Web site instead of wire services?
- Thread starter twiggy
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Just curious, Joe
Are you suggesting Joe, that florists join any WS without any of the whistles and bells, "stay with the basics" as you said? What's left after all the smoke and mirrors are removed? If anyone was to join any WS, ie wire service only, with no sending machine, no CC program, no nothing. The only thing left is the ability to send orders, which you can do without a WS, and received discounted orders which I just showed the numbers as to why a new florist should never get involved with discounted business. So why would any new florist want to talk to a WS rep. They only thing the rep is going to tell her about is the latest and greatest FREE program which WE ALL know is NOT FREE! It's a just a hook and we know what hooks are used for - to catch nieve fish!
Joe Mioux said:
Are you suggesting Joe, that florists join any WS without any of the whistles and bells, "stay with the basics" as you said? What's left after all the smoke and mirrors are removed? If anyone was to join any WS, ie wire service only, with no sending machine, no CC program, no nothing. The only thing left is the ability to send orders, which you can do without a WS, and received discounted orders which I just showed the numbers as to why a new florist should never get involved with discounted business. So why would any new florist want to talk to a WS rep. They only thing the rep is going to tell her about is the latest and greatest FREE program which WE ALL know is NOT FREE! It's a just a hook and we know what hooks are used for - to catch nieve fish!
so, Griff what about the AFS software and the IFA that goes with it? personally i would like to look up my own florists..(giving customers peace of mind) but during the holidays that could be a time problem..what do you do?
virginia_Bob
New Member
Twiggy,
Victoria is right and unless you are extremely fortunate and or in a very busy location I doubt your first year or two finding the time to find florist to send to will be much of a problem. And good luck on your shop. We started 5 years ago next month. It has been quite a ride and sometimes we wonder why the hell we did it but man what a rush. Nothing quite like starting something from scratch and watching it grow. In a lot of ways it is like having a child. A lot of long sleepless nights and anxious times but when they do good
There is nothing like being a proud parent. Just love em and never give up on em.
Victoria is right and unless you are extremely fortunate and or in a very busy location I doubt your first year or two finding the time to find florist to send to will be much of a problem. And good luck on your shop. We started 5 years ago next month. It has been quite a ride and sometimes we wonder why the hell we did it but man what a rush. Nothing quite like starting something from scratch and watching it grow. In a lot of ways it is like having a child. A lot of long sleepless nights and anxious times but when they do good
There is nothing like being a proud parent. Just love em and never give up on em.
Joe Mioux
Well-Known Member
Griff, I didn't specifically say to be without Dove.
Secondly, in one or your prior posts, you state that the discounted incoming business will hurt the business.
Here is your prior comment.
"In additon to all of the regular expenses you have every month, you have just added more and the only thing your are going to get for it is alittle DISCOUNTED business which isn't going to help you pay any of your regular expenses. You just fall further behind." Griff.
Well that isn't exactly true, it might but not necessarily. You need to look at the Contribution Margin of the additional discounted business. It isn't as simple as your example states. You must break out variable and fixed costs in order to determine whether discounted business will help or hurt overall profitablilty.
Joe
Secondly, in one or your prior posts, you state that the discounted incoming business will hurt the business.
Here is your prior comment.
"In additon to all of the regular expenses you have every month, you have just added more and the only thing your are going to get for it is alittle DISCOUNTED business which isn't going to help you pay any of your regular expenses. You just fall further behind." Griff.
Well that isn't exactly true, it might but not necessarily. You need to look at the Contribution Margin of the additional discounted business. It isn't as simple as your example states. You must break out variable and fixed costs in order to determine whether discounted business will help or hurt overall profitablilty.
Joe
prestonway
Well-Known Member
Finally...someone talking about Management or Cost Accounting versus Financial Accounting.
Thank you Joe!
Until Joe's post, labour was being talked about as a variable cost, which can be controlled based on the number of units (arrangements) being produced.
In reality, labour should be considered a fixed cost, similar to rent. Whether our designer produces one arrangement or 20 in an 8 hour day, we still have to pay her for those 8 hours.
