Farmgirl Flowers, a San Francisco-based startup company with a unique business model, was featured on CNBC’s “The Profit” this week on Tuesday, February 2nd.
Farmgirl Flowers produces a daily bouquet and lets customers choose the size of the bouquet, but they do not let customers choose their own flowers. They also order all of their flowers from local farmers in the United States.
In the show, Farmgirl Flowers owner Christina Stembel said she’d had trouble raising money for her business and tried to negotiate a deal with show host Marcus Lemonis: Stembel’s original request was $1 million for 5% of the business. Lemonis countered at $1 million for 25%, and negotiations finally ended with an offer from Lemonis of $1 million for 20% of the business and a $500,000 credit. The offer was refused by Stembel.
Arthur Conforti, founder of 30-year-old Beneva Flowers and current owner of Beneva Solutions LLC, watched the show and had this to say:
“It all sounded so wonderful and so sad,” Conforti said. “She (Stembel) was worried about the big guys and not being able to fund her growth. She hit it dead-on, though, with her idea of fewer offerings for optimal value. I couldn’t have said it better myself – that is a model we all need to absorb in the industry.
“Being selective and having options of small, medium, and large sizes are great points. However, the biggest challenge she’ll face – what makes it hard for her to compete – is the cost per acquisition! When cost per acquisition rises above $40, it doesn’t make sense if you don’t have a plan in place for the second order. Some companies have the capital to afford paying $40-60 to acquire a single order, and if they get that second from direct mail, the cost could be cut to somewhere around $20-$30. This is the greatest challenge – making the marketing dollars on a national effort make sense.
“A successful company has to have a truly fine-tuned targeted marketing program. You need to have a secondary plan to make customers permanent; that is the formula that I use, and that has proven to be successful time and time again.”