Abraham Cohen, SCORE counselor, shares with us his thoughts on managing your inventory. There is a saying “inventory can make you or break you.” If it is too high, it ties up working capital and cash flow; too low, it may cost you sales. The right balance is easier said than done. Forecasting sales, market conditions, and deliveries may require a crystal ball. Inventory control is not a perfect science. However, the following principles, when applied, will get you close to optimum levels.
- Frequent Inventory Analysis: Use a computer program that matches your needs. Create your own program, buy a ready-made one, or hire the services of a programmer. If you are using QuickBooks for your accounting needs, they offer an inventory control add-on.
- Purchasing - Basic Factors: Months on hand; sales/lost sales; frequency (quarterly, bi-monthly, monthly, weekly or daily); vendors’ lead (delivery) time; safety stock to cover the unforeseen.
- Inventory Turns: Reorders per year. Example: monthly sales for item X is 20 (annual 240) – ordering 40 (2 months worth) every 2 months gives 6 turns; (240/40=6) – average monthly stock would be 20 (240/12). More turns, the leaner the inventory. Order timing is of the essence as well as adjustments for seasonal products.
- Vendor Lead Time: Order date to delivery. A 30 day delivery works fine for the above example, annual 240 and 6 turns. Order 40 units 6 times a year when your inventory is down to 20. Depending on the location of your vendor, domestic deliveries usually arrive in 30 days or less. Imported items can take up to three months or longer depending on the country of origin, trade agreements, location of the port, and inspections at both the shipping and receiving ports. Arranging for ‘Just in time’ delivery would be nice but many times difficult to forecast.
- Safety Stock: This factor is important especially when deliveries are unreliable. A 10 to 20% extra inventory cushion comes in handy, more so when sales are higher than forecasted. Lost sales and backorders hurt business and drive customers to your competitor. Incorporate the 10 to 20% into the purchasing formula.
- Computer Program Data: Above are basics to formulate a purchasing program. They are not universal. Different businesses require different data for their computer systems. The system will work only as well as the data entered: “Garbage in – Garbage Out.”
No computer program can claim perfection. Checking the numbers before placing the order will prevent nasty surprises. An experienced purchasing agent must know the items and have a working knowledge of your business. And remember, inventory = $$$$$$ already spent.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
Wednesday, March 25, 2009
Tuesday, March 17, 2009
How do I keep my service customers?
Customer confidence is important to every successful small business, but particularly to those that offer services. Here, the customer’s satisfaction determines whether you cultivate loyalty or an unfavorable reputation through word-of-mouth.
The foundation of this confidence is quality. The typical customer knows little about the technical side of your business and therefore judges your business solely on results. For others, it’s the courtesy and integrity of you and your staff. Never assume things are satisfactory. Continually monitor your operations and competition to be sure you are staying on top of your customers’ needs.
For example, evaluate the price range for services offered by competitors, determine how and why they arrived at that price schedule, and make sure your prices are reasonable and reliable. Provide each customer with a comprehensive bill that breaks out specific charges.
Train your employees to be patient with all customer questions. Be sure there are clear policies in place to address service errors, complaints and discounts. Train your employees to handle such situations and to know at what point complaints should be directed to you. Not even a loyal customer appreciates getting the runaround.
In all customer dealings, honesty is the best policy. No one likes to hear that a service problem has not been solved or that the resolution will take longer than expected. Be as specific as possible, but leave room for unforeseen problems such as receiving the wrong part or an employee’s personal emergency. And if a delay is unavoidable, notify the customer right away.
If you would like to discuss this topic or business planning, business growth strategies or a specific business issue, contact us at 609-393-0505 or email us at info@scoreprinceton.org.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
The foundation of this confidence is quality. The typical customer knows little about the technical side of your business and therefore judges your business solely on results. For others, it’s the courtesy and integrity of you and your staff. Never assume things are satisfactory. Continually monitor your operations and competition to be sure you are staying on top of your customers’ needs.
