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Product Inventory: Don't Get Caught With Your Shelves Full

By Michael K.

If you're looking to put a heavy burden on your new business, I can't think of a more effective method than to stock all the shelves in your garage with boxes of inventory that you HAVE to sell. There are a number of ways that you can assure that you will have to carry significant levels of inventory:

1) If you are going to be in business for yourself, producing your own product, make sure that you're selling a product that is time consuming and expensive to create. In order to minimize the time between order and shipment, you'll have to keep considerable inventory on hand. This is especially important to be sure you're ready for an increase in demand in case of a well performing ad or positive write-up in the paper.

2) Find a good source for some discontinued or overstocked product that you think you can still sell for a good price. You'll have to buy out their entire inventory: 1,000 or so pieces ... at $5 each. However, since you're sure you'll be able to sell them, you can put the order on your credit card or take out a business loan to pay for it. Think that sounds ridiculous? You'd be amazed a how often that sort of thing happens and then the product doesn't sell.

3) You could set up a distributorship with a network marketing company that requires a hefty initial payment to set up a distributorship. This initial outlay includes an awesome "start-up pack" of "essential" products for you to test and sell. Thus, you are forced to carry inventory before you've even built up a clientelle to sell it to. That is a perfect to get yourself stressed out right from the beginning.

4) Alternatively, you could try a company that requires a minimum level of sales each month in order to maintain your distributorship, in which case, if you don't sell all your product each month, you basically have to buy it yourself and stock it in your basement (to maintain your business volume) in hopes that you can sell it next month.

5) A neat little twist on this would be to hook up with a company that requires you to set up what is called an Auto-Ship, meaning you authorize them to charge your credit card for, and ship to you, a certain amount of product each and every month (normally significantly more product than you and your family could actually use in a month). This is a great way to put an extra burden on your business because you HAVE to sell the product that you received this month because you'll be paying for more next month.

I'm going to assume that you're astute enough to pick up on the fact that I'm not actually recommending that you attempt ANY of the above scenarios. There is just no way of ever knowing for sure how a business venture will pan out. Obviously, you have to go into the venture believing that it will be successful, but not all businesses are. In fact, I'd submit that most are not, for whatever reason.

The problem is, if it turns out that your business is not the huge success you had hoped it would be, but you have large amounts of inventory on hand, you now have TWO problems. One, your business isn't generating any money. Two, you have a great deal of money tied up in inventory that you may never be able to sell.

So, What to Do?

My recommendation? If you're considering starting your own business, do your level best to come up with a business plan that does NOT include carrying large amounts of inventory (preferrably none, but in some businesses that would be unrealistic). That way, if the business tanks, at least you're not also dealing with the added difficulty of having significant money tied up in potentially UNsaleable product inventory.

That means, electronic information products, affiliate programs, network marketing programs that require little or no inventory, service oriented businesses, etc. I think you get the idea. There are tons of business options that don't require stocking product. Try and make yours one of them.

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