Starting a new company is exciting but also scary. There are too many things to be considered and it seems that no matter what we do, we will forget something. Actually, this is true. There is no chance to predict everything, however, if you have a good plan and the economics of your new business seems to be working well then most probably you will get surprised by an unpredicted problem but you will manage to solve it. If you have chosen a flower shop to be your small business, then this article will definitely help you to prepare.
Starting a florist shop requires less capital than most of other small business opportunities. That is why so many people do choose this option when setting up a small business. The average cost to run a single location flower shop is somewhere between $10 000 and $50 000. However, I will present you how to start a fantastic boutique flower shop with no more than $20 000.
As mentioned the most important thing is to prepare well for what is about to come. That is why next section will look over our florist business plan.
Have a plan how to run florist business
How much it will cost you to open a flower shop
A rough estimation is between $10 000 and $50 000. What are difference between the two limits? Well, it all depends whether you are about to rent a space and invest heavy in capital or not. So here are the basics things that you should decide whether to have and how much:
- Rent a space or do business from home
- Have a delivery van or outsource from a delivery company
- Florist equipment – you will for sure need flowers, some decorations but the more expensive are the refrigeration cases, you will need some of them, the question is how much.
- Employees – how many do you actually need to start a florist business? Well, if you are creative type person then you may be able to do the design of the arrangement yourself, that will enable you to save a lot of money from hiring a designer. In an ideal situation you would have been working in flower shop before and know all about creating great designs that sell. If not then you will need to hire someone to do this. Remember he will be better paid than average employees so he should be kept busy all the time.
- Advertising – with not much you can definitely do a lot if your product is good.
How much revenue to break even
A crucial point in the development of a small business is reaching the break-even point. The question is how much will be your costs per month and how much revenue on average the shop should make to cover its running costs. Here is the first time a price of the product should be considered. In flower business it is better to sell a little too expensive than too cheap. Your main product – fresh flowers cannot last longer than few days. Therefore, you will have a lot of waste.
Licenses local and state
You should check if you need any specific licenses to start a florist shop in your area. Usually, there is nothing more required than the standard business licenses and registrations.
What are the location options – from home or rent a space
The perfect location will be somewhere around church, hospital and restaurants/hotels that organize wedding. It is very rare combination so do not look too much for it. Generally, just next to the city center is a good point to start from because there will also be decent amount of foot traffic and as flowers are often impulse decision this will have impact.
The important thing is to be able to keep them busy. If you are not sure if initially there will be enough work for them to keep busy all the time, then do not hire. It is much easier to give extra money to a single employee for hard working than to pay 2 employees to do not so much.
What will be the process to get clients
Before starting a very clear process of attracting customers should be developed. How will your prospects find you?
1. The first important question is whether you rely more on your website or on your physical store?
- Once you have a clear mind on question 1 you can focus on either small clients or big ones – wedding organizers for example.
In business there should always be an exit strategy. This will minimize losses and also help you to take the decision to actually quit the business. Before starting the florist shop you should decide how much time and how much money you will invest in order to develop it to at least break even point. My recommendations is to have about $20 000 to start and another $20-25 000 for ongoing costs and stay into the business somewhere between 6 and 10 months. If for that period the thinks are not going well then probably something is not ok and it is better to do radical changes and even close the business.
How to start a flower shop [Case Study]
This section will have practical approach. I have helped a friend to start a florist business and so will give you my vision how it will be best to handle the situation.
My initial investment: $25 000
Setting up a small business is not an easy task but if you pay careful attention to three things and make them perfect then you will be able to succeed. I am talking about process, people and product.
My friend has been working in a big flower shop in Los Angeles for 4 years. The last one he was promoted to be chief designer/decorator. For personal reasons he had to move to Seattle and I encourage him to open his own shop.
The idea was him to be the designer and do all the arrangements and has 3 more employees.
The first employee will handle the delivery van. There are not so many orders to be delivered early in the morning so we decide it will be enough to have someone delivering from 14:00 to 22:00 5 days a week.
Second employee would work in the store with the designer. Helping everything to be processed and kept organized.
Third employee will work on the delivery van Saturday and Sunday from 12:00 to 20:00 and help some other days the store.
The marketing will be outsourced from a small digital agency I run and will be mainly focused on attracting customers through Google, Facebook, Pinterest and email campaigns.
