The Resilient Retail Game Plan Episode 195

The Third Golden Rule of Stock Management

Podcast show notes

The Third Golden Rule of Stock Management

How often are you reviewing your stock?

Stock management is not a one-and-done type scenario.  

I certainly would be able to sit down with you and audit your stock. We would be able to go through it, look at how much you’ve got, understand what’s working, and what’s not working, and I could make recommendations on how you could trim that stock back and what you should focus on going forward.

And while this can be incredibly helpful it won’t prevent issues on an ongoing basis. 

Moving into a monthly review is a simple, but powerful way to get a vision of what the impact of the month that’s just gone by is going to have on your future stock. And then you can use that information to actually take action. 

And I’m a big believer in information for action. You want to be able to look at your last month’s sales and understand immediately what that means for you going forward.  

So today we are talking about my third golden rule of stock management – making stock management a monthly review process and what steps you need to take to accomplish it. 

If this all sounds very interesting, but you know, for a fact, you will just not have the time to do it, then I do encourage you to join the waiting list for my new service, which will be launching later this year. I am going to be able to work with you to manage your stock better. Join the waiting list here: https://futureretail.lpages.co/feel-good-business/

Let’s Dive In:

[00:00] My third Golden Rule of Stock Management: Make stock management an ongoing process in your store

[03:21] Why stock management is not a one-and-done activity for your store

[04:08] What activities are included in a monthly stock management review

[07:08] Examples of what can happen when you are actively managing your stock plan

[08:15] Questions to ask yourself on an ongoing basis about your stock plan

[14:40] The Three Golden Rules of Stock Management – A Review 

[16:43] Final thoughts and my new service

About the featured guest

Catherine Erdly

Founder
The Resilient Retail Club
The Resilient Retail Club, is a membership group and mastermind for product businesses.

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Third Golden Rule of Stock Management: How to make stock management an ongoing process.

Catherine Erdly: Do you have a cashflow problem or a stock management problem? That is the question that I have been aiming to answer over the last couple of episodes on the Resilient Retail Game Plan. And today is episode number three in my mini series all about stock management. 

Hi, it’s Catherine Erdly. I am your host, as well as the founder of the Resilient Retail Club, which is my membership group and mastermind for product businesses. Go check it out at resilientretailclub. com. 

And so this is our, as I said, the third in our mini series, all about stock management, what we talked about in episode number 193 is about the importance of having a stock plan. Then in episode number 194, we talked about how to go further than having a stock plan and understanding the ins and outs of what’s actually working. 

And today episode number 195, if you can believe it, of the Resilient Retail Game Plan podcast, I’m going to be talking to you about how do you actually manage your stock on an ongoing basis? And what has that got to do with your cashflow? 

Welcome to the Resilient Retail Game Plan, a podcast for anyone wanting to start, grow or scale a profitable creative product business with me, Catherine Erdly. The Resilient Retail Game Plan is a podcast dedicated to one thing, breaking down the concepts and tools that I’ve gathered from 20 years in the retail industry and showing you how you can use them in your business. 

This is the real nuts and bolts of running a successful product business, broken down in an easy, accessible way. This is not a podcast about learning how to make your business look good. It’s the tools and techniques that will make you and your business feel good.

Confidently plan, launch and manage your products and feel in control of your sales numbers and cashflow to help you build a resilient retail business.

 First of all, as I touched on in the first episode, once you have a stock plan, you’ve got an idea of how much stock you want to be bringing in when, and that then helps you work out your cashflow because you can actually plot in your stock purchases ahead of time to avoid last minute surprises.

And it also encourages you to stick to the plan, which is what we’re going to touch more detail today, which means that you won’t get overexcited and spend too much money on your stock when you really don’t need to be doing so. It allows you to have that discipline and that in itself is hugely beneficial when it comes to cashflow.

And I’ve certainly seen people that I’ve worked with one to one and in my mastermind who’ve seen major shifts in their profitability when it comes down to something as simple as sticking to their stock plan. 

So what I want to really talk through today is how to make stock management an ongoing process.