Let's use the basic accounting equation of REVENUE - VARIABLE COSTS = CONTRIBUTION MARGIN.
Go through your financials, & decide what is a fixed or variable cost. For example:
Rent - fixed
Labour - mostly fixed, variable only to the extent of extra hours/staff at busy times.
Yellow page ad - fixed
Sporadic newspaper ad - variable
Cost of flowers - variable.
and so on.
To put it simply, contribution margin is money left to pay for fixed costs and profit.
With most florists there are three revenue streams, each with a different cost structure (Incoming/Outgoing/Local). Each stream has a different contribution margin, some obviously better than others.
The bottom line is that if there is even one dollar in Contribution Margin for that revenue stream, it is worth maintaining the product line (wire service). It may not be as much as we like or feel we deserve, but every little bit helps...and once the fixed costs are covered...it goes into your pocket as profit.
NO REVENUE STREAM SHOULD BE ELIMINATED IF IT PROVIDES POSITIVE CONTRIBUTION MARGIN (even it should be the dreaded wire service!)
It has generally been assumed on this & other boards, that fillers are idiots. Until you go through the numbers properly, please don't be so quick to rush to judgement!
(...sorry for the lecture, but as a B.Comm I couldn't keep ignoring the mis-information.)
Thanks.
Thank you Joe!
Until Joe's post, labour was being talked about as a variable cost, which can be controlled based on the number of units (arrangements) being produced.
In reality, labour should be considered a fixed cost, similar to rent. Whether our designer produces one arrangement or 20 in an 8 hour day, we still have to pay her for those 8 hours.
Let's use the basic accounting equation of REVENUE - VARIABLE COSTS = CONTRIBUTION MARGIN.
Go through your financials, & decide what is a fixed or variable cost. For example:
Rent - fixed
Labour - mostly fixed, variable only to the extent of extra hours/staff at busy times.
Yellow page ad - fixed
Sporadic newspaper ad - variable
Cost of flowers - variable.
and so on.
To put it simply, contribution margin is money left to pay for fixed costs and profit.
With most florists there are three revenue streams, each with a different cost structure (Incoming/Outgoing/Local). Each stream has a different contribution margin, some obviously better than others.
The bottom line is that if there is even one dollar in Contribution Margin for that revenue stream, it is worth maintaining the product line (wire service). It may not be as much as we like or feel we deserve, but every little bit helps...and once the fixed costs are covered...it goes into your pocket as profit.
NO REVENUE STREAM SHOULD BE ELIMINATED IF IT PROVIDES POSITIVE CONTRIBUTION MARGIN (even it should be the dreaded wire service!)
It has generally been assumed on this & other boards, that fillers are idiots. Until you go through the numbers properly, please don't be so quick to rush to judgement!
(...sorry for the lecture, but as a B.Comm I couldn't keep ignoring the mis-information.)
Thanks.
12BucksFor2Dozon
New Member
Yes prestonway I agree with your analysis...I argued the same thing when discussing PPC/advertising costs and concluded that as long as the employee is already at the shop, the profit of adding 2-3 more arrangements for that day has no real added labor costs, so the *real* profit of those sales is just COGS-Sale Price....
Perhaps some of you are so busy that all of your designers are worked at 95-100% capacity for the full day, but at least in my neck of the woods no one around here has that type of volume.
It has generally been assumed on this & other boards, that fillers are idiots. Until you go through the numbers properly, please don't be so quick to rush to judgement!
I don't think that necessarily all "fillers are idiots", but I am quite sure that many fillers, the ones that are not pulling at least 4-5/day, day in/day out, are NOT aware that they are basically subsidizing much of the dOG and OTS profits and keeping those who are skimming LOCAL ORDERS through full-page local YP and PPC ads afloat.
Perhaps some of you are so busy that all of your designers are worked at 95-100% capacity for the full day, but at least in my neck of the woods no one around here has that type of volume.
It has generally been assumed on this & other boards, that fillers are idiots. Until you go through the numbers properly, please don't be so quick to rush to judgement!
