“Florist Pricing 101: Markups, Labour & Profit”

What I want to talk about today is not necessarily just mark up your product by this amount. And that is it. I wanted to go into a bit more depth about how you can find the best pricing structure that works for your business. (upbeat music) Eat a flowery folk. I'm excited about today's episode. This is our 10th episode. Yeah. I did a little bit of reading up on podcasts. Obviously in my research before I started doing it. And 90% of podcasts don't go past the third episode. I think it was. And then from that, another 90% of that drop off at about episode 20. So I hit the first mark. I didn't drop off after three episodes. I am still here at number 10 and 10 more to go until we hit the next 20. So I've really enjoyed making these anyway. There are lots of fun. And I've really loved the feedback that I get from you guys. It's obviously resonating with you. Yeah, so thank you so much for your support. Keep it coming in. I'd love to hear from you. Your questions, your feedback, good or bad. All of those things, I think it's great. So thank you so much for supporting me up to episode 10. Actually, I need to say on that too. Probably a little bit over 10 'cause we've got a few bonus episodes in there, but they're just like quick ones. This is sort of like 10 big ones. All right, so what are we gonna talk about today? I've been pondering whether we go into this subject or not, but from what I see from different forums, Facebook groups, all of those things, also questions that I get from Flores who reach out to me directly. It comes up all the time. So I think it is something I need to touch on, just sort of give you an idea of how I think you should go through this. But yeah, as I said, it's a big thing. You go lots of different places, everyone's talking about it. And I, yeah. And now I am too. And yes, what is that pricing? So I see people asking this all the time, what do I charge for this? How much is this worth? What should I mark my product up by? All of those sorts of questions. So what I want to talk about today is not necessarily just mark up your product by this amount, and that is it. So I know when I started my Flores shop many, many years ago, I struggled with pricing and I still remember going to workshops and demonstrations. And these were from amazing Flores. They have successful businesses. And I would, they'd do these wonderful pieces. And I remember asking like, oh, how much would that cost? And they would all say, well, it depends on your pricing structure. And I know I used to walk out there so pissed off because I was like, why would anyone just tell me? Because I need to be a success as well. And obviously over the years, I've realized that the answer is actually 100% correct because there is no one pricing structure that works in every business. And now I am one of those pains in the butt that if someone asks me, I'm like, well, it really does depend on your business. And yeah, so I've become one of those. But rather than just saying that to you, I wanted to run through five sort of key points that you should consider when you're planning your pricing strategy. And also give you an example of how you can sit down and work it out. So it's probably a bit full on. I'm sorry, I'm not the greatest with trying to explain maths. But I hope we get through it all right. And yeah, if you've got any questions at the end always just reach out. So the first thing I want to start with is what is a pricing structure? A pricing structure is deciding how much you're going to charge for your flowers and services to cover your costs, make a prospect and attract the right customers. So you need to know what it costs you to make something. So all your flower costs, staff, rent, all of those things. And you need to add enough extra. So that you actually make money. Not just covering your costs. And you also need to think about what your customers are willing to pay for what you're doing and what others are charging because you need to obviously remain competitive. So there are so many different pricing structures out there or pricing standards that you might have heard. At school, the basic industry standard that we teach is a three times markup on your flower costs. Other places say four times, five times, six times the flower costs. There's so many different ones out here. So then there's also pricing structures that have a markup on flowers and then they'll have a separate labor or design fee added on today. There's just so many different ones. And there's honestly, they're probably all, well, they are all correct because there's so many different businesses out there. So that's why I just giving you one pricing structure and saying, off you go, you're going to be a hugely successful florist and everything is wonderful. Isn't really the best way to go. And I wanted to talk to you today about how you can find the right pricing structure that fits your situation and fits your business. So how do you work out your pricing structure? We need to start somewhere, obviously. And it might depend on whether you're actually in a business already or whether you're starting a business. There's all different places that you can be at. But these five steps that I'm going to talk about if you're just starting out and you haven't begun trading as such, you might need to do a little bit of guesstimating for different figures. But it's a good list of items to go through to figure out the right pricing structure for you. Number one is to match your pricing to your ideal customer and to your business model. So think about what you want to sell or what you are selling. Are you targeting budget conscious everyday sort of flower lovers or are you going for high-end wedding clientele? Your prices obviously need to make sense to the people that are going to buy them. This also ties in with what is your business model? So is it about selling bulk flowers with minimal labor requirements? Or are you planning on spending days making bespoke time-consuming, luxe, bridal bouquets? Because