Relevant and even prescient commentary on news, politics and the economy.

The Real State of the Union. Mr. President, I suggest for you: Flowers.

By: Daniel Becker

Well, it’s that time of year again. The State of the Union. And the state of my business. So far, from what I’m reading regarding the expected content of the address by President Obama, I think I’ll just practice my playing as I usually do on Tuesday nights. Really? What’s the use in listening? We have a person  who heads a company that is noted for pushing the off shoring concept of growing America via their prior celeb CEO, Jack Welch as Obama’s pick to head up the committee that is going to figure out how to boost job creation? And we wonder why this country can’t regain the glory days of accomplishment and prosperity. Actually, I don’t wonder. I know.

Though, I see Welch has had a change of heart? At least as it relates what a business should prioritize.

“On the face of it, shareholder value is the dumbest idea in the world,” he said. “Shareholder value is a result, not a strategy…your main constituencies are your employees, your customers and your products.”

Oh sure, after he got his.

Let’s get to it.

2010 started off looking hopeful for Fontana’s Flowers. We were up 1.5% for the first quarter, then April came. Off 17% even with Easter. By the end of June we were back up again 1.5%. So, I figured we had at least hit the bottom. WRONG! July came, off 21%. August came, off 20%. Every month since June as been off. It produced the following picture.

I guess we are hitting the bottom finally. It’s only been 5 years.

Now, before I start hearing about how flowers are a luxury, what does it say about a nation’s economy such as ours when a simple luxury that has the power to :

When women were given flowers, they always responded with a ‘real’ duchenne smile, and reported more positive moods three days later.

When men or women were given a flower, they responded with a duchenne smile and engaged in more prosocial activities (compared to control conditions of being given a pen or nothing).

Flowers given to elderly people resulted in more positive mood and improved episodic memory!

The researchers also reported other “unusual emotional displays that they were unprepared to measure,” (4, p122), including:

Hugs and kisses.
Invitations to participants’ homes for refreshments.
‘Thank you’ cards and letters – some with photographic evidence of the continuing beauty of the bouquet.

As they sum up – “In many years of studying emotions, we have never received hugs and kisses, thank you notes or photographs, not even for candy, doghnuts, hats, gift certificates, or direct monetary payment; flowers are different.”

…is not affordable to the masses? It says we are an elitist nation in the ugliest meaning of the word elite. I think considering the nation’s psyche, these pictures sum up the proper scientific based response to such ugliness.

Again, what does it say about our nation’s priorities when the masses can no longer afford such a simple luxury which has so many benefits that frankly, we need to experience desperately.

Back to business. There was a reason in part for our second half results. It was the stimulus programs of “shovel ready” projects. Seems many were not really shovel ready. Instead of having proper engineering and surveying performed, they went for quick and simple. This left me with 3 months of traffic issue powerful enough that even the big box stores were hampered. However, my “small business” is left with the following:

What you are viewing is a new, never existed prior, 6 ft wide concrete side walk that is 2.5” above my pavement and within 9 ft of my foundation. This might not be a problem if it were not for the fact that this new sidewalk leaves my foundation only 1/2” above the side walk. Can you say “gutter”. I am told, and I’ve tried, that I have to live with this. I also have to live with the curbing being 5” high, which means instead of having an easy in/out parking lot that was cut short when they originally widened the road, I have one that acts like a one way street. And, to add insult to injury, they stuck a “Tow Zone, Snow Route” sign exactly right where one backs up as they attempt to leave the left end of the parking lot.

Have I given enough to this “recovery” yet?

Back to the Real state of the Union. Here is the all telling picture.

