5 tactics to achieve sustainable profit margins in floral design
Are you producing sustainable profit margins?
Is it time to analyze your business? This may be the last thing you want to focus on right now, but it’s essential to the longevity of your success. Not only that, sustainable profit margins are essential to your exit strategy as well.
Let me explain.
The main reason I found a buyer for my floral design business was because it was profitable. When I bought my business back in 2006 my goal was to run it for a decade. I felt that if I could steadily increase revenues and profit margins annually, I would be able to sell it when the time came for me to transition to something new.
Then, in 2018 I was ready to sell. I found a potential buyer and she reviewed my financials easily. She did her analysis, agreed to buy the business, and the transaction went smoothly. Thanks to my dedication to running a profit-driven business, I sold when I was ready.
When the time comes for you to exit floral design your business will need to be in its best shape ever. Instead of closing shop, your business can be poised and ready for a buyer or successor to take the reins. That's all thanks to sustainable profit margin.
For your business to be saleable someday, ideally when you are ready to shift out of floral design, you need to be prepared now. This line of thinking also helps keep you motivated to do this type of important work regularly. A business plan including an exit strategy can help you focus on the most valuable aspects of your business today.
So, let’s get into a few of the tactics I used in my business to achieve my annual financial goals and an exit strategy that resulted in a successful sale.
I can’t wait to share them with you.
Here are 5 tactics that you can use to ensure your business is achieving sustainable profit margins.
1. Narrow your market focus
It’s more important who you say no to than who you say yes to. Healthy profits depend on your ability to say no to opportunities that do not fit your financial goals.
Don’t be shy about narrowing your focus to concentrate on your ideal clients.
Is there a weak spot in your client booking process that tends to drive down your prices? It’s time to start saying no to clients that are not a good fit. It’s empowering!
You can say no to booking certain events or you can say no to lowering your pricing when clients push back. Either way, you get to increase your profit margins by consistently sticking to your pricing strategy.
Custom floral design is not a volume business. Working more hours for less profit margin can be a viable option for some large business models, but I haven’t found a single small business example where that strategy has been a success.
Start saying no to non-ideal clients.
When you do that, you’ll find that space on your schedule for clients that value your work. Those who will happily pay for your skill and expertise.
When you start doubting this tactic, remember this. When you try to please everyone, you don’t please the people who matter.
It's empowering to say no. It opens the door for you to say yes to more ideal clients and drive sustainable profit margins.
2. Know your production times
You cannot achieve sustainable profit margins without knowing how much you are spending on labor for each project. I covered this concept in last week’s post so if you missed it I recommend that you spend a few minutes reading that post too.
Labor is a major factor in the profitability of custom floral design. Most weddings, events, and daily orders are based on an industry standard 30% labor fee. This fee covers your labor costs and provides you with sustainable profits. Be sure to include a fee for labor on every order. As I mentioned in my last post, the goal here is not to just break even.
What about the large-scale weddings and installations that will be returning to our industry when the pandemic subsides? How much should you charge for those labor-intensive designs?
One way to determine fees for labor-intensive work is to keep a log.
Track how long it takes you and/or your employees to create large scale installations like ornate arches, overflowing mantles, and floral laden chandeliers. Then, when it’s time to calculate the labor on a new proposal, you can refer to the previous entries in your log.
Your delivery and setup fees need to include appropriate pricing for large scale installs when the standard 30% fee doesn’t cut it.
If you don’t have the experience to reference, ask your peers or join a floral design Facebook group and ask peers on that platform. There are lots of ways to get insight into floral design labor. The more you know the more accurately you can price your proposals.
3. Do the math to determine sustainable profit margins
Successful businesses price their products and services accurately. You need to take the time to price out every project so that you don’t end up undercutting yourself. If you dislike this piece of your job, I suggest outsourcing it. You can hire someone to do the parts of your job you do not like.
I offer flower recipe services for floral designers.
It takes a huge weight off my small business owner clients who do not enjoy spending time on the ordering and pricing of their projects. If you are interested in more details about my services reach out to me here. I'd love to talk to you about how I can assist you with recipes and flower orders.
Alternatively, you can knock it out quickly.
Ann Handley is a writer and digital marketing pioneer. She asked a great question in her last email newsletter. How can we learn to love the work, even when it feels hard?
She wisely advises you to slow what you love and rush what you hate. Find the parts of pricing proposals and ordering flowers that you like the least and come up with a strategy to blast through them. Put on a timer and go. Don’t stop until the timer goes off. Use lists. Anyone can write a list. Do whatever it takes to spend as little time there as possible, but do it!
Then, find the parts you love and allow yourself to enter a flow state. Make it last. Revel in it. Use it to fuel you for the next portion of work that isn’t as enjoyable.
4. Package the experience
Are your ideal clients looking for an experience?
They don’t just want flowers for their event. They want a luxury experience that includes flowers for their event.
So, you need to be extremely helpful and showcase that you offer the full experience. Tie it all up with a pretty bow. Package it.
Include visual elements in every step of your marketing strategy. Nurture your leads along the buying path by being the most helpful and responsive floral designer in your market. Then, once they are booked continue to excel in the service and luxury experience departments. Create a workflow system that includes multiple touchpoints along the customer journey. Show them how much value you are offering above and beyond showing up with flowers the day of their event.
Then, share your system with potential clients everywhere you possibly can. Use your website, social media, and good old word-of-mouth to promote that your business offers a packaged experience.
Seth Godin once said, "Don't find customers for your products, find products for your customers."
Godin means it's essential to put your customers' needs first. Develop your marketing, sales, and packaged experience based on your customers’ needs.
Let me be clear your customers’ needs are simple.
They are to get the most value for their money and to get the best customer service of their lives. So, focus on how to give your clients those two things every single day.
Godin also said “When you’re the cheapest you’re not promising change. You’re promising the same, but cheaper.”
Lowering your price doesn’t make you more trusted. It does the opposite.
Price is less of an issue with clients who are looking for an experience. That does not mean they will spend a fortune on their flowers. It does mean that they see the value in your pricing and understand clearly that you are not the least expensive option, nor do they want you to be the least expensive option.
Clients expectations are high. Strive to offer them the best combination of premium product and knowledgable service.
So, what’s the best way to ensure you are working towards sustainable profit margins?
5. Allow yourself to make profits
You created a business to make money. Yes, you love flowers and people. I know you do! But, don’t let that be the reason why your business doesn’t turn a profit. You can’t price your products and services based on what people can afford. You need to price your products and services according to your business needs. Forget about what you think your clients can afford to pay. Leave behind the mindset that your services are priced to meet the budget of your clients instead of the value your team brings to their experience. Offer clients your price. Then, leave it up to your clients to decide to pay your price or to deal with a less expensive alternative.
There’s a simple formula for success.
Costs + Labor + Profit = Price
As the owner of your business, you get to decide how much profit you need to make a project worthwhile.
So, use these 5 tactics to determine who you want to sell to and how much you need to charge them to achieve sustainable profit margins.
Narrow your focus
Know your production times
Do the math
Package the experience
Allow yourself to profit
Ensuring profitability is beneficial now and in the future when you’re ready to exit your business. Whether your exit is due to retirement, a lifestyle change, or an unexpected life event, sustainable profit margins are key to making sure your business will continue to thrive even after you’ve chosen a new path.
You’ve got this!
Until next time,
LuAnn