WS Break-even calculator

[duanermb]

Just between MEE, U, and the lamp post, knocking out 126 orders just to meet the break even point, is a whole lotta work.

At which point, I would have to ask: "WHAT FORE?"

Like having 126 PUSH HANDS in a row at a Black Jack Table, and finally winning the 127th hand, but still NOT GETTING ANY BLACK JACKS.

You certainly had a lot of PLAYING TIME, but you never made any money!

Unless they offer you FREE MEMBERSHIP with NO DUES and FEES, I think ONE WIRE SERVICE has GOT TO GO JOE!

126 Orders is a heck-uv-a bar to have to meet, until ya begin to make that rather small marginal contribution to your operating expenses.

My vote is: "TAKE YOUR MONEY AND RUN!"
lol

I would tend to agree, but for one small thing...

It depends on the size and market exposure of your shop, how long you have been in business, and several other factors that would affect everyone else differently.

It may be that because you are pumping out those orders for "free", your flower volume is larger, you can have staff in on a more regular basis, and you can market your business on the orders.

More buying power, steadier work. There may be intangible benefits to those orders, depending on other factors within the business.

While we were losing money at the beginning, (in hindsight) those orders would have been very beneficial to us.

~ All that being said, I wouldn't touch them with a ten foot pole now... ~

 

[Joe Mioux]

Randy,

I have been looking at the total numbers for the year.

$7416 GS - 2225 COGS - $2610 Membership fees equals $2581 contribution margin.

$7416/$2581 = 34 pct.

is this what you are asking, but only on a per order level?

joe

 

[Joe Mioux]

Joe,

If the w/s was barely profitable for me, here's what I might consider doing if I had a shop. I might drop the w/s and substitute it with a more profitable incremental product. Get the latest seller, (once was Beanie Babies, then Webkins, etc.) and promote and make as much hay as I could while the item was "hot" and then move on to the next latest and greatest.

Plus, it wouldn't be as much work going thru the monthly statement from that company. You have to watch your w/s statements like a hawk, and comb thru each one, because they are always creating new fees, or upping their current fees. Also, some shops I have visited have said they went thru rigorous motions of getting their lsf and recip fees waived, and then lo and behold the charges magically reappear on their statements the following year.

Less work and more profit is a good thing.

Speculating on a new product line, doesn't guarantee that I will be more profitable or quite possibly even lose money.

I would recommend to myself, expand a winning market, such as my Spring plant business and pot plant business.

joe

 

[RC in Dayton and Cincinnati]

Randy,

I have been looking at the total numbers for the year.

$7416 GS - 2225 COGS - $2610 Membership fees equals $2581 contribution margin.

$7416/$2581 = 34 pct.

is this what you are asking, but only on a per order level?

joe

What happened to the 20% commission paid to the sending florist and the 7% relay fee?

 

[TOTO]

Tis TRUE Duane, Herb called it "THE WS MYTH!"

I would tend to agree, but for one small thing...

It depends on the size and market exposure of your shop, how long you have been in business, and several other factors that would affect everyone else differently.

It may be that because you are pumping out those orders for "free", your flower volume is larger, you can have staff in on a more regular basis, and you can market your business on the orders.

More buying power, steadier work. There may be intangible benefits to those orders, depending on other factors within the business.

While we were losing money at the beginning, (in hindsight) those orders would have been very beneficial to us.

~ All that being said, I wouldn't touch them with a ten foot pole now... ~

Your last remark are the KEYWORDS!

I still need to post the article which was written by Herb Mitchell entitled: "The DANGERS of FILLING ORDERS at a DISCOUNT!"

Herb threw out all of the WS SANTA CLAUS MYTHS.

1. Our delivery vehicle was going by there anyway.
2. Our help was standing around doing nothing anyway.
3. Our flowers were standing around doing nothing anyway.
4. Our buying power gives us better discounts for THEIR DISCOUNTS.
5. Our product got into the home of a FUTURE FLOWER BUYER.

He exposed the WS MYTH which has been perpetrated on filling florists since the beginning of the FLORAL ORDER BROKER ANOMALY.

From 1970 till 1984, when we had SEVEN WIRE SERVICES and were filling like fools while not making any money, I overcame the Lotus learning curve, put em all up on seperate spreadsheets, and VOILA, the truth smacked me in my face.

