Is your florist wire service working for you?

admin — Sun, 16 Sep 2007 06:38:00 +0000

An important part of a professional florist’s skill set is to understand the role wire services play in his or her company’s finances. For florists who offer their customers the ability to send flowers nationally and internationally, wire service membership can be a useful tool to easily transfer orders to distant locations.

At our school, we discuss the role of wire services in shop operations in our basic Floral Designer course.

With all the changes in the role of wire services, it’s important that shop owners and managers take the time to assess the financial relationship between sending outgoing and fulfilling incoming orders. According to a 2005 study conducted by Prince and Prince, ‘order gatherers’ (non-local marketing agencies) have dramatically eroded local flower shop outgoing order sales by approximately 48%. This means local florists are generally filling far more orders than they are sending.

To help shops assess the affects of wire services on their bottom lines, and to calculate the contributions to overhead of outgoing and incoming wire orders, we’re offering an easy-to-use Excel spreadsheet tool free to download.

Wire Service Profit Calculator (download)

You will need to download the form and insert the following data from your Point of Sale system or wire service statement(s):
(The corresponding letters below appear in red on the spreadsheet.)

a) Enter the number of months of data you’ll use on this specific report. Months can be entered individually or can be grouped together. If your company is a member of more than one wire service, I recommend you calculate each service separately.

Incoming Orders

b) Enter the quantity of orders received.

c) Enter total dollars of orders filled.

Variable Costs

d) Enter your cost of goods sold. The sheet defaults to 28%. Use your actual number by expressing it with a decimal point i.e. .35 for 35%. The US average has historically been reported to be 30% for fresh arrangements.

e) Enter the percentage of payroll from your shop’s P&L. Be sure to include payroll taxes and benefits to establish your actual payroll cost. The sheet defaults to 25%. (Express numbers with a decimal point.)

f) Enter commissions and fees given. The sheet defaults to 27%. Enter the appropriate higher number if you have been hit with an ‘unequal sending percentage.’ (Express numbers in dollars.)

g) Enter your wire service per order ”receiving fee”.

h) Enter your cost per delivery in a dollar amount excluding driver salaries. (They are included in item e). Expenses include vehicle cost (per amortization schedule), maintenance and insurance. (Express numbers in dollars.)

Membership Expenses

i) Enter monthly dues. Note: This number will be divided in half with 50% moving over to the Outgoing Order column automatically. (Be sure to add any ‘unequal sending fees’ if applicable.)

j) Enter monthly technology interface fee. This number will be divided in half with 50% moving over to the Outgoing Order column automatically.

k) Enter monthly Wire Service Directory and ASB advertising. Do Not Include co-op or other consumer ads. Enter 0 if you do not use this type of advertising.

Outgoing Orders

l) Enter the quantity of orders sent.

m) Enter the gross amount of dollars transferred to other shops for fulfillment.

n) Enter commission earned. Defaults to 20%

o) Enter rebate level per order.

p) Enter your shop’s outgoing relay service charge per order.

Results:

“Net Profit (Loss) Wire Svc” will tell you the average dollar value of each incoming and outgoing order remaining to cover business overhead (rent, utilities, advertising, insurance, office expenses, tech…).

To see the effect of a simple 1% lowering of COGS or payroll, reduce item d) or e) by 1.

If you have a question about the tool, please post it in the comment section here.

It’s important for florists to evaluate their relationships with national relay organizartions and understand the costs, benefits and net effect on the bottom line. Happy calculating.