For example, evaluate the price range for services offered by competitors, determine how and why they arrived at that price schedule, and make sure your prices are reasonable and reliable. Provide each customer with a comprehensive bill that breaks out specific charges.
Train your employees to be patient with all customer questions. Be sure there are clear policies in place to address service errors, complaints and discounts. Train your employees to handle such situations and to know at what point complaints should be directed to you. Not even a loyal customer appreciates getting the runaround.
In all customer dealings, honesty is the best policy. No one likes to hear that a service problem has not been solved or that the resolution will take longer than expected. Be as specific as possible, but leave room for unforeseen problems such as receiving the wrong part or an employee’s personal emergency. And if a delay is unavoidable, notify the customer right away.
If you would like to discuss this topic or business planning, business growth strategies or a specific business issue, contact us at 609-393-0505 or email us at info@scoreprinceton.org.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
Tuesday, March 3, 2009
What's the value of a business mentor?
Often the smartest people are the ones who know they don’t know it all. Like it or not, a business of your own exposes you to duties, situations, problems and opportunities you may never before have faced. Is it time for you to get a mentor?
A mentor is an experienced business adviser who is willing to share information and insights on a regular basis. If you worked in a corporate environment before going out on your own, you’re probably familiar with the concept of a senior manager in the organization mentoring a younger one. Some companies have even formalized their mentoring program. In your own business, however, of necessity your mentor will come from outside.
If you are seeking a mentor, it makes sense to start by looking for experienced business professionals in the same business or industry as your own company. Ideally the one you want will already know something about your work and management style. Over your entrepreneurial career, you may even have a succession of mentors.
What does a mentor contribute to your growth as a business owner? First of all, he or she helps speed up your learning in vital areas of your business. This individual is not afraid to share personal experiences with you as well as expertise. But there are other advantages. A mentor
helps you avoid isolation, by becoming a “trusted other” in which to confide your uncertainties as well as your breakthroughs. A good mentor lends perspective, reminding you to “keep your eye on the doughnut and not the hole”; supplies the candid, honest feedback you may not be getting from your employees; and provides moral support for the tough decisions you have to make in your business.
Not so very far down the road, you will be ready to mentor individuals who are where you were only a year or two ago. You may be pleasantly surprised to see how this accelerates your own learning and growth as an entrepreneur. You then become a contributor to the business community in the same way your mentor was to you.
In short, mentoring is a relationship that will pay dividends for both you and the individual who mentors you. Finding the right mentor could be one of the most important ways you help your business to succeed.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
A mentor is an experienced business adviser who is willing to share information and insights on a regular basis. If you worked in a corporate environment before going out on your own, you’re probably familiar with the concept of a senior manager in the organization mentoring a younger one. Some companies have even formalized their mentoring program. In your own business, however, of necessity your mentor will come from outside.
If you are seeking a mentor, it makes sense to start by looking for experienced business professionals in the same business or industry as your own company. Ideally the one you want will already know something about your work and management style. Over your entrepreneurial career, you may even have a succession of mentors.
What does a mentor contribute to your growth as a business owner? First of all, he or she helps speed up your learning in vital areas of your business. This individual is not afraid to share personal experiences with you as well as expertise. But there are other advantages. A mentor
helps you avoid isolation, by becoming a “trusted other” in which to confide your uncertainties as well as your breakthroughs. A good mentor lends perspective, reminding you to “keep your eye on the doughnut and not the hole”; supplies the candid, honest feedback you may not be getting from your employees; and provides moral support for the tough decisions you have to make in your business.
Not so very far down the road, you will be ready to mentor individuals who are where you were only a year or two ago. You may be pleasantly surprised to see how this accelerates your own learning and growth as an entrepreneur. You then become a contributor to the business community in the same way your mentor was to you.
In short, mentoring is a relationship that will pay dividends for both you and the individual who mentors you. Finding the right mentor could be one of the most important ways you help your business to succeed.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
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