Smithers-Oasis North America Design Director Sharon McGukin, AIFD, AAF, PFCI enjoys sharing floral tips and techniques for celebrating life with flowers.
Pricing for profits is always a challenge. To remain strong, a retail business must control operating expenses in order to create profits.
We can’t just ‘make it pretty’ we must make it profitable. How?
As you prepare for Spring holidays, Mother’s Day, special events and weddings, it's a good time to re-evaluate the pricing methods used in your floral business.
Nationally-known floral educator, Joyce Mason-Monheim AIFD, AAF, PFCI, AzMF joins me in offering tips for professional pricing. For more details, listen to the “Pricing for Profits” podcast on How We Bloom.
The information we share is not meant to tell you 'what to charge.' We offer suggestions for how 'you' can calculate what 'you need to charge' based on your personalized retail experience. You do the math.
Adapting to Change
Post-pandemic retailers are met with many new challenges. You must adapt to these ‘opportunities’ to facilitate change. Many businesses try to absorb increased costs, but this practice cannot be sustained long- term without losing profit.
Calculate your true costs, establish Cost of Goods Sold, and tailor a profit-and-loss sheet to the specific goals of your business. The resulting numbers can guide you in determining the number of designs, design staff, or other income streams needed to produce positive income flow.
Pricing differs according to how you service your customer. One-size-fits-all numbers, percentages, or price categories simply won't fit. Floral product can be delivered to the consumer in a variety of ways.
• Traditional florist
• Studio florist
• E-commerce florist
• Freelance designer
• Team design
• Aspiring floral enthusiast
Create the pricing flexibility that works best for creating profits in your floral business.
“Your pricing flexibility is influenced by regional flower prices, Costs of Goods Sold, labor costs, materials, and local supply and demand, along with the pricing your market will bear,” explains Joyce.
To achieve profitability, it’s important to take profits out first, then make the remaining Cost of Goods Sold (COGS), numbers work for your business. Your COGS, includes many things.
• Fresh flowers and plants.
• Overhead: facility costs - mortgage or rent taxes, utilities, repair, and marketing.
• Hardgoods - containers, floral foam, design accessories, mechanical aids, wire, adhesives, etc.
• Labor - including staff wages, social security taxes, benefits like insurance, gas or phone.
“You have to make a profit. Your profit needs to come out first,” Joyce reminds us. “Adjust the rest of your numbers to make it work within your budget. Adapt your profit and loss statement to fine-tune your specific costs, then re-evaluate every month.”
Calculating Labor Costs
Labor cost markups vary in different floral markets. They may run:
• 20 to 35% on a daily basis.
• 50% or higher for intense labor costs.
(Remember, these numbers are simply examples. Do your own math. Numbers change per shop.)
An industry benchmark of productivity suggests a designer can typically create one arrangement every fifteen minutes. Four designs within an hour. If $75 is your average priced design, four in an hour equals $300. In an eight-hour workday - $2,400 worth of designs.
If $4,800 in designs are needed each day on a regular basis, you might consider adding another designer. The numbers indicate you have the business to support that productivity.
There's also the issue of overtime. If you frequently incur employee overtime for wedding, holiday, or sympathy design, take a look at your numbers. If this happens in one specified area, consider raising prices for those products only - as opposed to an overall price increase.
If you often pay overtime, perhaps it’s a staffing issue. You may need to add a designer or re-evaluate how staff responsibilities are divided. Can this deficit be resolved by more staff or increased pricing?
Let’s compare two ways to calculate price. Joyce refers to ‘pricing down’ as using a fixed price usually set by the customer. Or, ‘pricing up’ by adding up materials, labor, etc. as you design to discover the aggregate cost.
For the sake of math, we’ll use these potential markups on cost-of-goods (costs incurred to you.)
Include any handling fees - received-delivery and box charges, wrapping your flowers for delivery in seasonal weather.
Anything that is a handling cost to you should also be included in your stem pricing.
If your customer says “I want to spend $200 on an arrangement.” Using the established ‘fixed price’ method, you can subtract labor costs to know how much is left for fresh flower and hard good materials.
