Let’s talk about COGS. One of the most important things to master as a ﬂorist is how your business turns a proﬁt. Floral designers (whether owners or employees) must have a clear understanding of how to price by following the industry standard markups on ﬂowers and supplies, but proﬁtability is directly tied to how much your business spends (i.e. your COGS, or cost of goods sold).
I’m a big believer in charging what you’re worth; however, when it comes to turning a proﬁt, it doesn’t matter what you charge if you overbuy.
I’ve never been particularly good with numbers, but I’ve always been able to turn a proﬁt in my ﬂoral design business by following the industry standard markups and, most important, by following recipes to help avoid overbuying. I was taught how to price in ﬂower shops, and by following the “ﬂower shop model,” my goal is to maintain a 70 percent proﬁt on the cost of ﬂowers and supplies on every order I make – whether it’s a wedding or a weekly order.
Now, there’s more to COGS than simply the cost of ﬂowers and supplies, of course. COGS includes all of your expenses including labor, overhead, product spoilage, taxes, professional fees, utilities, rent, advertising, etc. All the rest of your COGS will come out of that 70 percent proﬁt.
By keeping track of COGS, you’re able to calculate the real cost of what you’ve sold. It’s essential to keep an eye on spending at all times because you cannot improve what you do not measure.
Don’t be afraid of the real numbers. In business, the numbers don’t lie; they should help guide you. I know a lot of ﬂorists who achieve a 70 percent proﬁt by following these standards, and whether you work from home or a shop, this is a realistic aim. In other words, you shouldn’t charge less if you work from home; price like a ﬂower shop.
If you buy a rose for $1 wholesale and mark it up 3x, then you’ll sell it for $3. But if that rose costs you $1.25 the following week, then the retail price increases to $3.75. If you’re worried about this price ﬂuctuation and how it might impact your customers, you might choose to set a standing price of $3.50 or go for a markup closer to 4x on the on the $1 roses, so they’re set at a consistent $4 per stem.
You set the rules in your business, and it’s critical to understand how money comes into your business as well as how and where money goes out.
If you or your employees are less than 100 percent conﬁdent in what you charge your customers, you can end up feeling insecure every time you give a quote, and you’ll probably ﬁnd yourself wondering “Does this arrangement look big enough?” because you’re not sure if you’re worthy of charging this much. This is when ﬂorists tend to overﬁll their work – and overﬁlling is where you’ll lose money every time.
Remember: It doesn’t matter what you charge if you overbuy. Turning a proﬁt is directly tied to how much you spend, so keep turning a proﬁt so you can keep doing beautiful work.
By Alison Ellis