Marla had always wanted to own a flower shop; and she felt like she was living her dream. She now had two green houses growing beautiful flowers year round. She had one problem… she wasn’t making money. It didn’t make any sense. She only spent money on things that she needed for her business. She didn’t even pay herself a salary. Yet, somehow she was adding to her credit card debt monthly because she could not make ends meet with her flower business.
Bob, Marla’s husband, wanted his wife to succeed in her business; but was worried about the credit card debt they seemed to be accumulating the longer Marla continued her flower business. It was dinner time and Bob felt like he needed to let Marla know about his worry.
Bob waited for a moment of silence in their casual conversation, and then started, “Hon, I know that you’ve been working hard with your flower shop, but we can’t afford to keep pouring money into a losing business like this.”
With tears welling up in her eyes, Marla replied, “I don’t know what else I can do. I’m working hard; we are selling lots of flowers, but my business just keeps losing money. I don’t want to quit.”
“What if you got help?”
“I hired some expensive consultants, but they just told me that I needed to reduce my expenses. They said that I would make a profit, if I paid my people less; and cut back on some supplies that we use.”
“Did you follow their advice?”
“Bob, I’m not spending any money that I don’t need to spend. To make matters worse; when I think I’ll make a profit some other piece of green house equipment breaks down that I have to pay to fix.”
“There’s this guy that helped out my company. Maybe he’ll talk to you about your business. People call him Coach Russ.”
“I don’t want to pay more money for some supposed expert to tell me I have to reduce my costs.”
“Marla, we can’t afford to keep paying for your flower shop if it loses money for us month after month. Can you at least contact Coach Russ and see what he says?”
Marla stared off into the distance and wouldn’t make eye contact with her husband when she responded, “Okay…. get me his phone number and I’ll give him a call.”
Marla called Coach Russ the next day. She felt like she needed to do what Bob wanted before she called it quits with her flower business.
Coach Russ asked, “Marla, why do you think your business is losing money?”
Marla was furious, “That’s why I called you! If I knew why I was losing money, I wouldn’t need to hire a business coach. Right?”
Russ could sense the frustration in Marla’s voice, “I’m on your side, Marla. I don’t know much about your business; and so I need you to fill me in on any details that you feel may be limiting your success.”
Marla had calmed down and was apologetic, “Sorry for snapping. This flower shop has been a life long dream; and I don’t get it. I’m working hard. We sell lots of flowers. I have tried to watch every penny I spend; but I continue to lose money and build up credit card debt.”
“It sounds like you have a great business. Would you be interested in completing a two page questionnaire so that I can better understand why your business may be losing money?”
“Sure. What will it cost me?”
“I will do this at no cost; just to get you some answers on what may be causing your losses. What do you say?”
“Free is good. I’ll complete the questionnaire this week.”
Russ emailed the questionnaire to Marla and she struggled to answer many of the questions on the form. There were questions like:
How much revenue per employee do you have?
What is the revenue per employee for others in your industry?
How do your prices compare with your competition’s prices?
On a scale of 1 to 10; what is the quality of your product or service when compared with others?
How well are your employees paid when compared with your competitors?
How much money do you spend on expenses in a typical year?
It took Marla much longer than she thought because she had to research the answers to many of the questions. After she answered the questions, she knew why Russ expected her to know why she was losing money. She felt like she didn’t need to hire a business coach after all. Nevertheless, she called Russ, as promised.
Marla started, “Russ, I think I know why you expected me to know the answer to ‘why my company was losing money’. I think I know the answer now.”
Russ asked, “Why do you think your flower shop is losing money?”
“You asked me how much my competitors are charging for their flowers; and I was shocked at how much other flower shops are charging for their flower arrangements. It looks like most flower shops are charging almost double my prices.”
“What would happen if you doubled your flower prices?”
“I know what my research showed, but my customers constantly complain about the prices I charge for flowers. I am convinced I’ll lose customers, if I raise prices.”
“What percentage of customers do you think you’ll lose if you raise your prices to match the rest of the flower shops in your area?”
“I think I will lose at least half of my customers.”
Even though the conversation was over the phone, Marla could hear Russ chuckling, “Let’s say that you double your prices and lose half your customers. What would your revenue be?”
Marla thought out loud, “I guess I earn $10,000 a month in revenue now. If I lose half my customers, my revenue would drop to $5,000. If I then charge double what I am charging now for those remaining customers, I will be back up to $10,000 per month. Right?”
“Right you are. If you cut your sales in half, as you suspect, can you reduce costs in your flower shop?”
“I suppose I’ll have more inventory of flowers; and can probably cut back on florists with the reduced volume.”
“What would it take for you double your prices in the next month?”
“I don’t know how I can do that? Am I supposed to lay off my florists in this experiment?”
“You claim that you will have the same revenue, if you double your prices, so go ahead and keep your staff where it is and don’t do anything dramatic with your costs. What do you say?”
