Terms to know

• Labor=human activity that produces a good or service

• Mark-up: an amount added to the cost of an item or service to determine the selling price.

• Overhead: expenses and the general cost s of running a business.

• Operating expenses: all general and administrative costs, such as rent, utilities, insurance, fuel, etc. that are a necessary part of doing business.

Floral Design Pricing Strategies

What would this arrangement cost?

What would this arrangement cost?

What would this arrangement cost?

What would this arrangement cost?

Effective Buying

• Flowers are seasonal, in order to make keep the cost of arrangements at a minimum, know when flowers are at their cheapest.• Takes flexibility

• Know traditional sizes of bunches• Reduces overall cost

Determining the Unit Cost of Goods of an Item

Small design vase:$18.00 per case 36 (vases per case) = $0.50 per vase

Tulips: $7.50 per bunch (tulips per bunch)= $0.75 per tulip

Courtesy of Interstate Publishing

Example of Combined Prices6” Plant Costs 9” Bud Vase CostsFoil Bud vase

#9 ribbon Floral preservative

Card, envelop,cardette

Card, envelop, cardette

Care tag Care tag

Wrapping supplies: Wax tissue Cellophane Ribbon

Wrapping supplies: Wax tissue Cellophane Ribbon

Totals: Totals:Courtesy of Interstate Publishing

How Is the Price of an Arrangement Determined?

• The three most common methods of pricing design work are:

1. Ratio mark-up2. Variable ratio mark-up3. Percentage mark-up

Ratio mark-up is a method of pricing based on a predetermined increase from the wholesale cost of goods

• The selling price is called the retail price• Ratio for hard goods is 2:1; Ratio for

perishable items is 3:1• In other words, multiply foam by 2 and fresh

flowers by 3• Ratios vary from store to store; Will often

be higher for more labor intensive work

Ratio Pricing Using Two MethodsTypical ratio mark-up

Perishables Carnations 10@$.30=$3.00 x3 = $9.00Leatherleaf 10@$.10=$1.00 x3 = $3.00

Hard goods Vase 1@$.90=$0.90 x2 = $1.80Floral preserve 1@$.05=$0.05 = $0.10

Total: $13.90Across the board 3:1 pricing ratio

Perishables Carnations 10@$.30=$3.00 x3 = $9.00Leatherleaf 10@$.10=$1.00 x3 = $3.00

Hard goods Vase 1@$.90= $0.90 x3 = $2.70Floral preserve 1@$.05=$0.05 x3 = $0.15

Total: $14.85

Courtesy of Interstate Publishing

• Draw back to this system is that no net profit is planned and no overhead costs are incorporated into the calculations• Labor may be added based on an hourly wage,

but benefits may be added as well• For example: the labor wage may be $8.00 an hour,

but with benefits added, the cost of labor might actually be $12.00

• Another method is to add a flat 10 to 20% charge to the final price to cover labor and overhead expenses

Hourly Wages Concept ChartAmount to be added to Price of Arrangement

Time Spent Wage Wage with Benefits (Hours) (Assume $8/hr) (Wage rate + 50%)

1/4 $2 $3 1/2 $4 $6

3/4 $6 $91 $8 $12

Vase arrangement Cost $15.00Hours to Complete 1/2-

Wages including benefits $6.00Total Price $21.00

Variable ratio mark-up has different mark-ups depending upon two factors: type of design/type of flower and labor required to make it

• Advantage is that the labor is included in the calculations

• Disadvantage is that net profit is still a guess; May cause confusion with employees

Examples of Variable Mark-upType of Design Mark-up

Basic arrangements, budvases, boxed flowers,decorated plants

3:1

Creative designs, corsages 4:1

Wedding flowers, partyflowers, special designsrequiring time and attention,funerals

5:1

Courtesy of Interstate Publishing

Variable Mark-up

Type of Flowers Labor Required Mark-up

Form flowers(orchids, lilies,tropicals)

Low 2 ½ :1

Average flowers(carnations, roses,gladiolus)

Medium 3 ½ :1

Filler flowers (spraymums, baby’sbreath, statice)

High 4:1

Courtesy of Interstate Publishing

Pricing Strategies ContinuedPercentage mark-up is a pricing method that plans for profit

• Wholesale cost of goods is used multiplied by a set mark-up percentage.

• Advantage= if a customer wants to spend $30.00 you can determine how much product to use

Gross sales = total dollar amount that a florist shop sellsOperating expenses = the costs of running the businessLabor = operating expenses, which involve people and time it takes them to produce the products Cost of goods = the cost of merchandise and suppliesNet profit = the return on a florist’s investment

Determining the Price of an Arrangement Using

Percentage Mark-up Wholesale cost of goods = $6.00Cost of Goods Percentage = 30%$6.00 .30 = $18.00Retail cost = $18.00

If the consumer wants to spend $30.00, then calculate the wholesale cost of goods to use:

$30.00 x 30% = $10.00Wholesale cost of goods = $10.00

Courtesy of Interstate Publishing