Ajith owns a very successful antique shop. His store is usually busy, and it is not hard to see why. It is full of fascinating old knickknacks, gizmos, odds and ends, and other items that he buys from a variety of sources: dealers, antique shows, garage sales, classified ads, and bungalow sales are the most common.
“It’s all in smart buying,” he says. Ajith won’t buy anything, no matter how much he likes it, unless he can get it for the right price. He also knows that if he can get the right item for the right price, selling it won’t be a problem.
The type, quality, and style of the products you stock go hand in hand with the brand you create. The question now is where to find those products and how best to keep them on hand. Although stocking the store may initially seem like a needle-in-a-haystack chore, it need not be. With a bit of investigation, you can find the right suppliers.
So, as a small business buyer, your caveat is this: as you start to make decisions that will build your brand, don’t forget that the name of the game is making a profit. Buy low and sell high. The key now is to find the right suppliers that will help you buy low.
Finding the right suppliers
There are many existing channels for buying merchandise; you just need to tap into them. Here are your best bets.
Referrals
The problem with speaking to people in your community who have a business similar to the one you have. It is probably wiser then to find people in other districts and speak with them. Theycan tell you who their suppliers are and the names of the suppliers’ representatives. Call the reps and have them come to your home or store to show you their line.
Trade shows
Trade shows are presented by people in the business for people in the business. By attending, you will make invaluable contacts, see the latest trends, meet potential suppliers, learn the lingo, and get a crash course in your industry. By wandering the aisles, finding the products you like, and then talking with the rep in each booth, you will begin to establish yourself.
Trade magazines
Pick up a copy of the trade magazine(s) for your business and look at the ads. They want to sell to you. Call the companies whose products you like, and again, get them to send a rep to meet with you.
Trade associations
One of the nice things about contacting your trade association is that it may have a list of overseas contacts who sell what you are looking for, and those products likely will cost less.
Go to the source
If you know which product you want and who makes it, then go online and get the company’s contact information. Call the company up and ask for the sales department. Explain who you are and what you are doing and ask to meet with the rep in your area.
Meet the reps
Since you do not have an established business, meeting with reps should not be simple. The challenge is to get reps to take you seriously, to see you as a viable contact. Most reps are overworked and don’t have much time to waste, so be sure to present yourself professionally. If you are new tobusiness, it may be that the company or the rep will want to see letters of credit, references, or something similar.
The rep wants to be sure that you will be able to pay for what you order, in full and on time. Of course, the vendor wants your business, but business is business. Finding vendors is a matter of creating relationships as much as anything else, and you need to establish relationships with your potential vendors and their representatives.
Without any trade references, proving your mettle is difficult. This is especially true if you are trying to establish trade credit and want the vendor to sell to you net 30- or 45-days’ credit. If you find the big manufacturers difficult, start with a smaller company. Maybe, your margin may be lesser, but starting small and establishing yourself and build some trade credit and trade references maybe a feasible idea.
When meeting with company representatives or independent sales agents, you want to be sure to get samples of the products they are offering. Sometimes these will be free, sometimes not. Pay if necessary. Take the samples and make sure that they are the quality and style you want.
Inventory control
You need to order enough stock in enough variety to respond to the needs of the many different types of customers who will be coming into your store. It takes all kinds of people to make the world go ‘round. If you stock your store only with items you like, then you are losing the chance to sell to people who are unlike you, and rest assured, there are plenty of those out there.
How much product do you need? First, the shelves must look full. Second, although it might sound trite, you need enough product to meet the normal demands of your business. A store with a track record can look to previous years’ sales, but a new start-up must use the figures calculated in the business plan.
Once you know how much you need, you should order that amount and a bit more, maybe even 10 percent more. This is enough of a cushion should a vendor deliver late or should for reason your deliveries arrive late.
Inventory control software
One way to keep track of inventory is by searching for and purchasing a good inventory control software program.This leads us to reorders. After a while, you will get a sense of the rhythm of your business. You will know how long it takes supplier X to deliver product Y, and you will order accordingly. But especially in the beginning, you need to be all over this
Running out of inventory is a rookie mistake and one that can easily be avoided with just a little bit of planning.
The flip side of a lack of inventory is having too much inventory. This can be an especially nasty problem if you sell perishable goods or seasonal items. Excess inventory slows your cash flow and costs money by taking up space for items that would otherwise be selling.
What do you do when you have too much product on hand? The time-honoured thing to do is to have a sale. Sale is one of the two most powerful words in business (free being the other). The good thing about a sale is that it brings people in the door for the sale items, and they just may stick around and buy other items that are not on sale. The bad news is that you are losing money on sale items that you need to move because you didn’t practice smart inventory management.
Cash flow and inventory control
One of the most important concepts in business is the 80 - 20 rule, which holds that 80 per cent of your sales will come from 20 per cent of customers. It may not be - in fact, it probably won’t be—your most expensive items. Rather, it will probably be the less expensive items that are turned over again and again that will account for 80 percent of your sales.
Those vital 20 percent products are the lifeblood of your business, accounting for much of your cash flow. Obviously, if you don’t always have enough of those products, you will be severely hampering your cash flow. You may not be able to afford everything you want for the store when you want it. But if you know which products account for 80 percent of your sales, you will be able to prioritize accordingly.
Tracking inventory
Depending on how much inventory you stock, you may need an inventory control system. Such a system can tell you what you need to order, what sells best, and whether an employee may be stealing from you. Your system might be manual, although these days it is far more common to have a computerized system.
Accounting programs such as QuickBooks and Microsoft Office Accounting have inventory tracking control systems as part of their standard functions.
Manual inventory
With a manual inventory control system, each item in the store is tagged. Thetag is removed when the item sells, the used tags are itemized (so that you know what has sold), and then checked against the physical inventory (so that you know whether anything is missing).
A sophisticated inventory control system will allow you to know exactly what sells, compare it with what else sells, let you know when to reorder, and help you figure out which products are the most profitable. Another option is to invest in a point-of-sale (POS) system. POS software creates up-to-the-minute inventory records from the point of purchase.
If you buy the right products at the right price and keep track of what you need and when, your small business will be the better for it. And always remember, it’s all in the buying.
(Lionel Wijesiri is a retired company director with over 30 years’ experience in senior business management. Presently he is a freelance newspaper columnist and business writer.)
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