Each of the employees will cost about $2200 a month, we easily managed to hire them as the location was near the university village. So far the cost of running business is $6600 a month.
The digital agency will charge $1000 a month (this includes $500 spending on Facebook and Google Adwords).
Initially the business would run from the home of my friend. It was not a bad place – 5 minute drive to the downtown, located on the very edge of the city center.
We found on CarCurus decent second hand florist equipment and for about $4 800 we manage to buy what we believe to need in order to start – flower displays, some outdoor displays as well, a watering machine, stem cutters, ribbon racks, vases and some other less significant tools and gadget to make the whole process easier. If you have worked in flower shop before opening one then it will be easy to pick up the necessary tools. However, if not then better go to the wholesale store with your designer.
We got a second hand van as well and branded it. The van has mileage of 83 000 and price set up of $18 300. At the end we managed to bargain to get it for $16 000. Putting vehicle wrap was $2200.
So far we have everything we need to start the process. The only thing missing is our product. What type of arrangement we focus next chapter will present. For the process is important to highlight how we buy the fresh flowers. My friend was used to go to the wholesale market and order and wait everything to be delivered and pay with check. I could not understand why we make the process so complicated. He told me that was the process in the florist shop he used to work. It was no brainer that it could be much easier and cheaper at the end.
First, it is very important to always have cash – pay in cash to the wholesalers for fresh flowers. Even if you do not buy large quantity they will give you 3-8% discount. Furthermore, you can save additional 2-3% from the logistics. If your shop have delivery van why bother waiting someone else to deliver the fresh flowers? Furthermore, if you rely on yourself to get the flowers you will feel more secure they will arrive on time and thus keep lower quantity in stock. This is from huge importance giving the fact that our main product lasts only few days.
With floral supplies it is a little bit different. The process there is more like ordering office supplies. The best you can do is negotiate some 5-10% discount from a nice website and then order from there. It will save time and if they deliver on time everything will be perfect. If not speak with them and eventually you may change the supplier. When starting a small business there is almost always lack of capital and that is why very often it is necessary to start with lower quantities in stock. The focus of every owner should be to make the process so good that this is not harming the business. That is why it is very important not to have delay of any of your raw materials. Otherwise, your orders will also be delayed sooner or later and customers will be unhappy.
The delivery process was very simple. We deliver between 14:00 and 22:00. The customer can choose when the flowers to be delivered and sooner options is two hours from now. Furthermore, the owners always calls to confirm the order. That is very important, building some rapport with clients is essential.
For big orders the time to deliver is much more than two hours but even for the funeral people call a day in advance so it is possible everything to be organized and prepared.
Doing some basic research showed it is best to divide the products into three basic groups:
- Flower arrangements under 50$
- Flower arrangements between 50 and 70$
- Boutique flower arrangements 70$+
In the store and on the website this was the basic lay out of our products. They were divided according to their price. I suggest not to put products from Group B into the display of Group A. Clients will expect them to be under $50 and may be frustrated when they realize it was actually a bit more expensive. However, you should always propose to upgrade the arrangement. In order to do this the right way you should be able to define how much upgrade and what type of upgrade is good idea to be offered to this particular customer. Usually 10% more to the existing price is a reasonable and what more you will put for those 10% you should determine based on the occasion.
Many small businesses do not get the economics and failed at the end. In the case of opening flower shop we face the problem of a product that do not last long. Furthermore, we shall know that buying flowers is most often impulse decision. What does this means? It means that once clients are at your store or website they will probably not make big deal of 10% more or less but make the purchase. Therefore, in this industry it is expected to work with decent margin – 60% to 150% is ok. The only exception is when you are trying to sell flowers that will not last much longer and decrease the price heavily in order to liquidate some inventory that will eventually turn into waste.
For those who are not good at mathematics I will provide an example. If you are about to open a florist shop and an arrangement costs you 40$ you should sell it somewhere between $70 and $85. You should charge additionally for the delivery.