TRUTH BEE TOLD, a florist could only make money in the WS game when they had ONLY ONE WS, and sent out mo orders than they filled.

That strategy worked just fine, up and until 1994, when the INC WS DOT.CON ANOMALY came into play. By 1997, they got into a major food fight, and so, all the rules changed again.

 

[Joe Mioux]

What happened to the 20% commission paid to the sending florist and the 7% relay fee?

Yea, I just got back from a delivery and remembered, instead of subtracting from $7400, I should have subtracted from $5400, which was my revenue.

Sorry for the confusion and that actually brings the pct back to where I would expect it to be, which is close to zero.

I am not at calculator.

joe

 

[goldfish]

Randy, when we're talking strictly wire service profitability, this is what it comes down to, determining what costs are fixed and what costs are variable. I think this is an impossible debate to conclude, because 1, most won't be completely truthful or 2, it is very difficult to measure or 3, the florist is just plain clueless.

So true. The fact that no one thanked you for this post proves your point.

 

[RC in Dayton and Cincinnati]

With one last thought I'm done with this thread.

Some florists won't give a 20% courtesy discount to a florist direct order yet will give up nearly 70% on a wire order.


OK, one more thought. I think I'm living on a different planet than most of you florists.

RC

 

[Joe Mioux]

Randy, I am not sure what that last post was about or who you were addressing, but I thought I established in the very first post, that my FTD affiliation as it is currently structured isn't profitable.

This thread was never about that, even though there were a lot FC'rs going over the same old stuff and other FC'rs passing out a lot of Thank You's. Why? I can only guess.

Every day, when I do a server shut down, I check a graphing tool that is part of Visual Ticket's software. For the last four years, both incoming and outgoing have been dropping significantly while local sales increase enough to offset the WS losses.

That is good. The WS business is not some static department that produces a certain amount of revenue and costs every year. It is dynamic and those numbers change.

I am not married to WS business. I have chosen to participate when it earns me more revenue. I purposely chose to publish my FTD numbers.

Why? because my philosophy on this particular segment has always been consistent. If a florist can earn a profit, they need to participate, when they can't earn a profit they need to move on.

it is just that simple.

joe

 

[TOTO]

Ditto RC! Tell me about YOUR PLANET.

Some florists won't give a 20% courtesy discount to a florist direct order, yet will give up nearly 70% on a wire order. OK, one more thought. I think I'm living on a different planet than most of you florists. RC

There are a few of us who feel the very same way RC.

How can any florist filling WS orders at the "on the surface discount of 30%", and then, finally arriving at the REAL TOTAL PER ORDER DISCOUNT of 65% after they pay their annual WS DUES and FEES, possibly call that MAKING ANY PROFIT, marginal or otherwise.

In Joe's example, his break even point is filling 126 incoming orders at an average price of $48.10, thus covering his ws cost of $2,610.00 indicating ZERO PROFITS on the first leg on his journey.

We're also aware that, Joe has a DISCOUNTED PRICE from that WS and most other shops pay close to $5K per year for their membership.

That also means, those other florists are loosing more money at an even faster pace.

Also, another point which is bantered about around here, but has basis in fact.

All of those incomings come with FTO, or reverse the transmission charges to the filler. That additional cost is $1.50 and on an average incoming order of $50, that's another (-3%) discount.

So, let's all talk (-30%) off the top with another (-35%) off the bottom, leaving 35% in the middle, to doo all dat doo. With COGS at 30%, there is still a 5% marginal contribution, but that's based on FREE LABOR, FREE DELIVERY, and FREE OFFICE ADMINSTRATIVE COSTS, but only after one fills the first 126 orders FORE FREE TOO. WOW! What a field to have to HOE just to get to your first small carrot.

Personally, I agree that, the F2F orders at a mere 20% discount to the sending florist, is a whole heck-uv-a much better deal all around.

I even think that, the Medicaid, Medi-Cal, and Medicare reimbursements pay more than these WS's, but maybe not.

Lastly RC, does your planet have BEER? This planet, while obviously LOW ON OXYGEN due to GLOBAL COOLING, still has cold beer. And, I'm not moving to your planet unless it has BEER, or at the very least, LONG ISLAND ICED TEAS, many of them and some ice. And let's not tell Al Gore about your planet either.
:alcoholic

 

[Joe Mioux]

toto, i too, hope Randy's planet has beer.

a couple thoughts: First, I am losing both in and out business at a very quick rate.

