Is The Flower Business Profitable – Complex profit-and-loss statements, shareholder meetings and annual reports may cross your mind. But, really, scaling is a matter of growing your company to the point where you need to introduce new resources to accommodate the increase in business.
Naturally, the introduction of resources (staff, software, etc.) requires an increase in operating costs. As florists begin to scale, the biggest risk is finding a balance between the cost of growth and the profitability that comes with the process. If you can’t see more money in your bank account, more spending will make your advances meaningless.
Is The Flower Business Profitable
Say your business hosts 50 events a year and you want to double your revenue over the next year. It’s 100 events a year, which can make a beautiful difference. But now you have to double your flower costs, materials and labor time.
Opening A Flower Shop
If not, you can earn cash—but if your expenses are through the roof and your margins, is it worth it? There is no point in bringing in additional revenue if it is immediately absorbed in personnel and material costs. It’s hard to get off that treadmill, so always watch your margins when planning a growth move.
It’s all in the numbers. Here are some profit-driven strategies to make more money without stretching yourself too thin and wasting your time and resources.
When asked to charge more, many creative professionals get wobbly at the knees. There is a lot of fear that setting a high price point will drive you out of the market. But scaling a business means increasing your profits. Frankly, if you don’t have the ability or value to charge more for your services, you have no business scaling your business. Not yet, at least.
Higher price points give you higher profit margins. That’s the difference between a $5,000 event and a $20,000 event. The latter gives you a much larger margin to work with, and you don’t have to take on as many cases at that rate. You can be selective and attract only your best customers at that price point and give them your undivided attention.
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The fear that setting a high price point will drive you out of the market is high. ✗
If you want to make $100,000 in a year, you only need five $20K customers instead of 20 $5K customers. Now, say you want to increase your revenue to $200,000. Why not book 10 clients per year instead of 40?
The same goes for retail flower companies. Say your initial arrangement is $50 and you sell an average of 100 products in a month. That’s a $5,000
Work. But if you guide your clients to upgrade to a $200 or $300 product, you’ll make $20–30K for the same amount of work. At that level of revenue, you might even consider hiring a few associates to help you out — at $5,000 a month you’ll never spend.
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All of these flowers are circular in shape, but each has a different number and type of petals, providing variety in the arrangement.
On the topic of raising rates, it may not even increase your base price. You can still keep that price point for your customers but increase your profit margins by raising your fixed fees. You can create a higher margin by charging more for deliveries or installations.
Installations are a common area where florists lose money. Installation fees are sometimes based on labor costs and can end up being 10 percent of the total invoice. But this does not always provide enough margin to cover the work of an installation.
You don’t just deliver flowers; You install them! You are not an order taker; Instead, you create art. Charge accordingly.
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I’ve seen florists charge 20-30 percent of the total invoice amount for specific installations, especially large-scale events that involve a fair amount of legwork.
Edges are everything. Most florists know this. But it’s not always at the forefront of your mind—and often, it’s because of a lack of time. It’s the busy season, you have deadlines to meet, and if you don’t order enough, you give the impression that you need to pad your purchase orders. But this shows a lack of trust and respect for your process!
You already know what your flower recipes need. You know exactly what to order for any given arrangement. You have already mapped out the demands of your events or your retail needs. But you end up nervously buying and adding a bunch of stuff that ends up being unnecessary. Don’t fall victim to the “just in case” mentality—that’s how your expenses pile up and blow your profit margins quarter after quarter.
Another common pitfall is “gifting” your clients more resources than what’s listed in their contract. It’s not just a matter of a bottle of wine before their event day. You contract 12 daisies per arrangement. But you do a makeover at the office and realize 12 looks are lacking. So, you order 15 daisies to keep the customer happy. But those extra flowers come out of your pocket!
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There are a few ways to avoid this situation. First, cite accurately. Don’t send a contract if you know you may need more than 12 daisies. Or, if it’s realized later in the process, consult with your client to see if they’d like to add extra daisies and pay the difference. Let it be their decision to overspend, not yours!
Paired with a variety of options, bud vases are a simple and beautiful alternative to large, tasteful centerpieces.
Spending more than necessary. This is especially important in 2021 and 2022, as all the postponed events from 2020 have been pushed into this year and beyond.
There are only a limited number of days and hours in a year, and you can only do so much.
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Consider your capacity when looking at your calendar. If you’re starting to approach maximum capacity, raise your minimums in case there’s only a limited amount available for 2021!
When demand outstrips supply, you need to be sure that every customer is valuable. If your event minimum is typically $5,000, double that and earn $10,000 over the last several dates on your calendar.
Please clarify that remaining dates are priced at a premium. You can always adjust this over time based on changes in demand or the economy. But, in future years, we see an increase in demand, at least to match.
When you consider how exhausting this season has been and will continue to be in the event industry, you should only accept a dollar for your products and services.
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As you scale, you need to hire employees to support your growth. Of course, the more people you employ, the higher your overhead costs and the more complex your business structure.
If you have a lead designer getting paid $70,000 for their vision and strategy, but if they get their hands dirty making floral arrangements, your labor costs per arrangement can be astronomical! Additionally, they may not be able to dedicate themselves or their time to the high-level responsibilities they are hired for.
This environment is fine for busy or transitional periods, but it can dry you out if continued for long periods of time.
Just as you value your value, reward your employees for their value. Avoid paying employees at rates higher than their production needs and be wary of overtime. This goes back to avoiding overbooking—the money might come in, but if you’re paying everyone time and a half, are you making a profit?
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Often, ballooning labor costs typically break the profit margins of florists. You may have a large wholesale supplier and a large rent or mortgage rate, but if all of your revenue goes into payroll, you’ll have little left over to scale and make the moves you want in the business.
Knowing numbers is not the same as planning around numbers. I encourage florists (and any creative business, really) to get clear on their scaling strategy. Start mapping out the numbers and forecast: “What money will I have coming in over the next six months? Who will pay me next month? What about next month?”
Charting those fees in a spreadsheet will help you visualize your cash flow and better understand how much money you have in the bank at any given time. In turn, you’ll feel more secure about some of the big, expensive scaling decisions you’ll have to make.
Taking
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