How to Determine if an Expense is Right for Your Floral Business

Today we are talking about a subject that is so incredibly important to the viability of your business: expenses. If you didn't graduate with a business or accounting degree, you might feel like your eyes are about to glaze over. Resist the urge. I promise this information could be the thing that turns your business from the breakeven point or losing money to the position of making money.

In layman's terms, an expense is something you spend money on to make your business grow or to create a product/service. The keyword here is grow. As a florist, we love to see growth through nature and the beauty of flowers, but today let's look at your business and how you can use expenses to create growth.

Types of Business Expenses for Floral Pros

You will incur several types of expenses in your business. They are listed below, with examples in each category.

Cost of Goods Sold (COGS): The expenses related to creating your product or service. Anything you need to make your product. For florists, these could be flowers, tape, zip ties, foam, etc. These expenses are typically used only once to create a particular product in this category.
Inventory (This will eventually become an asset that continues to make money and grow): Vases, Stands, Arches
Overhead: All non-labor fixed expenses that are not directly related to creating your product (i.e. not COGS). These do not change as your sales increase or decrease. (Examples: Utilities, Rent)
Other Fixed Expenses: These expenses stay the same every month, quarter, or year. (Software - Canva, Flodesk, Details, Curate, Team Flower All Access enrollment, etc.)
Taxes: The money you pay to Uncle Sam in various forms. Unlike other overhead expenses, these can change depending on your sales. (Sales Tax, Franchise Tax, Income Tax, Payroll Tax)
Labor is our last category, and it comes in many forms. Be sure to research which form(s) of labor is/are best for your business.
- Contractors/Freelancers/Hourly Workers: Varies based on how much work you are doing. (Click here to read about which might be the best fit for your business.)
Salaries: Fixed Expense paid to your employees weekly, bi-weekly, or monthly. A salary could also be based on commission and how much money your team member is bringing in.

Trial and Error

So how do you know if an expense is right for your business? There are a few methods of testing expenses, some of which are better than others. The first method is trial and error.

Most start-ups take this approach because they do not have the data to decide if that expense is smart. You can think of this method as throwing something against a wall and hoping it will stick. Ideally, you'd only use this method if you cannot measure the pros and cons. Instead, consult with flower friends in your local area or in the Team Flower Community. See what their experience was with that particular expense and then evaluate your business. Try to think of it in terms of growth.

For example, if you purchase an advertisement, how many clients will you need to book from it to turn a profit? If you decide to move forward with the ad, track your inquiries and bookings so that you can reevaluate the decision before the ad renews.

Calculate the Cost

The second (and more efficient method) is to calculate the opportunity cost of that expense on your business.

This method may be different than what you have experienced from other professionals. Still, I want to encourage you to calculate not only the direct cost of the expense (i.e., $1,000 a year) but how many additional clients you need to book to cover the cost of that expense plus all of your other expenses. Other costs to consider are your time that is associated with that expense.

Styled shoots are a great example of an expense in both time and money. While I highly recommend styled shoots for many reasons, be sure to evaluate the amount of time you will spend on the project and what the return will be.

Is the photographer planning to submit the shoot to large blogs/magazines that could bring positive publicity to your business? Does this shoot allow you to show a new style or trend that brides have been asking for? Will you make a worthwhile connection with a large planner or venue that could bring in more referral business? What benefits will come, and how will this shoot help your business grow? If you can not find ways to grow your business through the styled shoot, it may not be the best use of your time and money.

Evaluate Expenses

Lastly, let's discuss how to evaluate expenses within your business. Plan weekly meetings with yourself to review your books. My go-to report is the Profit and Loss sheet in Quickbooks because it provides an itemized view of your expenses for any time period.

Be sure your books are up to date before analyzing this data to make sure you have a complete picture. Look for costs that may be larger than you expected (i.e., meals, travel, or advertising). You may have paid for something on a whim and forgot to analyze the result it would have on your business.

For example, subscription services are an expense that you could be paying for and not utilizing. Either delete the unused subscription or take time in your week to use that service and grow your business.

Overall, you have to make a profit above and beyond your expenses. If your expenses are higher than your profit, you need to start cutting costs that do not create growth. This may be hard at first, but I promise you—it is well worth it!