Let’s get into the nitty gritty of how to set a flower pricing formula that will work for your company, your market, your clientele, and that helps you achieve and improve your profitability goals!
Scared or overwhelmed? If not, here is a link to the psychopath test. If so, you’re in good company. Learning a new skill makes most people uncomfortable. As a business owner getting your flower pricing formula right is essential. You can do this and that the payoff (increased profit) will be worth it!
Spoiler Alert - Below we go into a lot of detail on flower math, expense tracking, etc., but you should know upfront that FlowerBuddy is a floral software that does all of this automatically. Understanding the concepts below is important, just know that you won’t be alone when it comes time to implement it!
Understanding the math (markups + fees)
Track every event expense
Adjust the size of your mark-ups
1. Understanding the math (markups + fees)
Many articles that say there is no "one size fits all" flower pricing formula. We disagree!
The formula is just math. It's true that the size of your variables (markups and fees) will vary based on many factors (see below), BUT how you multiply and add stays the same.
The goal of this section is to understand the flower pricing formula itself (e.g. the math). First a few definitions.
What is a markup?
A whole number that you multiply by your expenses. For example, a common markup for flowers is 3. So if your flower cost is $10 you would multiply by 3 to get $30.
What is a fee?
It’s a percentage. For example, a 30% fee on $10 of expenses would add $3 dollars for a new total of $13 ((0.3 * 10) + 10).
Flower Pricing Formula:
(flower cost * mark up)
+ (hard good rental cost * mark up)
+ (hard good sale cost * mark up)
+ (labor cost * mark up)
+ (other cost * mark up)
+ (Design Fee * (sum of all base costs))
Here’s a 3 minute video that shows the math in action
You’ve finished this section, great job! Get another coffee, crack your knuckles and move on to the next section.
2. Track every event expense
In order for this pricing formula to work you need to be tracking every expense. If you haven’t done this before, or not to this level of detail, it may take a minute to get used to.
Luckily there are tools available to help make this process much easier. At the bottom of this article we have a completely unbiased software recommendation for you :).
Do you currently track all of these event costs?
What did we miss? Comment below!
3. Adjust the size of your mark-ups
The size of markups and fees will differ between florists. For example, a common markup on flowers is 3 but for some it may be as high as 5. Where you fall in this range will depend on many factors (more on this later).
First let’s take a look at ranges you may consider applying in your pricing formula.
The minimum markups in the table above are just that. Think of that column as the floor and increase if and when it makes sense. Here are a couple reasons you may consider increasing your markups above the minimum.
High Overhead Rate
Overheads are expenses that are not directly attributable to a specific product/event. Think rent, marketing, insurance, admin etc. Your overhead rate is the percentage of your annual revenue that those overheads comprise. If you don't know your overhead rate, we wrote a whole blog post about it.
The point is, overhead rates will vary (sometimes greatly) between florists. This is largely driven by geography. For example, renting studio space in San Francisco is more expensive than renting a studio space in Casper Wyoming (that's what ya call an understatement). Rent is just one example, but the overall cost of living in different states and cities affects all prices.
If you live in a high cost city or state then you should be charging higher markups and fees to cover your increased overhead expenses.
Pricing Power is the amount you can raise your prices without affecting the amount of business you win. How weak or strong your pricing power is comes down to how many competitors, alternatives, and supply exists in the market. If you there is a lot of competition for a particular product (ex. basic green/white elopement pickup) then your pricing power is weaker. Also, if the client perceives other lower-cost alternatives (ex. DIY, other decor, balloon instals, etc) to be just as good, that lowers your pricing power. Also, if there is an abundance of supply (e.g. # of comparable florists) that too weakens your pricing power. So what, as a florist, could increase your pricing power and allow you to charge more.
Certain clients seek out unique, highly custom floral designs. If you have carved out a unique and desired ascetic and have a proven ability to execute and deliver those designs, you may have increased pricing power, and should consider experimenting with higher pricing.
Luxury / Brand
Some clients are just interested in a commodity (I don't want to spend more than $x), others are after a specific look (here's my Pinterest board), while a select few are after a specific florist. If your leads are pre-existing fans of your work and well aware of industry accolades, etc. then you certainly have increased pricing power.
If a client wants a large ceiling install, requiring scissor lifts and large day-of staff, etc. they will be approaching a small pool of florist who have a proven track record for this kind of work. Less competition means more money.
Ok, so this one is not necessarily an indicator that you actually have pricing power and you should charge more. However, if you're pricing formula has remained flat for the past few years, it's worth experimenting with higher pricing. To do this, look at your past conversion rate. For every 10 leads you speak to how many turn into booked clients. Now for your next 10 qualified leads, try notching your pricing up slightly and see if it affects your conversion rate.
4. Attempt to use it and adjust if needed
Now it’s time to “put pen to paper” (please don’t actually use pen, paper, or even spreadsheets, because FlowerBuddy is much much easier).
FlowerBuddy has this formula built in and helps you easily estimate and track every expense with an intuitive recipe interface.
The best part, it’s completely free to start (no credit card required) and only $30/mo + 1% fee on booked events after that. You can sign up in minutes and start testing your pricing formula now!
FlowerBuddy screen shot of settings page where you set and adjust your markups and fees
FlowerBuddy video demo of recipe creation, where you add your expenses (flower, hard goods, labor) and FlowerBuddy calculates the price based on your markups and fees