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From the Publisher: October 2006 |
Making a better pie
The cover of the magazine you are holding in your hand
is version two. The original cover had a gourmet food collage on it.
When I picked up the black and white proof of the issue, my immediate
response was, what a nice cover, which magazine is this? The food
images on the cover really threw me off. Where were the flowers, or the
pictures of people who work with flowers? Florists don’t sell food.
The folks in our magazine design department assured me that they had heard a stat claiming that 70 per cent of florists sell food. I said “Poppycock!, show me the numbers.” Of course they couldn’t because that’s not what they do, and Anja was in jolly old England at a conference so we couldn’t verify it with her. I then had a conversation with the director of editorial where we agreed that if you included gift basket sales it might be reasonable to say that 70 per cent of florists sell food.
And why wouldn’t they? I read some stats in the Franklin Consulting & Training, March April newsletter, The Market Leader that cites Amercians spending $3.78 billion on food at Easter, $1.72 billion on candy, $833 million on flowers and $676 million on greeting cards. Who wouldn’t want to get a piece of the food pie?
The traditional florist has had to expand and contract product lines to survive in an increasingly competitive market. In a large centre such as Toronto or Vancouver one could focus on selling cut flowers and find it quite lucrative, while in a smaller centre the florist may also be the interior decorator, landscape architect and funeral director. The challenge is to determine which products and services will help to create a profitable niche for you. Will gourmet foods and the impulse purchases they inspire add some margin to your bottom line, or will you be better off offering a plant rental business? The only way to know for sure is to examine your business and determine where your margins and profits come from.
This is where you develop your recipe for a better and more profitable pie. The first step is to examine where your sales come from. What percentage of your sales comes from perishables – how much from arrangements, cut flowers, handtieds? Then determine what your next biggest area of revenue is. This will vary from shop to shop but may include permanents, plants, giftware, food and services.
Once you know the sales or revenue numbers, you have to determine the profit margins. To do this you subtract your cost of goods sold for each product category. What you are left with is gross profit. You can graph this like the pie chart we’ve included here to help you visualize it better. Now you can see what your pie is made of and you may see that your area of highest sales isn’t necessarily your highest profit. Once you see which pieces of your pie are most and least profitable, you can decide where to focus your energies and dollars.
As you examine your pie to look for new opportunities, remember to consider all areas of your business. If your services are not profitable you may need to make some pricing changes, outsource, or eliminate them. Conversely, you may discover this is your biggest profit centre, and you should focus on expanding your services. If weddings are your least profitable venture, you may want to forgo the work and put more money into cash and carry sales. While the pies of all retail florists will have flowers in them, the rest of the ingredients will vary based on location, competition, ability and talent.
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