As you can see, account sales are still trending down. Cash sales are leveling off, but the all telling credit card sales is rising. Are people using plastic as they become more digital with their money handling or are they spending on credit? Is it real money, or are they trying to buy a little happiness today for a headache tomorrow?
Personally, and I’m speaking to you President Obama, I still need customers, with money so that I can partake in your job growing desires. Mr. President, considering all the problems you want to solve, and what the science suggests, I would think you would want my business to have all the customers it could handle. To steal a phrase: A vase of flowers on every table. It speaks prosperity, it speaks peace, it speaks harmony, it speaks re-election. When people are able to buy flowers again, Mr. President, you will know that you and congress have set this nation on a real foundation of life, liberty and the pursuit of happiness. Or, you can talk all flowery about job creation to me while I look at your new head of the “President’s Council on Jobs and Competitiveness” CEO who heads the company that lead outsourcing and the shift from making money via manufacturing to making money from money.

For you President Obama. 

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Update: Real world business

by divorced one like Bush

Time for an update on real world business. I posted back in 12/08 about the costs of a flower shop being in a wire service. The costs should matter, as it is what happens when one buys on line from a non-real florist. It is also a lesson as to what a real small business is dealing with. Sales are off 25% for the year on top of 8% for last year.

This morning my sweetie stated that “they” are screwing up health care for us. Her concern was that we would now have to be offering insurance for our employees. I informed her that the cut off was 25 employees. We are safe regarding this issue. Unfortunately, nothing proposed will help with our health care costs (currently $7800for insurance and $4028 out of pocket with an additional $3500 still owed to the hospital and the need for cataract surgery and about $1500 in dental for the daughter).

So, here is what has happened regarding the wire service aspect of our business.
June’s Teleflora statement.
Total value of in and out orders: $974.78

Processing costs (membership, Dove, Quality program, Sending fee): $301.15
Advertising (directory, Co-op): $206.00
Publications: $3.75
Commissions due (orders in 27%, orders out 80%): $455.46
Total paid to Teleflora: $966.36

Balance of order value – costs: $8.42

Total value of orders to be filled: $614.78 That is, I had $8.42 to work with to fill orders that valued $614.78. In a nutshell, this is how it is that bigger business have via financialization, sucked money up hill from the smaller business.

Percent of order value out to orders in 59% June 09. (Year to date: 50%, Last year to date: 60%)
Compared last year to date incoming value down 14%, outgoing value down 42%.

I can’t convince the sweetie to drop at least one of the wire services as she sees it as work and thus a cash flow perspective verses an accrual. Overall regarding our net profit as of the end of the first half of the year, (you know, money in the pocket) on a cash flow basis, we are off 43.9% on an accrual basis we are off 88.1. Far cry from Goldman Sachs No?

And, we are now in the slow period of the flower business cycle.

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Real world business for the economic buffs

by divorced one like Bush

I thought for something a little different during the holiday respite and assuming there will be no major economic calamities, maybe some readers would like a real world small business experience. This post deals with the world of flower wire services and just what it costs you and what you are getting. It is also a lesson in buying local, especially now that the web allows one to do long distance local buying. It is a lesson reflecting the issue of the middle man economy that we created over the last 3 decades and earning money from brand control, market access control. It is a lesson in a lost bit of wisdom regarding labor. It is a lesson in what is happening with pricing regarding value and purchasing power. I leave it all up to you to see these lessons and maybe others. Mostly, I thought it would be fun to see what the thoughts would be if this was your business situation regarding the world of money.

A local flower shop is considered a retail business. This is true but, it is also a manufacturing business. The shop actually takes raw materials and combines them with some finished materiels using skilled labor (as in educated) and then gets it out the door. We have a sales department (the same one doing the manufacturing), shipping and receiving, maintenance, accounting…

Frankly, without the individually owned shops where all the labor is performed to produce the product, Teleflora and FTD could not exist…just like any other business that doesn’t actually take raw material and input value by inputting labor. I can exist without them, but they can not exist without me. Kind of like the banking/finance issue I raise a short time ago. I can live without a bank (as the prior owners proved), but they can not live without me. This is not a healthly economic model.

I have crunched my numbers regarding Teleflora and FTD. The following is a comparison of 2007 with 2008, January through November. I specifically separate out my wire service money as if it is it’s own business. Most shops do not account for the wire services in this manor. In fact, they are told to account for the wire service business in a way that blends all the costs and profits such that it is very difficult to break it out.

