Corporate Account Price Cut and 7 A.M. Delivery
A florist quotes a weekly corporate account: 12 reception arrangements plus 4 executive offices, delivered every Monday by 8 a.m. Current cost per arrangement: flowers $22, hard goods $3, labor 35 minutes at $28/hour, delivery $18 per trip, spoilage 8%. The client asks for a 15% price reduction and a 7 a.m. delivery. The florist has capacity for 18 arrangements on Sunday, but Sunday labor is time-and-a-half. The current price is $85 per arrangement. The contract is 12 months, and the client pays in 30 days; the florist's cash cycle is tight.
1. Calculate the current fully loaded cost and margin per arrangement, then calculate the margin at the requested 15% reduction with Sunday overtime.
Read the worked answer
Current cost per arrangement: flowers $22 + hard goods $3 + labor (35/60 × $28 = $16.33) + delivery ($18/16 = $1.13) + spoilage (8% × $22 = $1.76) = $44.22. At $85, margin is $40.78 per arrangement, or 48.0%. A 15% reduction lowers price to $72.25, leaving $28.03 margin, or 38.8%, if nothing else changes. If production moves to Sunday at time-and-a-half, labor becomes 35/60 × $42 = $24.50, and total cost rises to $52.39. Margin at $72.25 is then $19.86, or 27.5%. The 7 a.m. delivery may also add a trip or helper cost not included here. The price cut is therefore not a 15% sacrifice; combined with overtime, it removes more than half the original margin.
2. Recommend a counteroffer and explain the trade-offs.
Read the worked answer
Do not simply accept the 15% cut. Counter with a smaller reduction tied to scope: for example, keep the 8 a.m. delivery and offer 8–10% off in exchange for a 12-month auto-pay agreement, or hold the price and reduce the flower recipe on the four executive offices while protecting the reception arrangements. If the client insists on 7 a.m., quote a delivery premium or reduce the number of weekly arrangements. The trade-off is visible: a price cut protects the relationship but compresses margin to 27.5% with Sunday overtime, leaving little room for spoilage, errors, or fuel increases. A scope change protects margin and is easier to explain than a silent quality cut. Put the revised recipe, delivery window, and price in writing so the client sees what changed.
3. Assess the cash-flow and contract risk of accepting the client's terms.
Read the worked answer
At 16 arrangements per week, the current cost is about $707 weekly, or roughly $3,070 per month. If the price falls to $72.25 and Sunday overtime is used, weekly revenue is $1,156 and margin is about $318; a single failed delivery or 20% spoilage event can erase much of that. With 30-day payment, the florist funds flowers and overtime before receiving cash, so a 12-month contract at thin margin is a cash-flow risk. Require a deposit or auto-pay, a written order deadline, a spoilage cap, and a price-adjustment clause for fuel or flower cost increases. If the client will not accept those terms, decline the 7 a.m. component rather than financing the account. The risk is not just the lower price; it is the combination of lower price, overtime, and delayed payment.