Have you ever struggled knowing how much inventory to buy for your reselling business each month? Have you ever overbought or underbought inventory? I know that I definitely have! It is actually something that I am working really hard to be conscientious of this year! Today, I thought that I would share some insight on how I manage and plan for inventory based on the period that my business is in at any moment. This simple system has helped me over the years and hopefully, it can help you too!
What Period is Your Business In?
When it comes to running a reselling business, there are growth periods and maintenance periods. During a growth period, you are typically increasing inventory in hopes of increasing your growth sales and profits. During a maintenance period, you are usually keeping your inventory levels steady and consistent month-to-month. In this period, you are not looking to grow but instead, looking to maintain your business as it is. This is important to know because when it comes to building a business, there is fluctuation between periods of growth and periods of maintenance.
For example: Last year, was my maintenance period. It was my first full year as a full-time reseller and my goal for that year was to establish a baseline of my reselling business at that level. In 2022, I am looking to grow my business significantly so this year will be a growth period for me.
Learn more about business periods in THIS post!
Buying Inventory to Maintain Your Business
Before looking at how to grow inventory, let’s try to establish a baseline of our business’ averages from this past year. In order to do this, we need to look at data from all of the reselling platforms that we utilize. This will give us an idea of how many items we are selling across different platforms and what our average sales prices are.
For this example, let’s look at some data from Poshmark:
In order to pull some Poshmark data, head on over to the Poshmark App -> My Seller Tools -> My Sales report -> Last Full Year
Once you have the report loaded after clicking the link in your email, let’s look at a few calculations…
Total Items Sold for the Year: The easiest way to do this is to write down the line #’s of the first and last items sold during that year on excel and subtract them.
For this example, let’s say that I sold 1000 items on Poshmark in 2021.
Average Items Sold Each Month: For this calculation, divide the number of items that you sold in a reselling year by the number of months that you were a reseller during that year.
For example, if you started selling in May and sold 1000 items by the end the year, you would divide:
1000/7 = Approx. 143 items sold per month
Average Sales Price Per Item: For this calculation, you will need to find the total gross sales number for your reselling year on your excel sheet (you can find it towards the bottom).
For example, let’s say that your gross sales were $30,000. $30,000 divided by 1000 items= Avg. sales price of $30.
What Does This Mean??
This means that in order to maintain the Poshmark sales that you made the previous year, you would need to:
*Buy approximately the 143 pieces of inventory per month to maintain last year’s sales rate.
*Maintain an an average sales price of $30 per item to meet your monthly sales goals.
***Since the numbers in this example do not represent a full sales year, the gross sales would increase the following year if the seller were to continue reselling for a full year. Based on projections, they would be making approximately, $51,500 annually if they were to continue at the current rate.
This process can be repeated with all of the other reselling platforms that you use. from there, you can compile the data together and analyze your results.
Buying Inventory to Grow Your Business
Before growing your business, it is imperative to know your business’ baseline numbers (or your maintenance numbers as I like to call them). Knowing these numbers will help you to calculate projections when you are trying to grow your inventory. In order to do this, we need to work in reverse…
Let’s say our goal is to make $100,000 in a year on Poshmark. Let’s calculate it…
*To do this, I am going to use the information from the previous examples. I am, however, going to make a few adjustments- I will be assuming that the previous seller sold for the full year and adjust the numbers accordingly.
After some cross multiplying x = Approximately 3,332 total items sold in 2022. This means that in order to make $100,000 in gross sales on Poshmark with an average sales price of $30, the seller would need to sell 3332 items annually. Further, that would be broken down to 278 items per month.
If we were to break this down to a daily level, that would be: 9 items sold per day at $30 each totaling $270 in gross sales daily.
Takeaways
Calculating all of these numbers may sound tedious or boring but the truth of the matter is that without knowing these numbers, you can really harm your business. Knowing your baseline especially, really can help you to stay on track when it comes to sourcing for inventory. Additionally, if you are in a growth phase, this information can help you to play around with different variables in your business such as average sales prices and annual sales projections. As always, do what is best for you and your business but I hope that this post provided you with some helpful information that you can apply to your reselling business.
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