So we’ve talked about the importance of setting a plan and how to go about doing that, how to think about that. And if you haven’t listened to episodes, 193 and 194 yet, then I do recommend that you go check them out. 

But today, what I want to do is talk more about making those plans and how you work with them on an ongoing basis.

Why stock management is not a one-and-done activity for your store

Catherine Erdly: Because the one thing that you have to know about stock management is this is not a once and done type scenario. I certainly would be able, for example, to sit down and audit your stock, to be able to go through it, to be able to look at how much you’ve got, understand what’s working, what’s not working, make recommendations on how you could trim that stock back and what you should focus on going forward.

That’s all entirely possible. And that in itself is hugely useful and would give you a lot of direction. But the real strength of stock management comes from looking at it on an ongoing basis. 

So in my mind, ideally every week you could look at your stock, but the way that I work it with a lot of clients is we do one big monthly update and then we can make decisions from there.

What activities are included in a monthly stock management review

Catherine Erdly: So a monthly review, let’s just touch on what a monthly review should really be made up of. So when it comes to doing a monthly review, what you need to be looking at several different elements. We go back to the elements of what a stock plan is. The stock plan is effectively you setting out what you expect your sales to be each month, what you expect your discount rate to be, what you ideally want your stock to close on and how much money you have got budgeted to spend that month or how much money you’re expecting to spend that month or what your confirmed orders are that month.

So you’ve got your sales, your stock, your intake. That’s why the tool that we use in big retailers is known as a WSSI, which stands for Weekly Sales and Stock Intake. So obviously I’m not suggesting, if you can do it on a weekly basis, that’s great. But for a lot of people, monthly is going to be sufficient.

So maybe we should call it a MSSI, Monthly Sales and Stock Intake. Anyway, The stock plan. Let’s just call it that. 

So each month when you update it, you need to update all of the elements that I just touched on. So you need to update what you actually sold. You need to update what you actually brought in, and that will therefore help you calculate what your actual closing stock will be.

And it’s as simple, but as powerful as that. And the reason it’s both simple and powerful is that it’s giving you forward vision of what the impact of the month that’s just gone by is going to have on your future stock. 

I remember talking to somebody that I worked with for many years. She was working for a brand that I worked for and they went into administration, were eventually bought by somebody else. She was one of those people there till the very bitter end. And I remember her talking about the new people came in and she was saying to them, look, because we’ve had to halt everything because of going into administration we are going to run out of stock in June. And it was maybe January at the time. And then she said the management team, who came in, said that’s months away. How can you know that we’re going to run out of stock? 

And the thing is you can see, you can preempt problems months in advance if you’re keeping an eye on your actual stock plan.

So for example, let’s say you have a plan and you’re going to sell a It comes in the month of March and actually you sold a thousand pounds. Now, your closing stock is going to end up being much lower than you thought it was. So what that’s going to do is, if you’ve got your stock plan set up correctly, is it’s going to tell you well, actually you can spend more next month, for example.

So you can go through and understand your sales and then you can use that information to actually take action.

And I’m a big believer in information for action. It’s not just enough to look at your numbers and go, yeah, okay. I did these sales this month. I don’t know what to make of that. You want to be able to look at the sales that you took, and understand immediately what that means for you going forward. 

Examples of what can happen when you are actively managing your stock plan

Catherine Erdly: So let’s take this first example where you’ve got sales planned in and your actual sales were much, much higher. That is going to get you to start asking a whole series of questions. That’s the point of this monthly review is to get you to start asking a whole series of questions. So some of the questions that you might ask yourself are on a very simple basis.

Why was sales so much higher than I thought? What was it that actually stimulated sales in a way that I wasn’t expecting? 

Now, small businesses, often our sales are somewhat unpredictable. Maybe it’s just that you hadn’t quite factored in that Easter falling into the month of March is going to have an impact, or perhaps it’s just been busier than you thought, and you can’t really put your finger on why. Or maybe it’s because you did some kind of new product launch, which was actually much, much better than you thought. 

So that is really important information to ask yourself. If sales are good, you want to ask yourself, why do I think it worked? Because you want to bank that for in the future when you’re to do more of what worked.

