Floral financial expert Paul Goodman, MBA, PFCI, offers advice on how to protect your profit margin amid rising costs and demands for higher wages.
Inflation — which, in 2022, reached the highest level in 40 years — creates extra challenges for business owners to maintain a healthy profit margin. Increased supply costs have prompted florists to increase prices, but at the risk of losing customers. Simultaneously, many employees demanded higher wages to accommodate the higher cost of living. In the March/April issue of Floral Management, floral financial expert Paul Goodman, MBA, PFCI, offers tips on handling these issues.
“By now, every small business owner has experienced inflation woes, including florists,” says Goodman, the founder of Floral Finance Business Services in Tulsa, Oklahoma, editor of Floral Finance, and author of “The Profit-Minded Florist.” “To manage your profit margin, focus on two things: pricing appropriately and controlling payroll.”
First, he says, florists must adjust their prices to stay in business. Goodman recommends using pricing formulas so price points change automatically as costs go up. He also stresses that it is important to talk with staff when changing prices. “Your employees need to be comfortable with the new price points.”
To control payroll when wages are rising, remember your target: total payroll costs (including taxes and benefits) should be 30 percent of total sales, Goodman says. “Ideally, your sales will increase enough to cover price adjustments to cover the change in payroll,” Goodman says. But if that’s not the case, you will need to lower hours and increase employee productivity.
Here are a few ways to do it:
- Staff according to the number of orders you typically receive so designers aren’t producing too few arrangements per scheduled hour. Holidays and high-volume events, such as proms or weddings, would naturally call for more workers and/or hours than a typical weekday.
- Ask employees if anyone would like fewer hours. “You might be surprised how many will take advantage of such an offer,” Goodman says.
- You may need to let someone go. “Often there is an employee with low performance or who is difficult to work with,” he says. “Now is the perfect time to reduce your staff and brighten the workplace for everyone else.”
For more tips on pricing and controlling payroll, check out “Mind Your Margin” in the March/April issue of Floral Management.
Katie Vincent is the senior contributing editor for the Society of American Florists.