I don't think that necessarily all "fillers are idiots", but I am quite sure that many fillers, the ones that are not pulling at least 4-5/day, day in/day out, are NOT aware that they are basically subsidizing much of the dOG and OTS profits and keeping those who are skimming LOCAL ORDERS through full-page local YP and PPC ads afloat.
Joe Mioux
Well-Known Member
Don't mean to start a fight, but sorry to say talking about Margin Contribution as your guys are doing is like talking about dropping your loose pocket change into a glass jar at the edge of your bed every night and telling yourself that someday you hope to take your dream vacation when the jar gets filled. I agree with Mark on this subject and most florists will never see any positive results for their business, especially a NEW business based on marginal contribution.
There was a time when margin contribution was viable factor. Florists used to meet their monthly "bogey" numbers by the 20-25th working day of the month and everything after was almost pure gravy <Profit>. However, times have changed and so has the way that many florists have to look at how they keep score. If I read Joe and Preston closely, they are saying that every dollar counts and even if incoming wire orders doesn't meet your full margin goals, it's OK because those couple dollars that you make off each order can be used to help pay your fixed labor costs. I'm sorry, but this is an old economic concept that florists have been using for years to find ways to keep the designers and drivers busy. As a small business person, you have other choices and one of them is reduce your monthly "bogey" number. In other words, have less designers or work them less hours. If you were in the clothing business, traditionally you would have SALES all the time to move your inventory. Clothing merchants were always willing to take LESS dollars for the merchandise to get it off the books. Many clothing retailers today, however, are seeing that it is better to buy less merchandise and have less sales and make more profit. Many of us florists are finding that by cutting some expenses, we are actually making more profit from less business and paying our bills.
As a florist, you can mathematically determine that if you join a WS to send out orders, you have just created an added "fixed" cost of $xx per month and the commission gained by this venue may be totally eaten up by these monthly costs. On the other side, the incoming discounted orders may provide marginal contribution as has been indicated, but in small doses which is what most small florists experience, and there is not enough CONTRIBUTION there to tip the waiter at McDonald's when you go to lunch.
If florists followed the idea of marginal contribution to it's fullest, joining one WS for incoming would be good, joining 2 WS would be better and joining all 3 would be GRANDEOSO. The MAJOR problem most florists face today is not being able to generate enough full margin business to pay their bills and it is foolhardy to try to suppliment this shortage of full value business with discounted business which has added fixed costs attached to it. What changed the idea of marginal contribution? The addition of grocery stores into the flower business and "flowers in a box" and lastly and most important, the increasing numbers of OG's. All of these factors are geared to reducing the amount of full margin business available to the local florists.
As one florists told me the other day when we were talking about all the mutual problems of the industry and I asked him why was he still in the industry, he responded, " it is very easy to get into being a florist, but very difficult to get out with your hide intact"!
There was a time when margin contribution was viable factor. Florists used to meet their monthly "bogey" numbers by the 20-25th working day of the month and everything after was almost pure gravy <Profit>. However, times have changed and so has the way that many florists have to look at how they keep score. If I read Joe and Preston closely, they are saying that every dollar counts and even if incoming wire orders doesn't meet your full margin goals, it's OK because those couple dollars that you make off each order can be used to help pay your fixed labor costs. I'm sorry, but this is an old economic concept that florists have been using for years to find ways to keep the designers and drivers busy. As a small business person, you have other choices and one of them is reduce your monthly "bogey" number. In other words, have less designers or work them less hours. If you were in the clothing business, traditionally you would have SALES all the time to move your inventory. Clothing merchants were always willing to take LESS dollars for the merchandise to get it off the books. Many clothing retailers today, however, are seeing that it is better to buy less merchandise and have less sales and make more profit. Many of us florists are finding that by cutting some expenses, we are actually making more profit from less business and paying our bills.
As a florist, you can mathematically determine that if you join a WS to send out orders, you have just created an added "fixed" cost of $xx per month and the commission gained by this venue may be totally eaten up by these monthly costs. On the other side, the incoming discounted orders may provide marginal contribution as has been indicated, but in small doses which is what most small florists experience, and there is not enough CONTRIBUTION there to tip the waiter at McDonald's when you go to lunch.
