Well, I’m officially done with my 2018 finances so hooray for that! Now, I have to shift my focus to the more day to day tasks of the shop.
This week, my focus will be on restocking sold out and low-stock inventory and looking to see if I introduce new items. There are two more small conventions in August and then I have to wait until November unless I do some last minute show or pop-up at my home.
For me, purchasing is as fun as it is challenging. Choosing what to stock and how much can become quite crazy-making. And if you’re not super clear on your numbers, it can get expensive fast. If you are interested in running a business that carries inventory, I would highly recommend a strict budget. I would also set aside a portion of your sales specifically for restocking and growing your inventory.
This is actually pretty easy to calculate and implement. Calculate the average cost of goods you carry in your shop as a percentage of your sales and then add a growth rate. So, let’s say on average your goods cost 40% of the price and you want to grow your inventory by 15%. That means, 55% of your sales get set aside specifically for your inventory and nothing else.
That leaves you 45% for everything else like operating expenses (rent/web hosting, utilities, shipping, packaging, professional services, etc), pay, and, ideally, profit.
This is, by the way, just an example. Run your numbers and see what you’re comfortable with for your business. If you’re interested in pretty easy to manage finances, I recommend the book “Profit First” which teaches a super simple and easy to use financial system for business. There’s an e-commerce version as well if you’re considering that type of business or have one already.
Having the budget definitely helps the practical part of how much to spend on inventory but it certainly doesn’t help on what to buy for your inventory. And frankly, I’m not entirely sure how much help I can offer on that front.
I think what I would suggest is starting small and paying attention- to your customers and to your gut. And know that you’re going to pick some duds, some dependable products, and some rockstars and that they’re all ok. There are tons of ways to find products but that’s a whole other post for a whole other day.
So, feel free to take some risks with your inventory. As long as you stick to your budget and keep moving product one way or another, you’ll be ok. Remember: as long as you can make the numbers work, you can do anything.