Inventory is like being married, you just don’t know if it will be
your first or last wedding. When you first start out in business you
have little money nor credit. So vendors won’t sell you a lot.
Therefore more times than not you don’t get over your head in
inventory. You make “enough money” and you probably pay your bills
more or else on time.
It’s like when you first got married. It’s exciting and you and your
spouse make enough between you that even though you’re poor, you’re
fine!
But then you get divorced. You don’t have children but you have to
divide things up and now you have less. It’s the same as having a
down year with fewer sales. It’s not as good as when you were happily
married, but you’ll survive.
Then you meet an exciting person and date and decide to get married.
This person has FOUR children that came from their previous
marriage.
You used to have enough money and cash flow to support two people.
This was like having just enough income to pay the vendors for just
enough inventory. Equal in/equal out. But now the stakes have
changed.
Your income is now the same as the previous marriage-two incomes.
But now you have SIX MOUTHS to feed rather than two and also educate
and clothe. All on the same income. Impossible! Now bills start
building up, creditors (vendors) call. To soothe them you post date
checks. This really hampers any possibility for a vacation as you now
KNOW how much you have to spend but are not sure of your income
during the summer (you’re a commissioned bottled water salesman).
You’re in a pickle because you’re income is the same but you’re
monthly outlay has increased. You know have more inventory than you
can support. Your only hope is to:
A. Sell more water. Your income will increase, but so will taxes.
But O.K. This is the same as selling more product in the store. The
cost of goods is the taxes. No increase in income is 100% free.
B. Work more hours selling the same amount of water per hour. Bench
people do this. They start out working 8-10 hours per day. Then when
they can’t pay for the extra merchandise (extra kids) they work
12-15 hours per day to pay for the extra expenses or bills.
As you work more hours and sell more product you JUST start to get
yourself above water. So what do you do? LET’S HAVE OUR “OWN” BABY!
Bingo, you’re back in the same pickle. Heaven forbid you get
divorced now. That would be the same as opening a SECOND LOCATION!
What to do? A few things:
A. Get a higher paying job. This is the same as raising sales
dramatically or getting a higher commission as a bottled water
salesman. This is not as easy as it appears as you’re competing with
others looking for more money too. These other people are called
"competitors."
B. Raise the price on water per bottle and you get to keep the
original commission (called for a store’s gross profit) plus you get
to keep the extra markup that you just put on the water. Like raising
your prices in the shop and also just adding a few bucks more in
every time you markup an item for the case.
C. Lastly-get rid of some of the spouses kids. Just think how it
would be if the ex-spouse took two kids back and you kept two. That’s
just like selling off old inventory without getting new. That would
also mean rethinking having another baby of your own until you could
really afford it. And this new baby (new inventory in the future)
would have to pull his/her own weight. I mean like get a job first
day out of the crib. No more free loaders in our family, everyone has
to bring in TWICE their cost per year (keystone) or back to your
other parent you go!
It’s a hard cruel world out there. Reality.
David Geller