1999 WholesalerÕs Profitability Report (1998 Data)

Executive Summary

Financial performance varied widely within Wholesale Florist and Florist Supplier Association (WF & FSA) in 1998. As can be seen in the exhibit on the facing page, the typical firm had sales of $3,631,314 and a pre-tax profit of 2.3 percent. In contrast, the high-profit firm had sales of S3,276,516, and profit of 6.4 percent. Of greatest consequence, the typical firm had a pre-tax return on assets (profit before taxes expressed as a percentage of total assets) of 7.4 percent. For the high-profit return on assets was 25.6 percent.

A number of factors led to the differences in results. In most instances these differences can best be illustrated by what are commonly called the critical profit variables (CPVs). The following exhibit compares the typical and the high-profit firm on the critical profit variables.

The Critical Profit Variables
Sales Per Employee Measures employee productivity	Typical WF&FSA $174,981	High Profit WF&FSA $206,063
Gross Margin Percentage Reflects the ability to manage COG effectively	32.2%	32.4%
Operating Expense Percentage Focuses on expense control	30.5%	26.6%
Inventory Turnover (Times) Reflects how well inventory is managed	11.8	14.4
Average Collection Period (Days) Reflects accounts receivable collection practices	44.8	44.0

The high-profit firm seldom performs better on all of the critical profit variables. Instead, it is the sum-total of their performance on the CPVs which produces higher overall results. The nature of the differences between the typical and the high-profit firm and the underlying reasons need to be understood by every WF&FSA member.

The typical and the high-profit firms have different sales volumes. They also differ on the critical profit variables identified above. The result is dramatically improved operating performance. The following exhibit indicates the results the typical firm achieved and the results the high-profit company earned.

An Overview Of Financial Results
Net Sales	Typical WF&FSA $3,631,314	High Profit WF&FSA $3,276,516
Cost of Goods Sold	2462031	2,214,925
Gross Margin	$1,169,283	$1,061,591
Operating Expenses	1,107,551	871,553
Operating Profit	61,732	190,038
Other Income/Expenses	21,788	19,659
Profit Before Taxes	$83,520	$209,697
Total Assets	$1,134,786	$819,129
Return On Assets	7.4%	25.6%

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