If florists followed the idea of marginal contribution to it's fullest, joining one WS for incoming would be good, joining 2 WS would be better and joining all 3 would be GRANDEOSO. The MAJOR problem most florists face today is not being able to generate enough full margin business to pay their bills and it is foolhardy to try to suppliment this shortage of full value business with discounted business which has added fixed costs attached to it. What changed the idea of marginal contribution? The addition of grocery stores into the flower business and "flowers in a box" and lastly and most important, the increasing numbers of OG's. All of these factors are geared to reducing the amount of full margin business available to the local florists.
As one florists told me the other day when we were talking about all the mutual problems of the industry and I asked him why was he still in the industry, he responded, " it is very easy to get into being a florist, but very difficult to get out with your hide intact"!
Joe Mioux
Well-Known Member
Griff said:
Cost Accounting is a Generally Accepted Accounting Principle (GAAP). It makes no difference the size or type of business.
YOur clothing store example is not appropriate here. That is an Inventory Control Issue, not an issue of accepting additional business at a discounted price.
Your Mc Donald's annalogy is also wrong because the additional income from a discounted order isn't going to be paid out as an expense (tip) it remains in your pocket.
One, two, three WS's, I think we will all agree that one is probably enough for any florist.
The addition of new competition (grocery stores, OG's) still doesn't change the fact that if you cover all your variable costs and some of your fixed costs with discounted business, your business will yield a higher net profit.
Griff, Thank you for the spirited debate!
Sincerely
Joe
prestonway
Well-Known Member
Let's take a hypothetical shop. They have to pay for one full time designer, even in the off-season.
Most of the time, especially over the summer, she works at "less than full capacity" as she often does menial tasks such as washing pails, filling water tubes, or cleaning the floor 3 times a day.
In other words, non-designer tasks.
As I stated previously, whether she does one order a day or twenty, you can't reduce her hours or only bring her in during busy times (she'll probably leave for a "go to shop" or a "filler fool" operation)
She is a fixed cost.
So let's say I'm wire free, but contemplating joining a wire service.
Let's crunch the numbers, based on additional or incremental revenues & expenditures involved in this decision.
My estimated revenues for a month are $2500, based on 50 x $50 orders, or about 2 orders for each business day.
I didn't get any "deal" from the wire service, so my dues are $250 month.
My flower costs are 30%, or $750, and my wire service charges the standard 20% + 7% + $.95/incoming...let's just call it another 30% or $750. These are the additional variable costs.
REVENUE - VARIABLE COSTS = CONTRIBUTION MARGIN
$2500 - ($750 + $750) = $1000.
The only additional fixed cost we incur is the wire service dues of $250.
Taking the dues away from the Contribution Margin leaves us with $750, to be used to help pay for all other fixed costs, including the designer, rent, the phone lines, the yellow page ads, etc.
I admit it's not great, but over a year this additional "Contribution" adds up to $9,000.
...and further, where does the Contribution Margin equal $0??
Revenues of $625 - ($187.50 + $187.50) = $250.00, which covers my wire service dues but contributes nothing to fixed costs or profit.
In other words, $625 would be the break-even point, or only 12.5 orders a month at $50 per order.
Am I missing something??
Most of the time, especially over the summer, she works at "less than full capacity" as she often does menial tasks such as washing pails, filling water tubes, or cleaning the floor 3 times a day.
In other words, non-designer tasks.
As I stated previously, whether she does one order a day or twenty, you can't reduce her hours or only bring her in during busy times (she'll probably leave for a "go to shop" or a "filler fool" operation)
She is a fixed cost.
So let's say I'm wire free, but contemplating joining a wire service.
Let's crunch the numbers, based on additional or incremental revenues & expenditures involved in this decision.
My estimated revenues for a month are $2500, based on 50 x $50 orders, or about 2 orders for each business day.
I didn't get any "deal" from the wire service, so my dues are $250 month.
My flower costs are 30%, or $750, and my wire service charges the standard 20% + 7% + $.95/incoming...let's just call it another 30% or $750. These are the additional variable costs.
