Key Operating Targets

Paul Goodman, MBA, CPA, PFCI, is the founder of Floral Finance Business Services based in Tulsa, Oklahoma, editor of Floral Finance and author of The Profit Minded Florist.  Floral Finance Business Services gets calls almost every day from individuals seeking statistical information on retail florists. The following information answers most of those questions. Members can reach Paul at plgoodman@aol.com.

1. Cost of Goods Sold for Arrangements – 26% – 33%
2. Total Cost of Goods Sold – 32% – 38%
3. Payroll (including payroll taxes and benefits)

30% with the owner/manager on the payroll

20% with the owner/manager not on the payroll

The owner/manager should be able to make from 8% – 10% of sales (including taxes and benefits) for a shop doing under $500,000 in annual sales.

For shops doing over $500,000 in annual sales, because of the need to hire additional managers, the owner/manager will make less than that as a percentage but more in actual dollars.

Designer pay (including taxes and benefits) should be from 7% to 12% of design sales. The lower figure during holidays with production designing and the higher figure during very slow periods.

4. Facilities Expenses (Rent, Utilities, Repairs & Maintenance, facility insurance) – <10%
5. All other expenses put together will run from 16% to 22%.

Advertising – the industry average is 3% of sales.

6. Net Profit before tax – the industry average is 5%. Your target should be 10%. There are many shops that make 15%. These figures assume the owner/manager is on the payroll. If not, add 8% – 10% to these numbers.

Sales – What comprises sales? All sales plus wire-ins at 73% and wire-outs at 20%.

The correct way to account for wire sales is to enter wire-in sales just like local orders. The only difference between a wire-in and a local orders is how it is paid for and the commissions involved. They should be entered at full value (100%) into the appropriate sales category. They are a charge sale and should be entered as a wire receivable. We recommend that sales be divided into Product Sales and Non-Product Sales. Wire-outs should be entered in Non-Product Sales at 20%. The remaining 80% goes into a wires payable account. Finally, in Non-Product Sales there should be a “contra-account” called “Wire-in Commissions” into which you put the 27% of incoming wire orders you are not going to receive due to commissions to the sender and the wire service. This will show up as a negative amount in sales. (If you need a more detailed explanation of wire order accounting, get a copy of “The Profit Minded Florist” from Teleflora or an article on wire order accounting.