Business 14 August 2018
When you are entering the realm of running your own business, there are a lot of things that require your attention daily: from relationships with vendors to opportunities to reach out to new clients to managing your employees properly. But when you are in the retail business, then the heart of your company is the one thing that needs to be put as a priority every day: your inventory. It is crucial that your inventory is managed properly every single business day – so do not wait until the end of the year to start implementing these tips.
Understand the Advantages of Managing Your Inventory
Imagine the trouble that comes with not having enough products to respond to orders or of having ordered too much stock that sits idly on the self – or worse, goes spoiled. There are many advantages to managing your inventory correctly, and the first one is that it saves you money. You avoid losses that come with products that can no longer be sold because they reached their expiry date – like food – or because they have gone out of style or season or have become obsolete, like clothes or gadgets. It also helps save on the cost of renting out space that you might not need – or renting out too much space for idle produce that you are not making money on. Proper inventory management can help you cut back on all those costs and keep your cash invested where it really matters, while it can also allow you to make more accurate financial projections and manage your resources more efficiently.
Set Your Minimum Stock Levels
It requires some research and effort on your part, but the first thing you need to do is understand your company’s needs. Start by counting and comparing: how many goods have you sold each month and how does that fluctuate with seasonal demand? That will give you an idea of the quantity of products you need to keep available every time. By setting a minimum amount that you need to have in stock every time for each of the products you sell, you will be able to react quickly every time your stock is approaching that limit by ordering more before you sell out. The minimum stock level will depend on various factors, such as the demand for the product, how quickly your stock order can get through, as well as how easy it is for the goods to go bad – it makes sense to set lower minimum levels for goods that will go bad if you do not sell them quickly. Remember to always revisit the minimum stock levels you have set throughout the year and readjust if they do not reflect your real needs any more.
Invest in a Plan B
Even if you have set out the more detailed inventory management plan, you might encounter an unforeseen surge or slump – so it is always important to keep your options open and know where you can turn to. One of the best ways to do that is to research your options when it comes to inventory loans and financing. These are short-term loans or revolving lines of credit that are
specifically designed for companies looking for quick funding solutions in order to replenish their inventory. They are usually flexible and come with favorable terms, as they are meant to be a tool to address seasonal fluctuations and not a standing financing mechanism. They are typically secured through your current inventory, so they do not require you to give up any additional collateral. Inventory loans are also quite quick to process and do not require any personal credit score. However, they are not always easy to qualify for, so it is advisable to do some research beforehand; even if you do not foresee that you will need inventory financing in the near future, knowing the types of financing available to you might come in handy when you need to react quickly.
Your Employees Are Your Best Allies
One common misconception among entrepreneurs is that you need to do everything yourself; to the contrary, making sure that you allocate tasks to your employees is key for efficiently running your business. More often than not, your employees are the ones that will manage your inventory daily, so they need to be prepared. Perhaps the most essential skill that you need to make sure they have in order to successfully manage your inventory is proper cataloguing and tracking your inventory goods. Do not hesitate to invest resources and time in training them on best practices in order to organize your inventory in the most effective manner – and also make sure that you regularly get feedback from them on what works and what not in order to finetune the details. It is advisable to put a specific employee in charge of your inventory in regular intervals in order to have a person of reference that you can talk with directly about your current needs in terms of stock.
Keeping track of what goes in and out and making sure that you never run out of stock nor stock up too much – they may sound pretty straightforward goals, but it takes a lot of organizing and testing in order to get things just right.
3 Min Read
"How did you ever get into a business like that?" people ask me. They're confounded to hear that my product is industrial baler wire—a very unfeminine pursuit, especially in 1975 when I founded my company in the midst of a machismo man's world. It's a long story, but I'll try to shorten it.
I'd never been interested to enter the "man's" world of business, but when I discovered a lucrative opportunity to become my own boss, I couldn't pass it up—even if it involved a non-glamorous product. I'd been fired from my previous job working to become a ladies' clothing buyer and was told at my dismissal, "You just aren't management or corporate material." My primary goal then was to find a career in which nobody had the power to fire me and that provided a comfortable living for my two little girls and myself.
Over the years, I've learned quite a few tough lessons about how to successfully run a business. Below are five essential elements to keep in mind, as well as my story on how I learned them.
Find A Need And Fill It
I gradually became successful at selling various products, which unfortunately weren't profitable enough to get me off the ground, so I asked people what they needed that they couldn't seem to get. One man said, "Honey, I need baler wire. Even the farmers can't get it." I saw happy dollar signs as he talked on and dedicated myself to figuring out the baler wire industry.
I'd never been interested to enter the "man's" world of business, but when I discovered a lucrative opportunity to become my own boss, I couldn't pass it up.
Now forty-five years later, I'm proud to be the founder of Vulcan Wire, Inc., an industrial baler wire company with $10 million of annual sales.
Have Working Capital And Credit
There were many pitfalls along the way to my eventual success. My daughters and I were subsisting from my unemployment checks, erratic alimony and child-support payments, and food stamps. I had no money stashed up to start up a business.
I paid for the first wire with a check for which I had no funds, an illegal act, but I thought it wouldn't matter as long as I made a deposit to cover the deficit before the bank received the check. My expectation was that I'd receive payment immediately upon delivery, for which I used a rented truck.
Little did I know that this Fortune 500 company's modus operandi was to pay all bills thirty or more days after receipts. My customer initially refused to pay on the spot. I told him I would consequently have to return the wire, so he reluctantly decided to call corporate headquarters for this unusual request.
My stomach was in knots the whole time he was gone, because he said it was iffy that corporate would come through. Fifty minutes later, however, he emerged with a check in hand, resentful of the time away from his busy schedule. Stressed, he told me to never again expect another C.O.D. and that any future sale must be on credit. Luckily, I made it to the bank with a few minutes to spare.
Know Your Product Thoroughly
I received a disheartening phone call shortly thereafter: my wire was breaking. This horrible news fueled the fire of my fears. Would I have to reimburse my customer? Would my vendor refuse to reimburse me?
My customer told me to come over and take samples of his good wire to see if I might duplicate it. I did that and educated myself on the necessary qualities.
My primary goal then was to find a career in which nobody had the power to fire me and that provided a comfortable living for my two little girls and myself.
Voila! I found another wire supplier that had the right specifications. By then, I was savvy enough to act as though they would naturally give me thirty-day terms. They did!
More good news: My customer merely threw away all the bad wire I'd sold him, and the new wire worked perfectly; he then gave me leads and a good endorsement. I rapidly gained more wire customers.
Anticipate The Dangers Of Exponential Growth
I had made a depressing discovery. My working capital was inadequate. After I purchased the wire, I had to wait ten to thirty days for a fabricator to get it reconfigured, which became a looming problem. It meant that to maintain a good credit standing, I had to pay for the wire ten to thirty days before my customers paid me.
I was successful on paper but was incredibly cash deprived. In other words, my exponentially growing business was about to implode due to too many sales. Eventually, my increasing sales grew at a slower rate, solving my cash flow problem.
Delegate From The Bottom Up
I learned how to delegate and eventually delegated myself out of the top jobs of CEO, President, CFO, and Vice President of Finance. Now, at seventy-eight years old, I've sold all but a third of Vulcan's stock and am semi-retired with my only job currently serving as Vice President of Stock and Consultant.
In the interim, I survived many obstacles and learned many other lessons, but hopefully these five will get you started and help prevent some of you from having the same struggles that I did. And in the end, I figured it all out, just like you will.