RC in Dayton and Cincinnati
New Member
Mark,
You are a member of FTD and Bloomnet, and only 1.7 orders a day????
Why two wire services?
RC
Too Many Wire Services ?
- Thread starter terryhmason
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Mark,
You are a member of FTD and Bloomnet, and only 1.7 orders a day????
Why two wire services?
RC
BOSS
FlowerChat Administrator
Good dang question...was FTD as you know, have been for 61 years...
Tried 800 for a couple reasons, better rebate, and a friend I think you know, D.P. convinced me they were different...not so much after the fact. Might be in the future, they tell me next month they are implementing real time statement balancing for one thing...but alas, their order value was not what I expected.
Now, as you know, I have another option that will allow me to remove both parasites from my world. I'm planning on getting back to nearly 100% local biz, with sending only for select customers. My local business is enough to keep me happy, and I only have 7 years 8 months and 14 days to go if everything goes as planned.
If you account the labor cost as a variable expense, you must be able to remove this cost if the coresponding sale doesn't exist. Otherwise it's not a variable expense.
For incoming orders, driver's wage is a variable expense rather than a fixed one, as long as you expect his wage would decrease if there was no incoming orders. So are the gas, cost of flowers, supplies, etc.
Designer's wage ("labor") is a different matter and more complex. I think you can account it either way. But one way is better than the other, depending on how this designer is paid in your shop.
To illustrate this point, let's take a look at a small florist with one full-time designer. If her wage does not significantly depend on the total number of orders, it is most resonable to account her wage as fixed.
Let's take another look at, this time, a large shop with 20 designers who are paid hourly. In this situation, the total wage will fluctuate, according to the total number of orders. Then it's better to account 'labor' as a variable expense, because it indeed varies.
Let's go back to the original point, which is contribution margin of incoming orders...
Without labor (i.e, if you account labor as fixed), the margin should be in the range of 20-30%, meaning you make only about 20-30 cents from one-dollar incoming orders. I can show why that is, if you are interested. This is most likely the case for most tiny florists with not much revenue.
With labor, the margin would shrink by the percentage you allocate to labor. The standard allocation, 25%, in my opinion is over-estimated for wire-in accounting. In all the likelihood, the total wage and the number of orders are not proportional. In other words, even if you get rid of all the incoming orders, you won't save the coresponding amount of labor time (because your designers would simply spend their time for filling water tubes or browsing FlowerChat).
I would put 10% labor for wire-in orders in a large shop. Then overall results would be the margin of 10-20%. You make a whopping $100 for filling $1,000 wire-ins. Note that I ignored all the headaches associated with filling $1,000 wire-ins. They can be costly.
For incoming orders, driver's wage is a variable expense rather than a fixed one, as long as you expect his wage would decrease if there was no incoming orders. So are the gas, cost of flowers, supplies, etc.
Designer's wage ("labor") is a different matter and more complex. I think you can account it either way. But one way is better than the other, depending on how this designer is paid in your shop.
To illustrate this point, let's take a look at a small florist with one full-time designer. If her wage does not significantly depend on the total number of orders, it is most resonable to account her wage as fixed.
Let's take another look at, this time, a large shop with 20 designers who are paid hourly. In this situation, the total wage will fluctuate, according to the total number of orders. Then it's better to account 'labor' as a variable expense, because it indeed varies.
Let's go back to the original point, which is contribution margin of incoming orders...
Without labor (i.e, if you account labor as fixed), the margin should be in the range of 20-30%, meaning you make only about 20-30 cents from one-dollar incoming orders. I can show why that is, if you are interested. This is most likely the case for most tiny florists with not much revenue.
With labor, the margin would shrink by the percentage you allocate to labor. The standard allocation, 25%, in my opinion is over-estimated for wire-in accounting. In all the likelihood, the total wage and the number of orders are not proportional. In other words, even if you get rid of all the incoming orders, you won't save the coresponding amount of labor time (because your designers would simply spend their time for filling water tubes or browsing FlowerChat).
I would put 10% labor for wire-in orders in a large shop. Then overall results would be the margin of 10-20%. You make a whopping $100 for filling $1,000 wire-ins. Note that I ignored all the headaches associated with filling $1,000 wire-ins. They can be costly.
These numbers are BEFORE paying monthly dues. You use these margins to pay for WS fees. Obviously, if you are making only $100 a month from wire-ins, you can't pay the monthly fee.
Joe Mioux
Well-Known Member
Fixed. fixed! FIXED!!!!
LJ.. i am glad you asked that question. And it goes right to my very thesis about WS business and labor.
I don't know too many flower shops that hire a designer to design exclusively for incoming wire service business.
If someone has a shop that does, then yes that designer AND ONLY THAT DESIGNERS LABOR (not the support staff's labor that must be accounted for on every order) would be a direct variable cost that could be used in that calculator.
Also, no employee should be making more that 10pct of GS. Think about it!!!!!
If you have money to invest, a ten percent return on your investment is a profitable investment.
joe
Joe Mioux
Well-Known Member
you have it backwards Varialbe costed labor won't exist if the order doesn't exist.
AND it's not a choice.
If you contract labor for a job, a task or in our case an order, then that labor is a variable expense to that job.
Not necessarily. If you contract deliveries with an outside company then yes, you can treat those deliveries as a variable expense. However, if you pay a delivery driver hourly and he shows up at 9 am and sits around all day not delivering, clocks out at 5 pm; then you can not cost delivery as a variable expense. He is fixed because he didn't do anything except suck oxygen. In other words, if you pay the delivery guy per delivery, yes it is variable. Otherwise, no he is a fixed expense.
