How to Run a Small Business: Inventory Management

One key in learning how to run a small business – inventory management – we've got the ins and outs of managing your inventory for success in your entrepreneurial endeavors.

“I’m booking solid revenues, but I need some tips on how to handle inventory management.”

You’ve already got a head start on a lot of people wondering how to run a small business
if your revenues are “solid.” Congrats! For many entrepreneurs,
inventory management takes a back seat to things like generating
revenue, personnel issues, finicky customers, or raising financing, but
it shouldn’t. Whether you’re in retail, wholesale, distribution, or
manufacturing, our view is basically the same…

Effective inventory management is key to running a profitable business.

You’ve probably heard terms like “lean manufacturing” and “just in time”
delivery – examples of streamlined inventory management techniques.
Consistent with these techniques, we like to think of inventory as cash
in transit. Every day you have inventory that is not being sold, your
profit margin erodes. Here are some key tips to get your inventory
strategy on track:

Get an attitude

Your attitude about inventory is the key to successful inventory management.
Think about inventory as a wasting asset. Unless you are dealing with
wine or single malt scotch whiskey, inventory does not improve with
time. Inventory becomes less valuable with every passing day. It takes
space, heat, light, power, handling, insurance and, of course, interest
to carry. Every day you have inventory and no sales your profit margin
will erode. So as you’re planning how to run your small business, try
not to carry any more than is absolutely necessary.

Be scrappy

Don’t be shy – it’s a competitive market out there and suppliers want your
business. Negotiate with them to extend payment terms. Consider
utilizing drop shipments. You can even negotiate consignment
arrangements or vendor-managed inventory techniques.

Think green

The way in which you finance inventory is critical. A basic point in
inventory management is to ensure that your payment terms are longer
than the terms you extend to customers. Consider different financing
options such as purchase order financing or asset-based lending. The
old axiom “cash is king” applies.


Also on StartupNation.com: Is Inventory Financing Right for your Business?


Clean house

Inventory should be eliminated regularly by using special promotions, unique
discounting, barter exchanges and charitable donations. Remember – keep
that inventory moving, keep it fresh and keep your customers happy with
special offers such as, “half off” or “2-for-1.”

Knowledge is power

Like never before, new technologies and techniques enable you to command
knowledge about how you run a business. With knowledge comes the
ability to control your destiny. So use the best information system you
can to capture history and forecast demand. Stay close to your customer
so you know what his needs are. Stay “cozy” with your suppliers to
learn about demand for their products and about new product
introductions.

We know as well as anyone that you’ve got a lot of things to think about in order to run a small
business like an ace. Though it seems like one of the less dynamic or
demanding aspects of your business, inventory management can actually
be the lynchpin between you and profitability, so make sure you’re proactive about it.

Total
0
Shares
Previous Article

Success Stories: We're looking for Key Moves

Next Article

The Faces of StartupNation

Related Posts
outsourcing
Read More

4 Reasons to Consider Outsourcing Your Sales Support

Sales representatives are responsible for boosting the company’s profits, and it can be a daunting task. Because of this, sales support takes some of this burden off their backs. Having sales support may not directly improve sales, but it has a positive impact on operations. Additionally, representatives can concentrate on improving their performance. The roles...
hiring remote employees
Read More

Crucial Steps When You Hire First Employees for Your Remote Business

Are you the one-person show behind a thriving virtual business? If so, you likely handle all of your company’s sales outreach, customer service inquiries, order fulfillment, social media marketing, budgeting … and the list goes on. Are you overwhelmed by all of the daily tasks you need to do to keep your enterprise running smoothly?...
empathetic company culture
Read More

Attract Talent by Creating an Empathetic Company Culture

Each new generation brings something different to the table and tries hard to paint the social norms in their colors. Nowadays, it’s millennials' turn to make the world a better place and they truly managed to bring some extremely sensitive issues under the spotlight.  Let’s take the workplace as an example. What used to be...
outsourcing
Read More

5 Areas of Your Business You Should Be Outsourcing

Whether you’re just starting a company or you’re growing faster than you thought possible, you need to consider outsourcing. Every business has an area of expertise. And the best businesses know to play to those strengths and outsource the rest. If you want to grow your business in a market more uncertain than ever before,...