I like to check to see just what I have to work with per order received after all expenses related to processing costs and advertising. I include for processing membership dues, fees related to use of the network, quality fees, senders cut, etc. I do not include any advertising or purchase of supplies (containers, mailers).
On the income side I included the total incoming dollars plus my commission on outgoing plus rebates.

Interestingly enough, both FTD and Teleflora after cost for processing and advertising gave very similar working dollar amounts for 2008, with a 5% benefit in 2007 for Teleflora.

FTD: $32.19/order (08) 484 orders in, $33.34/order (07) 527 orders in
Tele: $32.48/order (08) 335 orders in, $35.03/order (07) 399 orders in

These are the dollar amounts retail I had on average to work with. These amounts would be equivalent to a person walking in and purchasing an item for $32 to $35 dollars.

The cost of being with FTD and Teleflora as a percent of the gross income their brands generate is:
FTD 38% (08), 34% (07)
Tele 38% (08), 31% (07)

This is the percentage of every dollar coming my way (excluding the 80% for orders sent) that has to be expensed for every order I receive and for every commission I earn.

The increase of percentage for FTD is via processing cost increases of 3.8% and advertising of 13%.
The increase of percentage for Teleflora is via processing cost increase of 23.9% and a decrease of advertising by 3.3%. I do know that we did not participate in the Thanksgiving program for Teleflora.

The gross dollar amount averages as follows:
FTD $51.92/order (08), $50.52 (07)
Tele $52.39 (08), $50.77 (07)
Thus, the customer is paying more but the middle man wire service is leaving the one who will actually produce the item less money. This model of business is the predominate model of our economy. It is about gaining revenue by controlling access to the market in both directions, not about actually increasing productivity or that fantasy model of building a better mouse trap.

The dollar amount per order to me without advertising cost is:
FTD $37.79/order (08), $37.88/order (07)
Tele $42.18/order (08), $43.44/order (07)

Thus Teleflora spent on advertising 23%/order this year and 19.4% last year. I guess they are trying to promote their brand, but it has left me with 7.3% less per order with 16% fewer orders.

FTD spent 14.8%/order this year and 12%/order last year. FTD is not promoting as much as Teleflora, but I have 3.4% less per order with 8.2% fewer orders. My costs were controlled better by FTD, but then they were already high last year.

So, first off, it is very expensive to be with these two services. I can run my shop on a factor of 0.4. This is the number used to calculate the minimum retail price such that I have all my expenses covered and a 10% profit. Interestingly enough, this is only 2 points more than it costs to be in FTD or Teleflora as of this year. Or you could say it is only 2 points more than it cost FTD and Teleflora to run their operations and all they are is the middle man.

Now, here is where it gets bad. For me to cover my expenses of just having the shop in place and functioning so that FTD and Teleflora can use me, I have the following wholesale values on average to work with:
FTD $12.88/order (08), $13.34/order (07)
Tele $12.99/order (08), $14.01/order (07)

In my shop, had the orders come directly to us, my working wholesale values would be:
FTD $20.77 (08), $20.21 (07)
Tele $20.96 (08), $20.31 (07)
In both cases, the customer having spent more this year would have actually gotten more, not less.

Some would say that running both is losing me money. Not necessarily, especially now that both are running equal as to the cost of doing business with them. Infact, for the 10 yrs I have had the shop, they have been very similar in costs. Not including sales made of their product could be considered a fault in the numbers in that there is the good will benefit of customers coming to my shop do to the brands and being that I’m accounting these as a separate business, that money should be counted. However, if neither existed, I would still be selling something to the customer and probably at a lower wholesale cost to me as to the containers. At the same time, for all their orders received for their specials, I’m still paying the cost of doing business with them. Thus, it would make the numbers larger, but the ratios would not change much because it is still my costs to make their product and get it out the door for them on top of paying their brand costs; currently 38%.
So, what are you thinking?

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