Tips for pricing your flower arrangements so that they are affordable and appealing to your marketplace while generating a reasonable profit for your business.
By Patience Pickner, AIFD, CFD, PFCI, SDCF
When I present programs or create videos, I am often asked the same question: “What would you charge for that?” I usually answer $1 billion. While that usually gets a chuckle, the real answer is a little harder to come by. It is not one size fits all; it depends on your expenses— your cost of materials, your labor costs, your facility expenses and so much more.
Let’s start with the three main expense categories: COGS (cost of goods sold), labor (payroll) and facility costs.
COGS According to Paul Goodman, M.B.A., CPA, PFCI, your total COGS should be no more than 30 percent to 35 percent of the retail price of the arrangement, and that includes all the fresh materials (flowers and foliage) and all the hard goods (container, ribbon, floral foam, flower food, tape, ribbon, packaging materials, etc.) used in the creation of the arrangement. If you break that down further, the COGS for fresh flowers and foliage should be no more than 25 percent of the retail price of the arrangement. Keep a close eye on this; if you are struggling to keep your bank account at a good level, COGS is probably the culprit.
LABOR Goodman suggests that your total payroll expenses, which comprise all employee wages and salaries—including that of the owner(s), employer FICA (Social Security and Medicare) matches, costs of employee benefits, etc., should be no more than 30 percent to 35 percent of your retail sales. The cost of labor varies greatly throughout the U.S.—and even among flower shops in the same city because the cost of living—and, therefore, wages and salaries—in rural areas are typically lower than they are in large metro areas where the cost of living is typically higher. In addition, the cost of doing business varies even from neighborhood to neighborhood in metro areas.
Another thing to consider is are you a one-person show, or do you have a large staff that you need to pay? Only you can decide what your labor charges should be after looking at your payroll expenses in relation to your weekly, monthly or annual sales.
Some florists charge 10 percent of the retail price of all the materials used in the arrangement for labor; others charge as much as 40 percent—or even more. Some florists may charge a bit more for high-stress and labor-intensive events such as large weddings and events, and they may charge a bit less for high-volume occasions like floral holidays.
I am always surprised when I hear about florists who don’t charge for their labor. Let’s fix that today! Baby steps—start by adding a 10 percent labor charge, and then when you feel comfortable with that, go up to 15 percent and so on.
FACILITY COSTS The last of the big expenses for businesses comprise one’s rent or mortgage, utilities, property taxes, insurance, building maintenance, depreciation, security and so on. This should be no more than 10 percent of your annual sales, according to Goodman.
Are you like me—in business forever and your building is paid off? Or do you have a high monthly rent or mortgage payment, utilities, insurance, maintenance and property taxes ? This is a crucial factor in how much you need to mark-up perishables and hard goods and how much you need to charge for labor.
Ok, so how does all of this information help you determine how much you need to charge for your beautiful and artistically designed arrangement of flowers? First, you need to assess how you are doing in each of the three expense categories mentioned above in relation to your current sales volume. What can you do to increase your sales volume, buy smarter and decrease expenses where possible? Once you analyze all these things—and more, you can make informed decisions on how much you need to charge.
MARKUPS AND PRICING STRATEGIES
Standard industry markups on fresh flowers range anywhere from 3x to 5x, with the “norm” being 3.5x. So, a $1 rose could sell anywhere from $3 to $5. NOTE: Be sure to include shipping costs into your flower costs; we all know that has gone up significantly. Let’s say you decide to go with a markup of 3.5x on fresh flowers and foliage. If your cash flow is good, that is probably a great place for you to be. If cash flow is a little scary some months, a 4x markup—or more—could be what you need to charge.
The standard industry markup on hard goods (nonperishables, including containers, ribbon, cards, picks, floral foam, flower food, etc.) is 2.5x; however, some shops charge 2x while others charge up to 4x.
What you need to charge for an arrangement is going to be different from what I need to charge for the same arrangement—and different from what other florists in your area need to charge, as well. That’s because all of our expenses are different. Another more nebulous factor is your clientele: How much is your market willing and capable of paying?
Here is a pricing example using standard industry markups: Let’s say that an arrangement contains fresh flowers and foliage that cost you $10 at wholesale; apply a 3.5x markup, and you’re at $35 retail. Add a vase that cost you $2.50; at the industry average markup of 2.5x, you will charge $6.25 for that vase. You are now at $41.25. Now add 20 percent of the retail price of all the materials used in the arrangement for labor, which would be $8.25 in this example, and your retail price for that arrangement would be $49.50. NOTE: When calculating prices, don’t forget to mark up and charge for floral foam, flower food, tape, ribbon, enclosure card and envelope, card holder, packaging materials and all other supply items that go into the finished product.
At my shop, we mark up fresh materials 5x. That means that in the previous example, we would charge $50 for the fresh flowers and foliages. We charge additionally for ribbon and upgraded containers, but basic containers are included with fresh materials that are marked up 5x. We also add $1.99 to cover the small miscellaneous items mentioned in the previous paragraph, so we would charge $51.99 for that same arrangement in my store. This pricing method may not work for everyone, but it is simple and works great for us.
Discovering the markups that work for your shop is so important to your profitability. Remember, every shop is different, and only you can determine what is necessary for your shop to be profitable. And you do that by monitoring the big three expense categories and your cash flow. Best wishes for a busy and profitable Valentine’s Day and entire 2023.