depending on who your client is and where you're focusing your business, this is going to greatly affect your pricing. So for example, if you're planning on selling everyday flowers, thinking maybe like your daily bunch kind of thing, you have a set product which you will have pre-ordered. You probably have them pre-done. You're going to have minimal time spent on each product. And you'll buy your flowers in bulk from wholesalers, basically just wrap and deliver. So this kind of business model relies on bulk orders to generate your income. So you want to sell lots and lots, probably add a lot of profit margin to generate your income. So they're not overly time-consuming or overly designed pieces. Therefore, there's minimal labor charge on them. You're not offering endless options to your clients. It's basically, this is what we got, and that is it. So you're not holding a lot in stock. And your customer just wants a simple gift to brighten someone's day. They're not necessarily after a huge designer bokeh at a high price point. Think the IKEA cheap, cheerful. And once you get the product home, you're probably going to have to put it together to actually, before you can enjoy it. So with a business like this, maybe having a six-time markup is probably not going to align with your customer expectation. Whereas if you're planning on setting up a sort of a wedding and event studio, specialising in high-end events, your client will have a much different expectation of your business. They want your time. They want your experience, your knowledge. They want to see many, many different products. They want a lux-looking product. They will need more of your time. And you're going to need a lot more at your disposal to make that sort of business model work. And as you guessed it, that means you're going to need a higher markup on your product to cover all the costs on that particular business model. Think the Chanel. We all love Chanel. personnel. So it's going to be more costly to run. So and there's obviously everything in between. I think most of us are probably in the middle there somewhere. That's why there are so many different pricing structures out there. So there you go. Think about who your client is and what type of business model you have, where you sort of sit. Secondly is to research your market. Look at other flores. What are they charging? Now I'm not saying copy them or do exactly what they're doing, but use this as a guide. Make sure your prices reflect the quality, the service, the experience and the offerings of what you're seeing in other flores or other businesses. When you're looking at others in the industry and seeing what they're charging, make sure you keep it relevant to your ideal customer and your business model. So what I mean here is don't compare yourself to what you see say in, I don't know, woolies. If you're offering an exquisite bespoke product with spot on customer service and basically the whole experience, do compare yourself to woolies. However, if you cannot see a difference in style between what you're doing and what they're doing at the supermarket for the fruit style, okay? That may offend some people. But what I'm trying to say here is that you can't charge more for something if it looks like a trashy $50 dollar. Okay. That you get a woolies. Sorry, I don't want to offend you, but it's true. Okay. So you want to see what others in a similar sort of, as I said, offering a similar sort of product to you are charging. So you've got to keep it competitive. Now it's going to start getting a little bit more involved. You need to know your costs. So this is absolutely everything that goes into making your business. The flowers, the sundries, everything, packaging, salaries, and that includes your salary as well. Delivery costs, rent, insurance, power, subscriptions to all the tech things that we need to make our business run. Absolutely everything. If you don't know the real costs, then you can't set the right prices. Start by pulling up your profit and loss or your P&L from last financial year and this financial year. It's just about done. So this is a fantastic time to do this. A side note, if you do not have a P&L, even if it is the most simplest handwritten ledger or spreadsheet, you need to sort that out. There is just absolutely no point in running a business and expecting there to be any success from this business. If you're not recording information as simple as what you're making and what you're spending. So please, please, please sort that out. And as I mentioned before, if you're just starting out, you might want to just do a little bit of a guesstimate here and write down everything you can possibly think of that you will need to run your business and tweak it as you go along. So looking at your P&L, what's it costing you to run your business? What was your income during this period? And was it more or was it less than what you spent? Now, please do not tell me that you spent more on running your business than what you made. If that is the case, you really, really need to look at your pricing structure immediately. Otherwise, you're just spending your money from somewhere else and putting it into your business. You're seriously better off going on a bloody holiday and shut it up shop. At least that money is spent on something amazing, rather than you working your butt off and still paying money. So please, let's sort that out. So next up, we're going to come back to the P&L in a minute, but there's another thing you need to think about when setting your pricing structure and that is setting your profit. How much do you want on top of everything else at the end of it all? So decide how much you need on top. A healthy profit margin in floristry apparently is 30 to 50%. I'm sort of hearing from a lot of people that this is just not the case. So profit isn't a bonus at the end of it. It's part of why you do what you do and it keeps your business alive. It's what you invest into expanding or renovating or just keeping yourself as a reward for all of the stress, the sleepless