Arn't I just adding $500 revenue [$420 flowers & $80 delivery] without any increase in payroll?
I think so, yes.
IF the labor is a fixed expense, then wire-ins are profitable. Wire-ins have a small contribution margin of approximately 25% before labor is deducted (i.e., $25 gross profit from a $100 wire-ins); so if the menbership fee is $300 a month, you would need approximately $1,200 wire-ins a month to break even.
If the labor "cost" is, say, 25%, it obviously wipes out the profit.
So the question of whether wire-ins are profitable or not all boils down to the question of whether the labor is fixed or not.
My opinion is that for a small shop with one designer with fixed time schedule, it is better to account it as fixed. This way would give the owner a more accurate view of what would happen if they decided to get rid of WS.
If your shop can send some of your designers home earlier when the day is slow, then it is better to account it as variable. This includes a large shop with multiple designers and also a small shop with temp designers (such as during holidays).
Then there's a question of how much % we should allocate to labor. The stadard formula, ~25%, is justifiable only when almost all your payrolls are for flexible-time designers. That's rare. SO in general, allocating 25% labor would result in a more pessimistic picture of WS profittability than the reality.
Also, note that labor cost relative to the day's total revenue is smaller for busy days and larger for slow days. 25% is just an average. This point is important because, for a small shop hiring multiple temp designers for Christmas, the labor should
not be accounted as 25%.
