As the owner of a floral business, what can you do, not just to survive the COVID-19 pandemic but to come out on the other side, ready to make a strong recovery? In a March 31 Society of American Florists webinar, floral finances expert Paul Goodman, MBA, PFCI, shared strategies on cash flow, labor costs, new aid programs — and strategies for an unprecedented Mother’s Day.
Some of those strategies are not very different from what you should be doing during normal times —but with added impact. Others, special to the current situation, might run counter to your expectations. Targeted relief programs, like the Small Business Administration’s Paycheck Protection Program, can give a leg up to business owners who take advantage of it.
Focus on Cash Flow
In the present moment, your first goal is to preserve cash flow, Goodman advised — echoing an earlier SAF webinar on the economic impact of the pandemic, from economist Charlie Hall, Ph.D. Now is not the time to spend money on long-term maintenance, or on anything except what is absolutely necessary to keep your business going. Do, however, pay your suppliers within their terms — with the help of a credit card, if that’s what it takes.
Besides deferring unnecessary expenses, two factors are key to a retail florist’s financial health: cost of goods sold (COGS) and payroll. To control COGS at a time when business is slow, reduce standing orders to the level of the orders that you are receiving. For some florists (those that are still able to operate at all), that might be 50 percent of normal; for others, 75 percent.
Normally, standing orders should not be more than 75 to 80 percent of your total sales, with the remainder of required inventory filled in from your local wholesaler. And, supporting your local wholesaler should be a priority, said Goodman. That is a long-term business relationship you will need in times to come.
But if your wholesaler has shut down, or has limited availability, you should still be able to find fresh product online, deliverable by carriers like FedEx and UPS. Growers and importers have plenty of flowers, greens, and plants to sell, Goodman emphasized, despite temporary disruptions to the supply chain caused by the sudden drop in demand.
The other aspect of controlling COGS is, as always, in the design room. “Designers have to count every stem, so you know that you are charging for everything in the arrangement,” said Goodman.
Hard Decisions on Labor
If you as the owner are on the shop’s payroll, a first step to controlling payroll is to take yourself off it. That way you also avoid that extra cash expenditure for your own payroll taxes. Give yourself draws from the business only for what you need, Goodman advised.
Your target for payroll expense, without the owner, should be 20 percent of sales (maybe a little more for large shops with over $1 million in sales). To meet that target, keep productivity high. For most shops, designers should be putting out $150 an hour worth of design products, according to Goodman.
Unfortunately, you may have to let some employees go. Normally, that could mean your unemployment insurance premiums go up, but in the current climate, Goodman thinks that is not likely. He said florists should check regulations on furloughs and layoffs, state by state.
A helpful twist in the payroll picture comes as part of the relief package just passed by Congress. The Paycheck Protection Program offers low-interest, easy-to-obtain loans that will be forgiven if all employees are kept on the payroll for eight weeks, and if the money is used for payroll, rent, mortgage interest, or utilities. If those conditions are not met, the loan must be repaid after two years, at an interest rate of .5 percent.
“I would encourage every single florist to look into the details of this program, because it can help you significantly,” said Goodman. The lending officer at your bank will likely go on the assumption that you need the help, so you won’t have to jump through hoops, and approval could be given quickly. That said, “before you sign, look at the details,” Goodman advised. Find them here, along with other assistance that may be available to florists and others from the SBA.
Don’t Neglect Marketing
When times are tough, it’s tempting to cut back on marketing expenditures. Don’t, said Goodman. Of course, you should not simply throw money at the marketplace. But now is when extra attention to email blasts and social media is warranted.
Special offers, like an inexpensive free add-on, may be effective, but don’t go so far as to offer free delivery or a discount on flowers: that lowers revenue when you need it and runs the risk of shaping consumer expectations for the future.
“Move your e-blasts up to two to three times your usual rate,” Goodman counseled. Your message should have nothing to do with the virus directly: rather, tout the stress-relieving, people-connecting benefits of flowers, safely delivered: “We can convey your feelings when you can’t be there in person.” How about a banner on your website (this recommended by TeamFloral leader Dan McManus) that says, “We offer touchless delivery every day”?
That’s the same message, by the way, that florists can and should send to state and municipal authorities in places where they are still fighting for an exemption that will allow them to make deliveries. (Check the SAF website for examples of letters that have helped florists and other floral businesses win that exemption.)
Planning for Mother’s Day
How long will it take before economic recovery begins? Goodman sees a gradual return of business in a matter of weeks, rather than many months, as quite possible.
“Mother’s Day could surprise us,” he noted. He suggests calling customers in mid-April who placed Mother’s Day orders last year, to get a feeling for how many are considering an order this year. If the Paycheck Protection Program allows you to keep more employees on hand than you really need (only because the federal government is paying for them), use those people to research your market proactively, while you still have time to bump up your flower order as needed.
“Undoubtedly, it won’t be a normal Mother’s Day,” Goodman opined. But, at a time when people have been unable to travel or even visit, and when they are valuing family connections more than ever, the holiday could be bigger than expected. And that would be the best possible news for florists and their suppliers.
Bruce Wright is a contributing writer for the Society of American Florists.