Questions to ask yourself on an ongoing basis about your stock plan

Catherine Erdly: So first off, ask yourself why. 

Secondly, ask yourself, what action do I need to take? 

If your sales were better than you expected? Have you got enough stock coming in? Have you placed the orders that you need to do your sales plan for the next month? Or actually, is it now feeling like you’re going to be somewhat tight?

Are there orders out there that are with suppliers that you could even go out to your suppliers and see if they could bring them forward because you’ve had such good sales and you want to get more of them in? If it’s a product launch that worked really well, how can you do more of that? 

So let’s say, for example, you are a jewelry brand and you launched some new limited edition earrings.

Okay. So what’s that telling you about the product? What the customer wants? If that’s done really well, are there other things that you can duplicate? And definitely look ahead and see, is there a sales risk now? Because my sales was so much stronger than I thought. And this is the bit where you get to start feeling like you’ve got a crystal ball.

Because this is the bit where you can actually anticipate, okay, maybe not right away, but in the next month, unless I increase what I’m buying, I’m going to run out of stock. 

And that is the beauty of the stock plan is that you’re able to go through and really understand what’s happening, make adjustments now, not in a month’s time when you suddenly realize that sales have stopped because you’ve run out of stock. And that is the beauty of the monthly review. 

Catherine Erdly: On the flip side, there may be months where your sales didn’t come in as planned. And so this is also something for you to look at to understand what, what didn’t work. So you’ve got to do the, what happened? Why did it happen as much as you can work out? Did you make wrong assumptions?

Do you need to, tweak some of your future plans down because actually you think you’ve been a little bit over ambitious. Or other things that you can see quite clearly. Maybe you were out of stock of some of your bestsellers and those are coming back in, so actually you think you’re fine to hold your plan as it is. Lots of different things that you can think about and learn from what didn’t work 

Again, it’s really important when you’re looking at sales performance, especially when sales haven’t been in line with where you want them to be. It’s very important to keep it as objective as possible. Try and be scientific about your reasoning. Please, Please do not say the reason is because I’m rubbish or my business is rubbish or nobody wants anything from me anymore. That’s not useful, helpful things for you to be thinking about. They’re just things that are going to make you feel worse and get in the way of you coming up with some ideas.

Ways to move forward. So whenever you do have difficult sales performance, then you’ve got to just have a look at the numbers and say what do I need to do? Because often you can really turn things around, especially from a profitability standpoint, if you don’t then let your stock begin to stockpile.

So the beauty of having then this stock plan is that you can now take a look at it and say right, I am originally said. Let’s say you had a plan in let’s try and do some easy maths here. Let’s say you had a plan to take a thousand pounds in the month of April and you took 700 pounds. And the following month on your stock plan, it said that you needed to buy 500 pounds worth of stock to finish on your ideal closing stock now you could reduce that down.

So if you haven’t spent that money yet, you could just say right i’m not going to spend that money because the sales are lower than I thought and therefore I don’t need to spend as much to hit this closing stock target. Or if you have placed that order, could you push it back, delay it, talk to the supplier if it’s not going to put them in a difficult situation to cancel it, can you cancel it?

All of those things that you can ask yourself. Now all of this is not a hugely lengthy process. It’s something that you can definitely accomplish in half an hour or an hour once a month having a look at this. But it’s immediately allowing you to take action. What you don’t want to do is be sitting on a sales decline month on month and still keep buying lots and lots of stock.

And then the stock just keeps piling up and then you have to pay for it. And that’s when it starts feeling really painful and you start feeling really pinched. And that’s when it starts feeling like it’s having this major impact on your cashflow. If in fact what you’re doing instead is updating on a monthly basis saying, okay, these are what my actual sales were, right?

I need to buy less these next few months. Then you can start taking action. And again, as I said, it can really help you stay out of some sticky situations when it comes to cashflow. 

So there is so much benefit to having this monthly check in. 

And whether it’s sales are doing amazingly and there’s things that you need to pull forward, things that you need to do more of, things that you need to increase in order of bringing more in so that you don’t lose out on sales in the future.

