I have been in business for some time and I now know that business failure doesn’t just happen. There are many reasons for business failure including loss of business to competition, insufficient markup, unaffordable rent, and high utility service costs. There is one overlooked aspect that has brought down many, big and small, businesses. Most of those who have been and are in business have confessed having been victims to this most overlooked business killer ‘poor stock management’. I implore aspiring entrepreneurs and those whose business are in trying time to take this advice seriously as I have done a similar mistake in the past.

 

What is ‘stock management?’ In simple terms it is knowing exactly how much you have stocked, sold and how much remain. The money you have collected must match the number of units sold and when available stock and the money a totaled, they should balance with the initial stock value. It does sound simple yet it takes a lot of effort to do, particularly when your products are difficult to quantify.

 

Whenever you want to start a business or are running one, you must quantify your stock and always balance it at the end of each day. Never tire checking your stock, even if it is a small business you are running. I know you may excuse yourself and say you are only offering a service. I have news for you; a service can be quantified as well. You may choose to quantify it in time, per customer or otherwise but there is a way. Unless you do so, you may miss manage your stock and fall a victim to this deadly killer.

 

The Conversation

 

Today I was talking to a friend who works for an electric shop that also sells furniture asking him why his employer has survived all these years. He mentioned two things that I think all businesses should observe to ensure a successful in stock management:

 

  1. Put the right systems in place. People always try to beat systems for self benefit. Your employees are no exception. If your monitoring systems allow employees to right off some stock without following some security measures, then you must consider investing on another one. It’s difficult for me to say the next point to this effect because I’m an African and I know how expensive it can be to get the best system, ‘avoid working manually’.

 

My friend anticipated that the fall of ‘Decade Furniture Shop’ (a shop that had to several branches nationwide) was a result of being too manual that lead to poor stock management. It is advisable for entrepreneurs to automate their services as it becomes very difficult for cheaters to blame a system. For example, a system cannot victimize people as that can be put as a reason against a manager in a disciplinary case. 

 

  1. Take precautions on how your stock is dispatched and/or disposed. All dispatched stock must go through the front door. You must emphasize this and make sure it happens. If your stock is damaged for any reason, put policies in place to dispose that stock. Never allow employees to decide on damaged stock because this could be a reason for mishandling merchandise.

You may have all else in place and working well for you, but stock is the engine of your business and must be managed properly.

 

It was to my interest to know which of the stocks they sell works for them. He did say that appliances can be profitable but they have a high rate of returns from factory faults and damage.

 

Starting Your Own Business

 

Does it mean that my friend should start his own furniture shop now that he knows the business so well? No, I don’t think so because business in not only about stock management. Before he can risk starting one, he must at least do the following:

 

  1. It’s needless to say that he needs to draft the road map of his business (commonly know as the business plan), starting from day one to its exit.
  2. Assess to know his strength in this business so that he can recruit other competent fellows to do what he cannot do.
  3. Pick a niche market to serve that will be able to cover all operational expenses and get reliable suppliers.
  4. See if he can take the pressure of running his own business. You must be healthy to run a business because you may die from business demand sickness sometimes.

 

I will just highlight these four as basis for starting a business. There is an article that addresses this subject that I shall publish soon.

 :shock:

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