Small businesses typically don't have a lot of money to spend on inventory - so managing it properly is critically important. Here are actionable ways to maximize your inventory budget, effectively predict your needs, and avoid overspending.
How to Maximize Your Budget
As a small business owner, you're always looking to strike the perfect balance between value and quality. The old adage, go cheap and buy it twice, originated somewhere! But how do you get quality products at a reasonable price?
A product may look great online, but when you get it, you might be less-than-satisfied with the quality of the product or materials. The best way to avoid losing money on low-quality inventory is to request samples of the products you're thinking about purchasing. With samples in hand from multiple companies, you can make an informed decision on which products meet your needs and fit your budget.
Shop around and quote competitor prices
One of the best ways to get a price break is to get multiple quotes for the same product. Once you've gotten a few quotes, choose the company you like best, and ask them to match the lowest competitor's price. Knowing they are competing for your business will often incentivize them to give you a deal.
Ask about first-time customer promotions
Suppliers know that if they can land a first-time customer and wow you with their products and service, you're likely to come back. That's why many wholesalers offer promotions to new customers. Whether it's a discount on your order or an offer for free shipping, these incentives can save you lots of cash!
Ask about volume discounts
Typically, the more of something you order, the less you pay per unit. You won't want to do this with all your inventory, but buying supply items in bulk from a warehouse or online retailer can add up to big savings.
If you don't ask, you won't get - and asking can save you a lot of money when it comes to maximizing your inventory budget.
How to Predict Inventory Needs
Predictive ordering is part common sense and part data. When you're first starting out, you have to rely heavily on common sense to place orders. As you start selling, you'll be able to spot trends on which products fly off the shelves and which ones sit and gather dust. Here are a few tips on how to predict your inventory needs.
It's better to be modest than to overspend when you're just getting started. If you have a retail store, get creative when you set up displays to make the most of the little inventory you have. If you're opening a restaurant, start by launching a limited menu and increase your options once you can see what your audience demands.
Consider the season
Regardless of whether you own a boutique, restaurant, or specialty store - seasons can have a significant impact on what inventory moves. But how do you figure out what to order for your grand opening?
Visit similar storefronts or restaurants and take notes on what they're doing. Pay particular attention to businesses that have been around for a while. If they're profitable, they're doing something right with inventory management. If you're willing, you can also try talking to the owner to get their insights on trends and local consumer preferences.
Consider your location
If you're opening a boutique near the beach, it's a pretty safe bet that items like scarves, gloves, and boots won't sell. To be successful, you're going to want to stock up on beachgoer essentials; things like sundresses, sunscreen, sunglasses, swimwear, and sandals.
If you own a restaurant in a busy business district, consider what local employees will be looking for on their lunch hour. Then, use that insight to plan your menu, choose your service options, and influence your pricing structure.
Survey potential customers
Feeling overwhelmed by all the options? If you've picked out your storefront location, take the time to hit the streets and get some feedback. Talking to the people who could potentially be spending money at your restaurant or store is the best way to make well-informed inventory decisions.
If you have a list of products or menu items you're considering stocking, ask potential customers to rank them from best to worst and use their feedback to narrow your options. Also, ask for insight on any holes in the market - what's missing nearby? You may uncover some previously unrealized value your business could offer!
Evaluate existing sales and profit margins
Once you've been in business for a while and have data to analyze, take a look at sales trends and identify which items make you the most money. Then, use a combination of seasonal knowledge and customer insights to determine when to order more of your best sellers and how to incorporate complementary products into your business model.
Beware of backstock
You may start with a well-thought inventory plan, but before you know it, you've got a stockpile of product you can't sell or, food that expires before you have a chance to use it.
The best way to avoid this is to make sure your stockroom is organized and that everything is clearly labeled. Keep detailed logs of what you have in stock, or better yet - use software and barcodes to track your inventory levels.
When you get ready to order, evaluate your existing inventory and be careful not to order too much. Also, keep notes on how much lead time you need to get more product and sell through most of what you have before you order more.
Use these tips to predictively order product, avoid overspending, effectively manage your inventory, and maximize your budget.
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