple of weeks ago and got a call last night from the local rep. They are trying to keep us (of course). However, We have to look at the bottom line. FTD has lost alot of shops over the years. TF was growing. There appear to be more TF than FTD or BLM now. However as they sign up more shops that just slices the pie thinner. For May FTD sales stayed about the same. We didn't have BLM last year, and this year's sales were almost as large as TF. However, TF Sales were about 1/3 lower than last year. There are, however, some other factors to consider. We were at capacity to fulfill orders on Friday evening, so I suspended all of the wire services early Saturday morning. We usually do not buy the codified vases. However, we did buy a case of one of the Mother's Day vases from TF. We sent out the stuffers, participated in advertising, and got 3 orders!!! We might have gotten more if we accepted orders on Saturday.

 

[Joe Mioux]

Joe, help me out here. I agree design time is variable, hence my position that it should be accounted for as a % of each design (I agree it is a fixed cost, but it must be recouped).

My designers do not do merchandising. They design, answer the phones, and meet with brides...thats it.

Mark, let me re-phrase my objection to incorporating labor into the WS calculator.

If you have a designer not filling a WS order that designer will be doing something else. It might be answering a phone, it might be processing flowers, it might be answering the phone, it might be consulting with a customer or a salesperson, it might be a whole myriad of other taskes not associated with designing.

If you could tell me that you hire a designer to ONLY design for WS incoming business or you pay your designers on a Piece Meal Basis, then YES YES YES YES!!!!!!!!

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

that labor would be considered a VARIABLE EXPENSE TO THAT INCOMIN WIRE ORDER.

However, I don't think your shop of your size ( you once told us your shop sales) has a need to designate a designer ONLY for WS business. I sell to shops that are much larger than yours and I see what those designers are doing.

Most shops do not hire designers on a daily basis. Most shops base their labor on historical weekly, monthly and yearly sales.

SO.

Let me retract a bit of what I have said in this thread ( I was attempting to zero in on this issue and fine tune my thesis re: WS business and labor mgt. I am failing at conveying the labor cost differences a flower shop needs to assess labor on each and every order direct and WS order.)

If a shop hires a designer to work 315 days, 8 hours per day JUST arranging Incoming Wire orders THEN Yes you need to treat that designer as a variable expense.

Also, if you only pay your designers on a piece meal basis THEN YES you need to treat that designer's time as a variable expense.

HOWEVER!!!!

That isn't reality in North American Flower shops. Most shops hire a designer to do mainly design work but with that other work... such as silks, such as planters, such as decorating plants -- which are activities that do not necessarily justify having an order on that designer's work bench.

The only thing I can say is ask you accoutant to explain cost/managerial accountancy to you. Accepting some additional business at a discount will increase your profitablilty!

joe

 

[RJD]

If you could tell me that you hire a designer to ONLY design for WS incoming business or you pay your designers on a Piece Meal Basis, then YES YES YES YES!!!!!!!!

This is why I suggested tracking the time spent to prepare the order. Most POSs have the ability to do so, or the designer can mark the start and end time on the worksheet. This way you can track at least a close approximation of how much labor was spent on each order. The timing needs to start at the time the worksheet it picked up, and goes until the arrangement is placed in the cooler or delivery counter. The time spent filling the vase, selecting the flowers, etc. count as much as the actual arranging.

 

[Joe Mioux]

This is why I suggested tracking the time spent to prepare the order. Most POSs have the ability to do so, or the designer can mark the start and end time on the worksheet.

Rich that is a good point.

but.

we as flower shop owners have no way of knowing how busy we may or may not be on a daily basis. Yes, there are the events and the holidays, but there are also those days where you get really busy just with daily work, ie birthdays, annivesaries, school stuff, etc. These are orders you can not plan for. Those order may be direct or the maybe WS incoming. Good floral mgt dictates that we all have the proper staffing to handle these orders.

therefore, we as managers hire design help to fill orders that already exist and orders that pop up during the course of a business day.

None of us can predict from day to day, how busy we will be with desgign time.

That is why we have designers doing other things during the course of the day. Like Cathy mentioned, when there are down times, she has the designers active in merchandising and other promotional activities.

My point is, in normal everyday floral business, incoming WS business isn't that significant for most shops. A designer that is already in your shop being paid by you will arrange that bouquet. That designer would have been there irregardless had that WS order come into the shop or not.

LABOR IS A FIXED COST ON A DAILY BASIS!

Mark Smith, do you hire an additional designer to cover your incoming ftd orders?

Joe

 

[RJD]

Joe,

Labor is not accounted for as a fixed cost for a reason--it's not fixed. My point was, you need to measure the amount of labor you're spending on these wire orders so you get an accurate picture of what they're costing you to fulfill. It's a close approximation, but a number that needs to be included. Some people can cut staff during the day, and some have designers who only design since they're so busy. It's individual to your business, but I think I mentioned that, too.

 

[Joe Mioux]

Joe,

Labor is not accounted for as a fixed cost for a reason--it's not fixed. My point was, you need to measure the amount of labor you're spending on these wire orders so you get an accurate picture of what they're costing you to fulfill. It's a close approximation, but a number that needs to be included. Some people can cut staff during the day, and some have designers who only design since they're so busy. It's individual to your business, but I think I mentioned that, too.