nights and all the hours that you've put into your business. Your business really should make you a profit. Otherwise, why do you do what you do? You might as well just go get paid an hourly rate working for someone else, completely stress free. You decide what is a good profit for your circumstances. Do you only do a few days a week and if you made a profit of, say, $20,000, you would be over the moon. Or are you working 50 hours or more a week trying to get this business going off? It's going to be your retirement plan. So you want a profit of $100, $150,000 a year. So it's personal. It's up to you. And it isn't your salary or wage for working in the business. It is extra. So salary or your wage should be accounted in your expenses. This is your reward for taking an elite and running your own business and for why you're doing what you're doing. Okay. So whatever this number is, you need to ensure that the market volume flowers covers that as well as all of your other expenses. So let's have a little bit a look at how to set the right pricing structure for you. In your profit and loss statement, have a look at what you spent on flowers. So the things that you actually mark up to make money. If you take that number and you mark it up by a different amount, whatever, maybe you mark it up by four or five CX, whatever. How does that affect your bottom line? So what I mean here is say, we'll just do a simple example. You have a profit and loss and your overall turnover. So that is the amount of money taken by your business, excluding GST at the end of the financial year is say $100,000. Your expenses all up. So your rent, your insurance, your wages, including your wage for you and maybe another part-time staff member, say $90,000. And that means you have a profit of $10,000. If you just simplify that in your P&L. So you get excited. Now, you're going to get tax bill, let's say $5,000. So now for all your hard work, you've got $5,000 profit. So if you think about changing the mark up a little, how does that change? So if you just look at the flowers and foliage, the stuff that you mark up, what is that number? And if you change it by a markup of something different, how does that change? So again, using the previous example, we turned over $100,000. We spent, say, $35,000 on flowers. And in our current markup, it's a simple three times the cost of goods is what we mark it up. So what would happen if I changed that to say four times? This would increase our turnover to $140,000. And then if we deducted those same expenses of $90,000, this leaves us with a profit of $50,000. Obviously, tax has to come out of that. But you can see what I mean. So just taking those numbers from your profit and loss, have a bit of a play around with what a different pricing structure or multiplier of your cost of goods can do. Okay. So obviously, I mentioned there are sort of straight multiplication markups, two times, three times, four times, ten times. So I don't bloody know whatever. Or you could add a labor component. So if you like that style of model, this sort of works if you probably have a more labor intensive product or business that you might consider needs to add in the labor. So if you do add a labor component into your pricing structure, keep in mind that you don't do that at cost either. It's like your flowers you mark it up. So at the moment in the General Retail Industry Award which applies to most of Australia, not all of it, but most of, I believe the permanence, Lourish rate is $27.17, and then the casual is $33.96, something like that anyway when I checked it. Now that isn't exact, you can't bring around with that. That's a minimum wage, you have to pay that. So you don't just charge that out, you would mark it up. I would recommend by two to three times as well to cover all of those overhead costs that you have in your business. So for example, then if we work out thinking of our example of a costing structure, you might say, mark up your flowers by three, but add a labour charge of $1.50, or maybe $2 a minute. So for a bouquet, which would retail to your customer at $150, you would have a $30 labour charge, and you would be putting in $35 worth of product at cost. Give it a take a little bit, okay? So that's one way you could do it, but just keep in mind, keep it simple for yourself. If you do that same $150 bouquet, and you marked up the product by four, you would pretty much equate to the same wholesale value of flowers and you've got that same sort of labour charge in there as well. So just something to consider. And just on like a bit of a side note, it is completely acceptable to have different pricing structures on different product lines, such as like your everyday daily delivery florals, your wedding florals, your regular retail gifts, like candles and vases and things like that, you might have a different pricing structure. That is completely up to you. But just think about more so the time involved in each particular one. So your general retail floristry may have a lower markup than your wedding floristry. Your gift lines may have a lower markup than your general retail floristry because you basically just buy and sell it. Whatever, you know, you can decide that, but they can have different ones. And our last point on setting your pricing structure is that you need to review it and adjust it regularly. You can't just set it and forget it. You need to look at your costs regularly and see how that markup that you're using is tracking against your costs and also that profit that you want in your business. So keep looking at it. It's never going to be something you set and forget. I would say at least every quarter, you should be looking at this and making sure that your business is still on track. Especially at the moment we know prices are sort of going up all the time, our freight costs are going up, our delivery, drivers are charging more. Like there's so many costs that are going up and up and up at the moment. So you, as a responsible business owner, need to make sure that you do the same with