Keep in mind to also include the labor costs before calculating the final price. At the wholesale market you can buy roses at around a dollar each, white calla lilies at $3, stems of white daisy poms poms for about $1.4 each. So for example if we have this decoration:
- 1 Glass Cube – $5
- 3 Orange Roses – $3.9
- 3 Hot Pink Miniature Gerberas – $4.2
- 3 Hot Pink Carnations – $1.2
- 1 Stem Hot Pink Miniature Carnations – $0.65
- 2 Stems Green Button Spray Chrysanthemums – $2.4
- Other decorations: $1.5
- Labor cost – 15 minutes = $5.5
This arrangement should be sold from $45 to $55.
Florist business is ready, what’s next?
So far the investment is about $23 000 – the equipment, the delivery van and its branding. Furthermore, the ongoing costs per month are $6600 for the employees and $1000 for the digital agency to do some marketing (we will discuss that in a minute), so in total $7600. For a small just starting business it is good idea the owner not to get any money out of it. So in order to break even in a given month it is necessary to have somewhere around $15 000 worth of revenue.
How to get to the break-even point
Knowing the characteristics of your basic clients groups
There are two main type of customers in florist business – small clients (individuals) and big clients (businesses that organize weddings and funerals). You may thing it is great idea to have as a client someone who organize weddings but keep in mind you will have 15-20% margin at most in this type of deals. So if he orders 100 arrangements that cost you $25 you will not be able to $4 000 – 5 000 of revenue but merely about $3 000. On other hand if you do just 25 arrangements for small clients you will be able to get the same profit. The best practice is to have from both type of clients. The businesses will decrease your average margin but increase the volume a lot. This will help you to negotiate better prices with wholesalers, enables you to have a steady amount of income coming and also decrease significantly your waste.
Therefore, it is very important to be targeting both types of customers.
Targeting new customers
Targeting your customers the right way is essential. To do this you should realize that the two main types of customers require different approach.
How to target individual customers
The digital agency has the aim to deliver us this type of customers. Trough Facebook promote, Google AdWords, listings in local business directories, press releases in local media and the organic searches in 3 months we managed to grow a steady traffic. The average number of visitors you should expect in 3-6 months spending $1000 per month is somewhere around 75 per day.
The average number of orders was roughly 13 per day and the revenue more than $500, and so more than $15 000 revenue from individual client per month. This number is enough to break even. With good customer service, better search rankings, newsletters and some business clients the florist shop will make a good amount of profit as well and be able to expand.
Without any doubt the website was very well optimized to convert as many visitors as possible. We also have a landing pages for special occasions – wedding flowers, birthday flowers and so on. That is why I recommend working with Viyve – exceptional results at very reasonable price.
How to target businesses
With this type of client a different strategy is required. From my experience before I know it is best to go in person to funeral homes and wedding organizers and have a chat. It is almost sure that you will not lend them but at least let them know about your business. In few days you can send some samples along with detail pricing of your arrangements. I like to put the pricing on hard cardboard that is laminated. That way it cannot be easily folded/damaged and so go into the rubbish bin. Furthermore, if you manage to speak with someone that is about to organize wedding or funeral and offer him great price then it is very likely when they go to funeral home or wedding organizer to insist that you are their florist. This is fantastic method and works very well. It is very customizable for different types of business and always works well, however, be prepared that it takes time.
The digital agency did a lead generation and collected from local business directories and websites email. And send them an email asking if they need such services. It is good idea this to be done from someone with experience as otherwise it may go to category “unsolicited sales message” and cause you trouble.
Turning business into profit and growing it
Once you reached the break-even point then continue the same way and emphasize on customer service. Soon enough the new clients will become recurring and your revenue will increase significantly. Increasing sales of a small business will also mean you will be able to decrease the price of your main supplies and make it even more profitable.
With the time you should optimize the process – make everything as simple as possible. If you are using delivery company and have huge amount of orders – invest into your own van. If your waste is high because you lack of refrigerating cases then purchase more. Organize the shop and work places as well as possible. Keep buckets clean, change the water often, try to make your presentation appealing. Flowers are often impulse purchase and all this cane really make the difference.
Once you are feeling comfortable and have enough cash aside then think about opening a second location. The best choice will be nearby town – around 15-20 miles away from your first shop.
Doing this will enable you to scale up the whole process and also decrease additionally the costs of delivery, marketing, supplies, accounting, make the use of employees more efficient.
It is never easy task to start and develop a business but this guide will definitely help you to prepare your checklist on how to start a florist shop. If you need any advice or have a question, do not hesitate, to post a comment or contact me on my email. I would love to help you!