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Budgeting for Inventory: Part Two

inventory management

Last week we covered how to budget for inventory with funds you have. (Remember, if your inventory account is empty, don’t buy more inventory!) In part two of our budgeting for inventory series, we cover what inventory to stock and how to avoid supplier marketing schemes.

Buy with your customers in mind

First, know who you’re shopping for. If your client description is as overarching as “knitters” “quilters” or “scrapbookers” you’re not differentiating yourself enough.

Second, think of who your best customers are. A list of clients likely jump to mind, but note, your best customer doesn’t have to be the highest spender. Rather, your best customer can also be the most enthusiastic or a promoter of the store.

Once you have a list of 10-20 shoppers, buy with them in mind. Ask yourself before purchasing any product if it is something your best customers would like. If they won’t like it you shouldn’t buy it.

Finally, try to find a happy-medium when ordering inventory. You don’t want to buy so much product that it overwhelms your top customers, but you also want to have enough to satisfy demand.

Shop smart for inventory

Another thing to keep in mind are marketing campaigns from vendors. Vendors will use tactics to create a sense of urgency, such as “limited supply” or “limited-time-offering.” Remember, you should only purchase inventory if it makes sense for your store and you have enough funds in the account.

Inspiration for this post came from The Not-So-Obvious Basics of Buying by Gwen Bortner published in the October 2022 issue of Creative Quilt Retailer.

If you’re looking for more information to guide you in owning a retail business, subscribe to Creative Quilt Retailer today. Already a subscriber? No worries—join our Facebook group for insights and dialogue from industry specialists like you. And don’t forget, you can always purchase single issues if you prefer that instead.

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Budgeting for Inventory

inventory budgeting

Are you spending money you don’t have for inventory? Continue reading to learn how to avoid this financial situation.

Budgeting

To avoid overspending set aside a portion of every sale in a separate account to be used specifically for inventory. If the account is empty, do not order inventory (even if a calendar reminder is telling you to do so). Once the account has money in it, the first thing to cover are orders placed but not yet paid.

To determine how much of each sale to set aside, check last year’s cost of physical goods. Then compare that as a percentage of your total sales. If you can’t find this information, anywhere from 40% to 45% is a good place to start.

Note, this account is for inventory only, not classes. As you use this system ensure the account has enough funds for basic products, as they are the backbone of your inventory.

Inventory Scheduling

Another piece of inventory is when the product arrives. The first thing to avoid is feast or famine, meaning you don’t want all of your product to arrive the same day. That means you won’t have anything new to stock your shelves with for the next three months.

To avoid this, inventory tracking is essential. Once you know how long it takes a product to ship, you have the option to contact the vendor to deliver when you need it. Most vendors are flexible on delivery dates after payment, as the sale is what matters most to them.

The other option is to cut your order. If you know the order isn’t arriving for two more months, take a look at the list and determine what you can do without.

Inspiration for this post came from The Not-So-Obvious Basics of Buying by Gwen Bortner published in the October 2022 issue of Creative Quilt Retailer.

If you’re looking for more information to guide you in owning a retail business, subscribe to Creative Quilt Retailer today. Already a subscriber? No worries—join our Facebook group for insights and dialogue from industry specialists like you. And don’t forget, you can always purchase single issues if you prefer that instead.