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Greenworks owner bet on flowers, and the risk has paid off big

February 9, 2010

 

Greenworks owner bet on flowers, and the risk has paid off big

 

You are shoveling out from another big snowfall and yet another drop is expected later this week. So who is thinking about the sunniness of flowers, roses by the basket and a heart-filled Valentine's Day, which arrives Sunday?

Loved ones, of course.

 

Florists, definitely.

 

Having spent my fair share on everything from white roses to poinsettias over the years, I have always wondered about the economics of the florist business. How much are these people making on the $100 I pay for a dozen roses?

 

I called Mike McCann, owner of Greenworks, which has five District flower shops and has been brightening area hotel lobbies, weddings and dinner tables for 23 years.

 

McCann, 53, has been in the flower business for three decades and has been a go-getter all his life. He grew up in Akron, Ohio, where he would often leave high school at noon to earn $5.90 an hour at a meatpacking plant. His $20,000 annual pay was more than his teachers made. Having later learned about plants working at a Pier One store, he took $8,000 in savings to buy a small plant store in the Akron suburbs.

 

"I have a tolerance for risk," he says. "You aren't going anywhere in life, unless you take risks. You can't have a box around you and say this is all I'm going to do."

 

He later moved the store downtown, where his business went from houseplants to snazzy vases and colorful arrangements gracing the desks and conference rooms of big financial firms. He started serving malls, bars and restaurants, but the business never took off. He followed a girlfriend to Houston, where he arrived on a Friday night in 1981 with $800 in his pocket.

 

Houston was in its oil-fed heyday, and the resourceful McCann began the next day doing the only thing he knew: selling flowers. He found floral wholesalers in the Houston Yellow Pages and bought leftovers for 5 to 10 cents apiece, wrapped them in cellophane, and sold them out of styrofoam coolers on street corners for $5 a dozen. He soon heard about a new nightclub that was looking for a flower supplier, and talked his way into a contract for $1,500 a month. It wasn't long before he had a sprawling flower business, including a lucrative sideline called Le Rose, which employed more than 100 women -- in revealing outfits -- who sold roses for $2.50 each (which McCann bought for a nickel) at high-end Texas restaurants and nightclubs. The women were paid on commission.

 

When the oil industry crashed in 1986, so did McCann's flower business. He had a shop at the InterContinental Hotel in Houston, and the chain asked him if he was interested in opening a shop at its Willard Hotel in downtown Washington, which was reopening after decades of being closed. McCann opened the 700-square-foot store in September 1986, and it took off immediately.

 

"We were all Willardized," said McCann, who sells frames and historical memorabilia at the Willard, in addition to flowers. "We got swept along in the rebirth of the Willard and the boom of Washington, D.C., in the mid-1980s."

In addition to the Willard shop, Greenworks has a 1,700-square-foot store at the Ritz-Carlton, an 800-square-foot shop in Georgetown (in a building owned by McCann), a Capitol Hill store near Eastern Market, and a store on Yuma Street NW, where Greenworks' central offices are located.

 

After getting its start at the Willard, Greenworks went on a 22-year profit tear until last June, when it posted its first fiscal-year loss (its fiscal year runs from July through June), which came to $180,000 on sales of about $3.3 million. Most of the loss was due to scaling back by corporate clients and those throwing big parties. Although Greenworks expects to lose around $210,000 this year, business has improved.

 

To mark Valentine's Day, McCann's fleet of five trucks will make about 550 flower deliveries to homes and offices in the region between this Thursday and Saturday at an average ticket price of just under $100, which includes a $14 delivery charge. That's around $55,000 for the holiday, a small fraction of Greenworks' annual revenue.

McCann said Valentine's Day and Mother's Day are not highly profitable for Greenworks because of the various expenses of taking each order, paying employees to arrange it, buying and outfitting the delivery trucks, and paying the delivery person to drive several miles.

 

Greenworks much prefers the economies of scale on big events such as weddings, bar mitzvahs and corporate lunches, for which one delivery person can drop off thousands of dollars' worth of flowers at once, saving on costs and boosting profit margins.

 

"We still do all the birthdays, funerals. We just didn't put all our eggs in one basket," McCann said. Greenworks even does Christmas decorations for the Willard and Ritz-Carlton, which helps cover overhead and promotes visibility.

McCann's flowers come from all over: tulips and lilies from the Netherlands, irises from Oxnard, Calif., high-end roses from Ecuador. The roses that sail out of the stores this week cost him anywhere from 85 cents to $2.50 each. So why does a dozen cost $85 to $100? In addition to the flowers, factor in a $10 vase, greenery that goes with the vase, packaging, and by the time you add it up, Greenworks is making about $50 or so per dozen in operating profit. The $50 gross profit goes toward the company's $1.2 million annual payroll, its $35,000 monthly rent, health insurance and utilities.

 

I asked McCann what his big mistakes have been, and he said he hasn't made any. Hmmm. The biggest challenge has been maintaining pricing power. An arrangement that cost $35 in 1999 is only $42.50 now, he said. The cost of admission to the industry is small, and people can operate out of their home, which increases competition and holds down prices.

 

McCann said he rolls all profits back into the flower business. He also has a real estate sideline, in which he owns commercial properties in Washington as well as some high-end residential properties. He refurbishes the residential properties, and tries to sell them at a profit. But not always.

 

"Not everything you do is going to make you money," McCann said. "But you have to try different things."

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