your costs. You may find that you don't need to, that's fine. But if there are costs going up, then you need to adjust for that. Just finishing up, I want to leave you with a quote from the famous investor, Warren Buffett, you've all heard of him. And we've all heard this quote. Price is what you pay and value is what you get. That's something we really need to think about when we're setting up pricing structures. So what it means, price is just a dollar amount on a tag and value is the real worth of that product. It's how useful, how beautiful, how meaningful or satisfying that product or service is to the person buying it. Flores need to understand that customers aren't just buying flowers. They're buying an experience and emotion, a solution to a problem. So keep this in mind when you're setting your pricing structure because there's really no point in having a high marker on a product, if that product or that service doesn't align with the value that your customer can see in it. If you need to significantly increase your marker on your product, going through this exercise and you found that things aren't tracking all that well, I really need to increase my markup a lot. That's obviously going to mean there's gonna be quite a different price point that you're going to be offering and in some instances that may not align with your clientele and with your current business model. So you will need to then work out what that means for your business. Maybe that means coming up with a whole new product menu, sitting down and working out different types of flowers to use, different styles to design, maybe using less flowers or maybe it might even be it's time to look at the business model and who you're targeting as your client. So it's not an easy thing to tackle and it's not something I'm going to go into a lot today. But if you do find when you go through and you look at the profitability of your business and adjust your pricing structure to cover all those costs and you're worried that there's going to be a little bit of a disconnect with your existing clients and the prices you're now having to charge, just change up your menu, do different things, try a few different things because my point is you can't just stay the same, digging a deeper hole, not making any money. So yeah, I hope that makes sense. All right, in summary, pricing is huge. It's the most important thing in our business. I don't care how wonderful a designer you are if you can't price your product correctly to cover your costs and make a profit, then your business isn't going to succeed and you're not going to keep doing it in the long term. It's going to become something that you load, it's going to be sort of a burden rather than an amazing experience in running your own business 'cause it is. We all love that. And if you're not getting that reward in some sort of monetary way, you're going to sort of just give it up, you're gonna walk away from it and say, this is like shit, I don't like it. But it can be something that could be fixed if you look at your pricing structure and just getting that right to cover those costs and give you some profit at the end of it. So I hope this just starts you thinking about it. Get that PNL out, have a look at it, see how you're tracking, play with some different multipliers, change those numbers around a little bit and see what happens. There's lots of information out there. Maybe it could be time that you need to talk to your accountant. They may have some sort of ideas for you. There's also so much information from different business coaches on the socials and YouTube, all of those things, just get as much information as you can and start working on getting your pricing structure right for your business so that your business will be a success in the long run, okay? Yeah, that's about it, really. I, it's a pretty heavy topic for today. But as I said, we are getting close to end of financial year so it's a really good time to sit down and do this. I know typically this is always a good time for a big kick in the pants for me. You're looking at your figures sorting out at your tax. So it's a good time to look at all your pricing as well and just make sure your business is where it's going to be. Some more exciting news. We are hoping to, we may launch our eight week program which is all about resetting and refocusing your business. It's designed for florists that already have a business and they're finding it difficult to stay on top of everything and it's just simple program one particular task that we're going to focus on and just get you to reset and have a good look at it and move forward to the next one. So hopefully I'm just finalizing all of that at the moment. Hopefully we'll have that up and ready in the next couple of months so that you can start your financial, well your new financial year with some more tools to get you set and get you really succeeding and doing well in your flower business. So again, thank you so much for listening. Please, please give me your feedback. Let me know if you followed along on this. As I said, I'm really hard to find it hard sometimes explaining mathematical stuff. That's just not how my brain works. Sometimes it's easier with a piece of paper. But please let me know how you go. Did you take the moment to look at your pricing and have you made changes? Maybe you're going really well. I'd love to hear that too. So yeah, let us know. how you're going. I would also love for you to hit the follow button. I'm learning not only is it great to get past three episodes but it's really really good to have people follow you because the more people that follow the more chance series that the platforms. So Apple or Spotify or Amazon will then recommend it to other people that might need some help in this area as well. So I'd really appreciate it if you could do that. And thank you very much. Until next time, maybe we'll come up with a bit of a lighter subject to talk about next time. I don't know, I haven't really thought about that yet. But yeah, until next time. See you.