The above quote is from another thread, but it reminded me of the idea that I have been meaning to throw in here: the number of incoming orders does matter, especially for a "micro" florist. By "micro" florists, I mean those with a revenue of less than ~300K a year, which includes us and, I suspect, the majority of FC members.
In this thread, I will argue that (1) the requirement of a WS for a larger florist is fundamentally different from that for a micro florist, (2) the number of incoming orders does matter for a micro florist. I'm not sure I will succeed, but I will try anyway.
Difference in WS requirements between larger and micro florists.
It is important to recognize this. When varying opinions are expressed in this board, it is sometimes difficult to see where they are coming from. What works for a big florist may not be applicable for a micro florist.
A big florist needs a WS to send a large number of outgoing orders efficiently. There simply is no good alternative right now, other than wire services.
For a micro florist, however, the number of outgoing orders is tiny, usually just a few a day at most. With this kind of number, there are many alternatives to wire services. We can simply phone out the order, or use a cheaper WS-alterantive such as FSN or IFN, among others.
Micro florists do not need a WS to send outgoing orders. There would be little net gain for them to join a WS, if all they do with the WS is to send outgoing orders.
That's not the case for a large florist who must send tens or hundreds of orders a day. WS does save money for them. Also important, a micro florist who actively gather outgoing orders (via YP or web site) does need a WS. For them (let's call them micro OGs), outgoing orders will make money even after WS fees.
The number of incoming orders is important for a micro florist with WS
The above should be self-explanatory. Unfortunately, the idea that "outgoing orders make money, while incoming orders lose money" has become a dogma without much needed scrutiny.
True, for a big florist, outgoing orders do make a lot of money, if they are sending out a lot of orders. And it is also true that, to make the same amount of money with incoming orders, a big florist would need to hire extra personnel, which would dramatically decrease the profit margin of incoming orders (same effect as doubling/tripling COGS). They would need perhaps 3-4 incoming orders to make the profit equivalent to one local order.
Now, that's not the case for a micro florist. For most micro florists, they don't need to hire extra personnel to handle incoming orders (if they do need to hire, the situation would be similar to a big florist; incoming orders won't be as profittable). Most of us are one-two person operation, so there is always excess labors left to be utilized.
In this situation, incoming orders can generate a postive cash flow under a certain condition. The number of orders must be greater than that needed to pay for the monthly fee. Without labor, the gross profit margin of incoming orders is around 30-35% (roughly half of local orders). If the monthly fee is $300, you would need about $1,000 incoming orders a month, to break even.
Equally important, the number of incoming orders must be small enough so that you don't have to hire one more person to do the work. If you do, the margin might plummet to 10-15% or even less.
For a typical micro florist, what this means is that they would need at least 20-30 orders a month, but no more than 100-150 orders a month. That's the window that could generate a positive cash flow.
A few more thoughts
It is also important to consider the impact of your business decision on your competitors, too. Say, you are currently a WS member and thinking to quit because there aren't enough incoming orders. Chances are that your competitors are thinking the same. If so, and if you quit, they would be saved. Becaue of that, if you aren't making any money from a WS (just break even), it is not an easy thing to decide whether you should quit or not. You don't want to "help" your competitors.
Finally, perhaps most importantly, a micro florist who depends on incoming orders is fundamentally unhealthy businesswise. My opinion is that revenue from incoming orders should not exceed 10-15% of your total revenue.
Our store, for example, has a way too much exposure, 30-35% right now, mostly to FTD. This is quite unhelathy and risky. It is like having a single customer controlling 1/3 of your revenue. This is a legacy of the previous owner, and we have been trying hard to reduce this reliance on WS orders. I don't plan to do that overnight, though. My inclination is to do it steadily and gradually. Thanks for reading.:beer
