2022 is almost over, so it’s time to get your 2023 budget in shape. While creating an annual budget can be daunting, a recent article in Floral Management magazine lays out how to streamline the process to make it much simpler. In doing so, you can maximize your profits in the coming year.
In the article, financial expert Paul Goodman says, “Most people envision a budget as a large spreadsheet of numbers that projects revenue and helps you look at every expense to figure out how much you will spend each month in the coming year. That is a formidable task. It can be much, much easier.”
Costs vs. Profits
The article recommends targeting profit as 10% of sales. While your expenses can cover so many things, the three categories that take up most of those expenses are facilities (10%), cost of goods sold (30-35%), and payroll (30-35%).
By focusing on these three major expenses, you’ll have a better chance of increasing your profits. However, facility costs are most likely fixed, so your two focus areas should be the cost of goods sold and payroll.
1. Cost of Goods Sold
The article recommends keeping your budget at or below 25% of your weekly sales of flowers and greenery.
• Review your sales for each month of this year and adjust them for any sales increase or decrease you’re experiencing.
• Take 25% of those sales as your budgeted amount.
• For hardgoods and other non-perishable products, buy only enough to cover expected sales.
• This amount doesn’t include weddings or events, as you plan for these and purchase items separately.
2. Payroll
When it comes to payroll, don’t look at overall annual sales, but instead look at the sales during non-holiday periods.
• Take four consecutive non-holiday weeks and average the sales for each day of the week.
• Set a target to have 30% of your total sales cover payroll, including payroll taxes and employee benefits.
• Use part-time employees as much as possible.
• Have your permanent staff handle daily, non-holiday sales.
Streamlining your budget can increase your profits in the new year. We hope these tips will help you do just that!