Rather than calculating labor for each design, create a master list of labor calculations for every price point you sell. For web designs, use the pre-established menu of each design.
• Document any deviation from the menu.
• Keep a running tab of everything in the design.
• For custom designs, list all items according to price.
• Perhaps on the back of the order form.
This documentation can also help resolve any customer question of the design being full value. It's important to follow the menu, without adding additional flowers to ‘make it pretty.’ Giving away free flower stems doesn't lead to profitability.
Joyce refers to the second way of calculating the price of a design as ‘pricing up.’
• Start by totaling your cost of goods (flowers/ hard goods).
• Add the reciprocal of your labor percentage.
This gives you the total selling price of the item.
Another major factor in profitability is controlling your cost of goods.
Controlling Cost of Goods
“A good way to control your shrink or your cost of goods is to pay attention to your product,” suggests Joyce. “Watch your design room budget. Avoid waste by not ordering more than you sell.”
• Pay attention to the processing and care and handling of your flowers.
• Use the proper tools and professional products for long-lasting flowers.
• Mark cooler storage bucket sides with flower arrival date.
• Rotate buckets in the cooler, use oldest flowers first.
• If they're not fresh enough to use, dispose of them.
“You're always going to have some type of breakage or damage when you're delivering and shipping product,” suggests Joyce. “If it's minimal, incorporate a small percentage into your stem pricing to compensate.” For shrink control:
• Keep list of stems tossed and estimated cost for end-of-year accounting.
• This should not consistently be over 10%.
• Continually losing money on poor quality products? Alter buying methods or change suppliers.
• Purchase less flowers if you aren't selling them before they age.
• Request credit from supplier when there's major damage or flowers are obviously old.
• Be really honest about this. Develop a trustworthy relationship with your salesperson.
• Ask for substitution advice when requested products are of poor quality.
Keep wedding flowers separated from everyday flowers in the cooler. Color-code buckets. You cannot donate to or subtract from the wedding flowers your customer paid for. They must be reserved for the wedding.
Estimating Future Wedding Costs
We’ve met new post-pandemic pricing challenges. Escalating prices. Flower shortages. Difficulty procuring preferred varieties. How can you price today a wedding for next year?
• Impress upon your client the need for flexiblity.
• Promise fresh flowers, beautifully arranged, in a complementary color harmony.
• Suggest a mix of available seasonal flowers in the wedding palette.
That's as much as you can promise. You cannot promise specific flowers or prices far in advance. Use a general pricing structure. Just as the color harmony is a predicted range of colors, offer a general range of prices. Suggest the highest price and the lowest price you think possible for their requests. Agree on an estimate within a specified range and accept the deposit to hold the day. At your final consultation, one-to-three months in advance of the wedding, discuss more specifically flower availability and fluctuating prices. Accept initial payment for the wedding, file a credit card for any cost overages.
For example, a $5,000 wedding. If flowers are projected to increase another 30%, that could be an additional $150. Establish a price range they're comfortable with. This allows you to go back to the $5,000 if that works, or move forward to the $5150, if needed.
If the wedding party insists on a specific flower, that may require an additional charge. Communication is key. Suggest options. Let them make final decisions. Inform them if the flowers higher priced.
If the price is lower, follow their request. Lower the price to the first amount agreed upon? Add more flowers into high profile designs? Upgrade bouquets or altar arrangements? This gives you the flexibility to procure their preferred flowers, or make substitutions as needed.
This also allows them to say “Price is not an issue - this is what I want.” When the flowers arrive, it all comes down to creativity and how you fulfill their requests.
Should you add a clause to your contract allowing for variability? Perhaps. Look at the elements that could change - fuel charge, flowers, hard goods, labors, rising costs and consider what steps to take.
Meet Challenge with Change
What are some ways you can keep prices down while ‘pricing for profits?’
• Plan what you need in advance.
• Buy in bulk for lower prices.
• If you have space, buy now and store.
• Sell from the cooler, sell what you have.
• Be less specific, more generic.
• Promote seasonal products.
• Menu your designs for cost effectiveness.
Facing this year’s challenges, we must focus on new opportunities to do things differently. It’s a good time to re-evaluate both your floral product mix and how you price it.