REVENUE - VARIABLE COSTS = CONTRIBUTION MARGIN
$2500 - ($750 + $750) = $1000.
The only additional fixed cost we incur is the wire service dues of $250.
Taking the dues away from the Contribution Margin leaves us with $750, to be used to help pay for all other fixed costs, including the designer, rent, the phone lines, the yellow page ads, etc.
I admit it's not great, but over a year this additional "Contribution" adds up to $9,000.
...and further, where does the Contribution Margin equal $0??
Revenues of $625 - ($187.50 + $187.50) = $250.00, which covers my wire service dues but contributes nothing to fixed costs or profit.
In other words, $625 would be the break-even point, or only 12.5 orders a month at $50 per order.
Am I missing something??
Yep. Variable cost of delivery (gasoline, maintenance/mile of use) or flat fee cost if using a delivery service/pool.
Eric S
Demoted Webmaster
Joe Mioux
Well-Known Member
CHR said:
O.K. so if your fixed and variable cost for a mini van is $5.00 per delivery, you have an additional $250 in expenses. That still leaves this florist with a contrbution margin of $750. for the month.
Joe
Joe, we were already down to $750 after deducting monthly dues so now the contributing margin is reduced to $500.
In today's fulfillment of WS-generated orders, rather then helping rotate a shop's core set of flowers, some fillers find the need to stock specific containers and flowers just to 'court' incomings.
As 12Bucks said in another thread, the big senders already have their lists of preferred florists and the .com orders primarily go to the stores that pledge to carry their codifieds so if the goal is the gain incomings, most new shops will need both time as well as investment in WS-specific inventory before any level of volume kicks in.
We haven't yet discussed the other fees that need to be amortized over the lifetime of the membership like selection guide costs.
In today's fulfillment of WS-generated orders, rather then helping rotate a shop's core set of flowers, some fillers find the need to stock specific containers and flowers just to 'court' incomings.
As 12Bucks said in another thread, the big senders already have their lists of preferred florists and the .com orders primarily go to the stores that pledge to carry their codifieds so if the goal is the gain incomings, most new shops will need both time as well as investment in WS-specific inventory before any level of volume kicks in.
We haven't yet discussed the other fees that need to be amortized over the lifetime of the membership like selection guide costs.
12BucksFor2Dozon
New Member
How 'bout the fact that someday soon that OTS will capture the order (because what the customer "bought" was FTD/TF, not *your* brand) and convince the buyer that "local florist are no longer of any quality", and then direct ship the item instead.prestonway said:
Personally, I'm convinced that this is the long-term goal of the OTSs...to so destroy the value perception of the local florist by forcing those who still fill to lower and lower price points, so one day they can step back and throw their ex-members under the bus...
My tagline says it all.
Joe Mioux
Well-Known Member
CHR said:
Cathy, I love it when you enter the fray!
Would you turn down a $500 sale per month? I suspect not.
If a florist chooses to buy containers from a WS inorder to fill a product that is their choice. I think you know where I stand on this issue.... " 'If you don't have the product, you don't have the problem,' filling the order."
Big senders... before I start, you have to know that I come from a small market environment rather than a large population basis such as yours. So your experience with large senders is probably different from mine.
With that said...........
Big senders like OG and .com's is a moot point. That is nothing different than me sending orders to flower shops I know in STL. You do the same, I'm sure, you send to the best fulfilling florist possible. A florist gets (incoming) what they get. I still receive far more incoming orders from traditional florists than I do OG or .com.
RE: goal of new shops gaining incoming..... That is why I originally said if a new start up shop chooses to use a WS to start out with the basics. Keep the costs associated with WS membership as low as possible.
What do selections guides cost now? $300 every two years? I really don't know, but costed out over a monthly basis, seems insignificant. If it is $300 every two years that comes out to what $12.50 per month? I did not use a calculator so I maybe off.
Joe
Joe Mioux
Well-Known Member
12BucksFor2Dozon said:
Mark:
That has nothing to do with PW's last sentence in the posted example about cost analysis.
Joe
Joe Mioux
Well-Known Member
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