No you can't --- maybe!. If you pay a designer on a per order basis, then yes that designer is a variable expense. If you pay the designer hourly, then the designer is a fixed expense.
Joe Mioux
Well-Known Member
Mark, this is my point!!!!
You have two choices. You can keep your one designer working and extra hour on discounted business or you can send her home an hour earlier or have her come in an hour later.
That isn't reality in most flower shops.
so what do we do with designers who aren't filling local orders? We augment some of their time with discounted business.
Remember, you are going to pay this designer for 8 hours anyway. so if you don't have the incoming business that designer will do something else that isn't related to a sale/production work.
This is why I keep harping on labor is a fixed cost for WS sales. You are paying your designers anyway, you might as well pay them for production work rather than merchandising or some other non revenue (this is meant literally, not figuratively - merchandising is important) task.
Joe
The non-revenue work (as you put it) has to be done by someone. It's often that non-revenue work that leads to greater 100% sales and/or less overtime.
I well remember the days when we were filling loads of incomings and 'too busy' to shoot our own photos or work on strategies for future sales.
The WS calculator is not perfect because there are loads of caveats that could change the outcome. But no matter how it's calculated, the cost of labor as a part of fulfillment is not zero.
Joe Mioux
Well-Known Member
You don't understand.
Cathy, you pay your people for a certain amount of hours everyday.
It doesn't matter what they are doing. they are a Constant cost (fixed).
the more sales - production work you bring in - the more you can spread the overhead labor (as well as utilities, insurance, advertising, etc) out over those additional sales.
This isn't an emotional thing with me. It is a fact of business life. We run a factory and we need to accurately cost out and accept sales that improve NET PROFIT. All sales need to cover 100pct of variable and contribute 100 pct OR something less to fixed costs.
Call me! Please! so I can explain this to you.
Cathy, you know my how I feel about you, but you need to listen and understand this accounting stuff.
Actually, Joe, the GAAP (Generally Accepted Accounting Principles) do not treat labor as a fixed cost. What you're advocating is a decision distinct to your business. That's fine, if you want to do that, but recognize that others will do it differently and to their satisfaction.
Joe Mioux
Well-Known Member
Joe Mioux
Well-Known Member
Oh, yes, I do!
As right as you are about incremental contributions and fixed expenses, there is a definite tipping point where florists move from helping cover fixed expenses by filling wire-ins to devoting large chunks of staff time (all levels of staff, not just designers) to handling them. Holidays are the absolute worst.
It's a simple Excel Calculator that most florists still find confounding. If we put in every single caveat possible, maybe you and a couple other shops could work your way through it.
The idea was/is to get an overall grip on the expenses (commissions, receiving fees, WS directory fees, ad fees, unequal sending fees, etc..) instead of just being happy receiving a check from a WS each month and wondering why the bills outpace the bank balance.
I've already conceded it isn't perfect, but IMO it's a helpful tool to visualize a complex picture that's never clear when looking at a WS statement.
If nothing else, it makes florists realize the real profits are on the sending side. :>
BOSS
FlowerChat Administrator
Joe, I often send them home 1-2 or even 4 hours early. They are designers, if there is nothing to design then they are done for the day once orders are filled and the coolers stocked.
Why? It should be! Do you pay your landscaper to mow the grass in the drought months when it's not growing?
My designers know that they are well compensated, they know they get every hour I can afford to pay them for, and they get overtime when the works there. When it's not, they know they will be sent home. We have it so fine tuned they come to me and tell me they are leaving for the day, so I can evaluate conditions/next days needs before they leave.
They also know, to save some of that overtime $$ for the summer months...I have one designer that cut her own hours to 2 days a week for the next 3 months, and is available as on call for the rest...it works for me.
You can not afford to pay designer wages to have them do display, nor can you keep them around to fill discounted orders. Discounted orders must fall into the normal days operations, and be done as expediently as possible.
I say send them home...
Nope, I'm not...see above.
prestonway
Well-Known Member
The perfect world
In a perfect world, ALL costs would be variable.
If nothing sells, you pay for NOTHING.
Just think...
...rent as a percentage of sales
...just in time inventory of flowers (product received immediately after the sale is made, in the exact quantities desired, or better yet you can return what doesn't sell)
...delivery service that gets paid only when deliveries are made
...designers that only work on designing sold orders, then go home
...advertising paid for only if the ad generates sales
...wire service containers only paid for if they sell
Wake up Preston...it ain't gonna happen.:alcoholic
In a perfect world, ALL costs would be variable.
If nothing sells, you pay for NOTHING.
Just think...
...rent as a percentage of sales
...just in time inventory of flowers (product received immediately after the sale is made, in the exact quantities desired, or better yet you can return what doesn't sell)
...delivery service that gets paid only when deliveries are made
...designers that only work on designing sold orders, then go home
...advertising paid for only if the ad generates sales
...wire service containers only paid for if they sell
Wake up Preston...it ain't gonna happen.:alcoholic
Joe Mioux
Well-Known Member
Yes, I send staff home or tell them not to come in at all.
However, in my shops, I can not predict when the orders will come in. They might come in at 8 or 9 or 10 or 11 or 12 or 1 or 2 or 3 or 4 or 5.
We can't predict when the orders will arrive.
joe
However, in my shops, I can not predict when the orders will come in. They might come in at 8 or 9 or 10 or 11 or 12 or 1 or 2 or 3 or 4 or 5.
We can't predict when the orders will arrive.
joe
We do, I mean for the head designer. The only wage I cut during summer is the hours of part-timers.
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