Second, I didn't include my TF business in this thread, but I will look at those numbers as well. We receive and send most everything via TF.

Third, the 20 pct direct thing isn't about the 20pct but rather other potential problems, such as CC theft, sales tax issues, lack of reciprocity and arbitration/mediation remedies.

Fourth, Goldie brought up a point, if I drop FTD, that in effect gives my competitor the business, whith the greater number of orders will actually make her more profitable, (or less unprofitable). Why do I want to help her by default? I don't know the answer to this.

Fifth, I do know one thing, that as I see the WS business continue it downward trend, costs need to be eliminated, prices raised, and sending volume increased.

 

[TOTO]

Send more BEER!

a couple thoughts: First, I am losing both in and out business at a very quick rate.

That's the CRUX of the problem Joe, and all of us share that pain. Which is also why, the added costs associated with having more than one wire service is no longer sustainable. In fact, might even come to a point where having the one wire service meets the same criteria.

Second, I didn't include my TF business in this thread, but I will look at those numbers as well. We receive and send most everything via TF.

That's your money train for now, provided you continue to send more than you receive. However, that's subject to change as well, especially during this recession.

Third, the 20 pct direct thing isn't about the 20 pct but rather other potential problems, such as CC theft, sales tax issues, lack of reciprocity and arbitration/mediation remedies.

Personally, I haven't had any issues along those lines with IFA and since we started with them back in the Spring of 2007. Also, my primary reason is SENDING OUT orders for our customers rather than filling orders at a discount. However, I am also happy to fill incoming orders for other REAL FLORISTS like myself, especially when I net the full 80% and get my money in 48 hours versus 48 days.

As to order problems, I haven't had any issues there as well, but if I did, and the filling florist wouldn't address my customer's complaint, I would contact my credit card company and dispute the charge.

Fourth, Goldie brought up a point, if I drop FTD, that in effect gives my competitor the business, with the greater number of orders will actually make her more profitable, (or less unprofitable). Why do I want to help her by default? I don't know the answer to this.

Might be a good thing Joe, especially since you're allowing them to LOOSE MONEY AT AN EVEN FASTER RATE, which may put them out of your picture entirely.

Fifth, I do know one thing, that as I see the WS business continue it downward trend, costs need to be eliminated, prices raised, and sending volume increased.

The KEYWORDS being "COSTS NEED TO BE ELIMINATED" When your money is invested in a $ERVICE, you are entitled to a reasonable return. Failing a return, it's time to CASH OUT and use that money to INVEST IN YOURSELF! I think FILLING VOLUME needs to be increased, but only with 100% ORDERS along with your 100% $ERVICE CHARGES. That can be accomplished by using the money saved from the redundancy of having more than one wire service, and investing that in a stronger web presence and by working to build more sales in your own local market.

Having said all of this AGAIN, I think you've already made the right decision for your business as usual. You're just playing with us to see if anyone can come up with a good reason for you to stay.

Or, it could be as simple as: A campaign to SEND MORE COLD BEER TO JOE because HIS PLANET has a shortage. After all, WHAT ARE FRIENDS FOR? As I think about it, for $2,610 you could probably rent a MILLER TRUCK for an entire day, throw a serious party, and help all of us get really sloshed.
lol

 

[Mikey the Flower Guy]

everyone needs to read Toto's message....simply put, re-evaluate, re-address, re-focus, and out with the things and services that "cost" you money....
Silly past glories and loyalties, are just that...silly and without benefit.
AND, JOHN said the magic "Toto Words" of wisdom....bring more beer!!

 

[Golferdude]

Joe, WOW what a thread...
Here is my two cents.
In all your figuring you are assuming that the filled orders are at your retail.
When we first priced the FTD retail BOOK I was SHOCKED to find out how much we were losing on every order.
Every item was underpriced and I was giving a 27% discount (plus) on top of there pricing.
Using your thinking of free labor or delivery. YOU SHOULD NEVER CHARGE FOR IT because its a fixed cost. Your shop should be rolling in the dough.
just a thought. Golferdude