Tell me how labor isn't a fixed expense. yes I realize you can send employees home, but that doesn't happen every day.

joe

 

[Joe Mioux]

R,

you don't hire design staff on an order by order basis, do you? If you don't then you are making assumptions about how much business you will have in a given day and staff accordingly.

joe

 

[LJVF]

What if some labor is salaried? Would that be considered fixed or variable?

 

[MANORVILLE]

RC and TOTO nailed down some good points

 

[CHR]

What if some labor is salaried? Would that be considered fixed or variable?

Salaried posititions are generally for management, not for employees who perform routine tasks. From the payscale blog.

What are the guidelines for an exempt worker? A key phrase for exempt positions is that the job must require "discretion and independent judgment." In addition to this soft requirement, there are rules that act as a guideline for employers.

An employee must be paid an annual salary, i.e., exempt employees cannot be paid an hourly wage (the blogging boss at beatyourowndrum.com asks a good question, is it better to be paid hourly or by salary?). The employee's weekly income can be no less than $455 per week. Keep in mind though, just because an employee is paid an annual salary that doesn’t automatically make him or her exempt.
Problems for Starbucks

You would think that defining an "executive" would be easy. The rules say an exempt “executive” regularly supervises two or more other employees, is in charge of a unit, sub-unit, department or shift when on duty. However, there can be a problem when retailers require exempt employees (manager and assistant manager) to multi-task and perform tasks normally performed by non-exempt employees.

This problem occurred when Radio Shack managers claimed they spent most of their time making sales, vacuuming the store and cleaning the bathrooms. Likewise, 1,400 Starbucks managers and assistant managers claimed in a class action lawsuit that they spent more than half their time running cash registers, cleaning cappuccino machines, cleaning floors and other menial tasks. In two class action lawsuits against Longs Drug store, store managers who had been classified as California overtime exempt employees - according to bizjournals.com - said they had spent more than half their time ringing sales and stocking shelves.

As I understand it, a salaried design manager must supervise at least two employees and not spend the majority of his/her time designing.

 

[LJVF]

Salaried posititions are generally for management, not for employees who perform routine tasks. From the payscale blog.

As I understand it, a salaried design manager must supervise at least two employees and not spend the majority of his/her time designing.

What if the salaried employee is non-exempt per the payscale blog, but only works overtime during holidays or special events? Or perhaps the salaried employee is an owner/designer who will spend the whole day at the shop regardless of the volume of business? Would these be considered fixed or variable?

I know it's splitting hairs, but I think there are shops with these circumstances.

 

[CHR]

To handle another $75K in orders annually (per the other thread), in theory you'd need roughly another $300 in orders produced per day.

Unfortunately, the wire-in business isn't a steady stream. More like a trickle during non-holidays and a dam burst during prime time. Another $150/day would likely be doable, another $10,000 - $15,000 on a holiday (above your regular order volume) means additional designer(s), and/or O/T, and lowered quality (unless you have killer free-lancers).

 

[MANORVILLE]

To handle another $75K in orders annually (per the other thread), in theory you'd need roughly another $300 in orders produced per day.

Unfortunately, the wire-in business isn't a steady stream. More like a trickle during non-holidays and a dam burst during prime time. Another $150/day would likely be doable, another $10,000 - $15,000 on a holiday (above your regular order volume) means additional designer(s), and/or O/T, and lowered quality (unless you have killer free-lancers).

Guess one day we'll have to fly out to Cali and fill in some blanks !!!!!!!!!!

Manipulation is an interesting concept, when you appear to represent entities that pay for service !
How does one conjure up a scenario that will increase orders, if in fact the said system is supposed to be fair and somewhat exclusive ?
Obviously asking for an additional payment, to subsidize the intended increase, would be unfair, to say the least, as that then would be an OPEN DOOR to anyone with the budget to seek monopoly.

I can think of about 7 ways that orders are currently sold, to unsuspecting or naive shops, and each method of sale should be held accountable, as the practices are so close, if not over the edge.
Problem is, they get away with it, don't they ?

If in fact an agreement is to be made, with anyone, that will make money from our shop, or any other, it will not be an agreement that will cost more than the original, constantly changed and upgraded agreement.
:headbang:

 

[bloomz]

Tell me how labor isn't a fixed expense. yes I realize you can send employees home, but that doesn't happen every day.

joe

Mine is fixed - I very rarely send employees home early - they depend upon us to make a living wage and getting the hours they are scheduled for is vital to their lives.

 

[LJVF]

Mine is fixed - I very rarely send employees home early - they depend upon us to make a living wage and getting the hours they are scheduled for is vital to their lives.

There are certain valuable employees that I guarantee a specific number of hours per week, I consider this to be a fixed cost.

In my opinion there is a difference in an employee "keeping busy" and "working efficiently". There are always "things" to be done in a shop, but they are not necessarily urgent tasks or even necessary at all.

 

[BOSS]

Mark Smith, do you hire an additional designer to cover your incoming ftd orders?

Joe

No sir...not just incoming orders, I do not receive enough to keep a designer busy for more than an hour a day if that much. I just checked the first 5 months of 2008, and incomings are at a 1.7/day average. This is the reason I cost out labor per order at 25% guaranteeing that I generate a profit on that same labor. The additional 2 incomings in my mind are nothing to worry about.

Joe, I'm not trying to be antagonistic, I'm trying to understand. This is how I have always done it, that does not mean it's right...but my low incoming volume does not seem to me, to be a factor in my biz.