Time to Keep Your Business Healthy, Wealthy and Wise
Having spent a big portion of my life in the manufacturing business, the actual business of a jewelry retailer always leaves me scratching my head. And for anyone who knows me, there isn’t much left on the head, so I scratch with caution. Why are so many jewelry stores closing? You can play the recession card. But the truth of the matter is stores are teetering on the edge because they simply have no control of their inventory.
In the jewelry business, inventory has always been the proverbial double edged sword. You can’t live with it and you can’t live without it. In the automotive manufacturing world, we produced goods based on orders. As a retailer, that order is a come bet. You’re pre-buying goods based on what you think your customers will want in the coming weeks, month or year. All at incredible cost – both in buying it and holding it. As owners, if there is anything you need to focus your energy on, it’s controlling inventory. There are inventory management systems from here to kingdom come. All of which don’t mean a hill of beans if you personally don’t control it. Let’s take a look at this process of buying and holding inventory.
First you buy. The cost to borrow money for inventory from your friendly bank is the formidable noose around your neck. For years you’ve conducted business this way, which is totally understandable for a start-up business, but, inexcusable for a retailer who’s been conducting business (sadly the same way) for a number of years. For example: every night when I come home, I throw all my change into a container. At the end of the year, I open it up and I’m amazed at how much I’ve saved and how little I need to add to my gift budget. In theory, could you do the same? Each year put a little aside for inventory. Add to it each year. It’s not a quick process but in future years, you’ll be able to fund some or all of your inventory internally. NO MORE BANKS! That also means no more fees, interest or being at the mercy of a gray suit with pinstripes who is your friend one day and foe the next. And, most importantly, it means more money in your pocket. Is it an overnight fix? Is anything? If you plan on remaining in the business for any length of time, there’s truly no better time to begin this process than now.
After decisions are made on purchases, enter holding costs – the place where many of you lose profitability. As you know, it’s pretty simple: the longer you hold it, the more you pay in interest and taxes. Successful jewelers will all tell you that they turn their inventory often, and the more often the better. Showcases always look fresh and new and customers are excited to visit their showroom. How do they do it? How do some jewelers remain successful (even in these trying times) and make money? They are highly selective in their buying process; they rely on purchase history and a keen sense of what their clients (not themselves) will like. Biggest accomplishment? They admit errors in buying quickly. They adjust pricing, sometimes dramatically. Better to sell the piece quickly with a lower GP, because inevitably GP takes a dive if a product sits in your showroom for over a year. It’s all about cash flow.
A banker is a person who will loan you an umbrella when it’s not raining. For years you’ve welcomed the favor. Come in from the rain and take the necessary (even baby) steps today to ensure the health of your business tomorrow.
Share your thoughts. Email suits@fruchtman.com
By Michael Fruchtman on November 10, 2009 :: Filed under Take into Account,Think
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