“What if I lose more than 50% of my customers. Doubling my prices is quite dramatic. I think I may lose even more than 50% of my clients.”
“Ultimately, this is your choice, Marla. It’s your flower shop. I am merely asking you to execute a strategy that you claimed was the cause of your poor profits at the start of our call today.”
“I guess I have no choice.”
Russ interrupted, “You always have a choice. However, I can see that you’re having anxiety about this choice. Let me make this choice easier for you. If you fail to have the same dismal revenue you’ve had over the past several months, I will pay you the difference. However, if you make additional revenue, I want you to hire me for weekly coaching for 6-months. Do we have a deal?”
“What do you charge for six months of coaching?”
“I charge $1,000 per month for weekly individual coaching.”
“I don’t know. I’m trying to keep my costs down. How would it look to Bob, if I tell him I’m adding another $1,000 per month to our credit card debt?”
“I guarantee that I will not create a situation where you are paying more than what I’m helping you earn. What do you say?”
“Okay. I guess I have nothing to lose.”
Marla raised her prices. She re-printed brochures and changed her website; and her point of sale systems. It was a pain, but she felt that the response from her customers would be even more painful. Sure enough, she got an earful from George Baker. He had been a long time customer; and wanted to order a bouquet of roses for his wife’s birthday. Instead of paying the traditional $26.50 for his 12 roses; Marla was now asking $52 for the same dozen roses. He was livid. He stormed out of Marla’s flower shop vowing to never come back. He threw in a few choice words that ensured Marla would feel terrible about her dramatic price increase.
Marla told herself, ‘It’s just one of the 50% that I am bound to lose with this drastic price increase.’ I’m sure that others will be more understanding. After all, my competitors are charging these same prices and they are selling flowers. She then remembered the research she had done to answer Coach Russ’s questions. She was on the right track by increasing her prices.
Marla didn’t pay attention to daily orders; but she could tell that she was losing some business. She could also tell that she was gaining a few new customers that had not been in her shop before. She was confused as to why her price increases would have attracted people who had not visited her shop before.
A month had passed and it was time for her meeting with Coach Russ. After adding up her receipts for the previous month she was shocked. A normal month would yield $10,000 in revenue. She showed a total revenue of $15,000 for the month; and a net profit of $5,000. Doing some quick math, it appeared that she lost approximately 25% of her clients due to the price increase.
Russ asked, “How did your month with increased prices go?”
Marla was smiling, “I had my first profitable month since I opened my flower shop….” just then tears started to flow; and Marla couldn’t continue talking.
Russ paused and then gently asked, “What emotion is coming to the surface for you right now?”
Marla was shaking, “You don’t understand. Just a month ago, I thought I would have to let go of my dream. I now see so many possibilities that I didn’t see before. Thank you so much for your help.”
“I appreciate your gratitude, but I want you to take credit for the turn around in your flower shop. I merely asked you a question. You came up with your own answers; and then you took the bold step that was required to turn your flower shop around.”
“Without your assurance that you’d pay me if the price increase didn’t work, I would have never made that brave step to increase prices.”
“Maybe I deserve a little credit; but I want you to celebrate your confidence in following through. Are you ready to work on the rest of your business?”
“What else do I need to do? I’m making a profit. How can it get any better?”
“We only covered the answer to one of the questions on my form. I’m guessing you may need to cover a few more items to create the flower business you truly want. Right?”
Marla and Russ discussed several other items that Marla would need to address over the next few months. Marla realized that she had let her shop get run-down because she was trying so hard to cut costs. She also realized that she was underpaying her staff; and had opportunities to work with other flower delivery companies to improve her revenues.
After working with Russ on a weekly basis, Marla decreased her time at the flower shop; and promoted one of her better florists to store manager. She was being paid a regular profit sharing check; and quickly paid off the credit card debt that Bob and her had amassed. Instead of worrying about credit card debt; Bob was considering looking for a less stressful job that didn’t pay as much; but would allow him to spend more time with the kids.
Marla’s flower business grew its revenues to $20,000 per month on average in revenue with her small flower shop. After a year of demonstrating strong profits, Marla decided to open up two more stores… and continue to use Coach Russ to help her clearly see opportunities; and also use Russ for that needed periodic boost in confidence. It was funny. Every time Marla would thank Russ, he would always let her know he was on the sidelines; and that she was always in charge and making the change that she was always capable of doing.
As a business coach, I help my business owner clients change their mindset in a way that allows them the freedom and profitability they have always hoped for, but never thought possible. If you’d like to develop a successful business mindset, I urge you to contact me for a complimentary initial consultation.
Note from the Author
My name is Jeff Schuster. I am a certified Life and Business Coach serving small business owners, corporate executives and others who want to transition from “expert” to “entrepreneur”. I have been a small business owner for most of my 30-years in the workplace. I grew an energy efficiency and renewable energy engineering and construction company from nothing to over $10-million/year and sold it in 2013. I now help other business owners make amazing progress toward their own dreams of business ownership independence and success.