Whether it’s the fact that sales are declining and you need to pull back or try and dig in and understand what happened. Then either way, there’s still an awful lot of information for action that you’re gathering from doing this monthly review. 

And it also allows you to do something that is known in the industry as “clear as you go”.

And that is keeping an eye on the things that aren’t moving, that aren’t turning and being aware of the fact that you may have to take discount action against them in order to clear them. And depends on you and depends on your business. This may be something that you’re really reluctant to do.

Even if you’re really reluctant to do it, I would suggest that maybe once a year, maybe twice a year, you think about doing a stock clearance sale where you’re clearing out some of this older stock. 

Because the other thing that you’ll notice is that once you start setting yourself a ideal closing stock target on your stock plan and sticking to it, so that means sticking to it means that if you haven’t done the sales, you don’t buy the stock.

Once it starts, Hitting you where it hurts, which is in not buying the things that you love to buy, not buying that shiny new stock. Then you start thinking about, okay how else can I let go of some of this trapped cash? So we talked in the last episode about every business has these areas of trapped cash.

Then all of these are ways in which you can identify and be really motivated to clear through some of this older stock because now it’s freeing up lovely cash for you to buy some of the lovely newness instead. 

The Three Golden Rules of Stock Management – A review

Catherine Erdly: So those are my three golden rules of effective stock management. The first golden rule is make sure that you have a plan. And I go through that in episode 193.

The second one is know what is moving the needle and know what’s actually productive within that. That is what I go through in last week’s episode 194. And then the third one is. Keep an eye on it. Keep working on your stock on an, on a monthly basis. 

So this is something that is definitely seasonal. So it will shift. Your stock requirements in January, a very different from your stock requirements in October.

And if you have a different peak time, then you’ll have different stock needs at different times as well. So it is something that you really want to be focused on and you really want to be taking in the information and taking action to make sure you’re sticking to your goal and helping you manage your cashflow because your stock is well managed.

It really goes a huge way towards managing your stock effectively. If you can have a stock plan, an idea of where your stock is moving well compared to where it’s not moving well and a monthly update where you can really get to grips with how much you took versus how much you plan to take, what stock you’ve actually got and what actions you want to take.

So those three things together go a huge long way towards managing your stock effectively and managing your stock effectively also really helps you get into the driver’s seat when it comes to your cashflow because you’re not spending too much on stock. Plus you’ve got planned out amounts that you’re planning to spend each month on your stock rather than just buying what you think you need when you think you need it.

It really helps you move from being reactive to being proactive. And to be much more strategic and controlled in your business. And it can really help alleviate a lot of the stress that a lot of people feel when it comes to their business, they feel like it’s out of control or it feels like they’re on this hamster wheel when money is going out faster than it’s coming in.

Final thoughts and my new service

Catherine Erdly: So if all of that sounds good to you, I mentioned this in the last episode, but I am launching a new service And if you head over to the link that is in the show notes, then you’re going to be able to sign up for the waitlist. Lots of people have already signed up for the waitlist. So if you’re interested, then do come along and sign up.

It will be a service that will effectively help you manage your stock on a monthly basis. It will be a done with you service. So if you want to DIY it, then go read tame your tiger, how to stop your product business eating your life. My book, go check out the course inside the resilient retail membership club, which has got full video walkthroughs of how to create plans, how to do a monthly review.

And how to update them. There’s lots and lots of ways in which you can create your own stock plan and get into the point where you can manage it yourself. And if you are the kind of person who knows that you would love to have a stock plan, but you just do not have the time or the knowledge or the inclination to do it yourself, then this new service is for you.

 You will be able to have a monthly meeting of a stock plan that has been created for you and to understand what you need to do in your business to manage your stock and really be able to manage it more efficiently. So head over to the link in the show notes for the wait list and you’ll be the first to know about the new service is completely free, no obligation, but you’ll be the first to know about the new launch of the new service. Thank you so much. And I’ll be back next week. If you have a moment to write and review the podcast, then please do. It makes a huge difference to getting out there in front of more people.

And of course, if you subscribe or follow, then you’ll be the first to know about each new episode every Thursday morning.

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