“The profi t margin in fl owers now is so tight that you really can’t aff ord to give things away for free”
moving the business forward is about embracing new technology such as having a website or getting into social media, and that in itself seems to be enough for them to cope with.” But as Nikki says, although
fl owers may be your passion, it is important to remember that business comes fi rst: “I think it took the last few years of recession for people to realise that profi t margins have to be the sole focus, not just for the business to survive, but to grow.” According to our reader survey,
11% of respondents do not charge for labour in an order, 15% do not charge for packaging, and 19% do not charge for foliage. West Malling works to a
meticulous and well organised schedule to ensure staff can keep track of the business costings: “Everything in the shop is put on a spread sheet. I factor in everything from a block of OASIS® to the use of tape and pins that go around a bouquet,” says Nikki. She adds: “I think a lot of
people are frightened of charging for the extras because they think
What you said “I believe customers appreciate not having to pay for gift wrapping in the shop, it should be incorporated into the fl ower cost.”
What you said “How can we charge realistic prices when our customers want to pay less and less whilst the price of EVERYTHING is going up?”
92 F&wb Summer 2013
that nobody is going to buy the fi nished product. A few years ago, there was enough profi t in the fl ower itself to cover those sundries, but there isn’t now. The profi t margin in fl owers now is so tight that you really can’t aff ord to give things away for free.” To make it clear to the
employees what they should be charging, Nikki stores workbooks on all counters and updates a price list every week, which is also on display to customers.
Balancing the budget
According to our survey, the most popular pricing structure was to double the initial cost price, then adding the 20% VAT charge (A £2 rose = £4 + VAT = £4.80.) However, according to Adrian
Godfrey, a partner at accountancy fi rm Mazars LLP, this is no winning formula: “Retailers cannot just focus on price or gross margin. If your way of thinking is ‘if I buy this at £5 and sell it at £10, I am making a £5 profi t margin,’ then unfortunately you are mistaken. “You have got to get to grips with the fi xed cost of the shop
Adrian Godfrey, partner at accountancy fi rm Mazars LLP
and of the operation. Rent and business rates are huge costs for any retailer, as are utilities, so you have really got to understand what these costs are.” Adrian also highlights the
general offi ce and administration costs, such as the telephone, internet services and book- keeping, which can seem relatively small on their own, but together add up to a signifi cant amount if not factored into a budget. “You need to ask yourself ‘am
I going to be selling enough and making enough gross profi t on the sale to cover those fi xed costs?’” he adds. It is essential to either charge
for these extras as you go or ensure that your initial pricing covers these costs. Let us look at this another way; supposing the cost of your business operating a premises is £600 a day, with all overheads factored in, and you are making a £5 margin
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