I started off in manufacturing and ran my own pottery factory for 15 years. I was the designer, maker and marketer of the pottery. This taught me many skills of which I am grateful today. The limitations as manufacturer were many. Time was the biggest limitation. I only had 24 hours a day and I can only make so many pots a day. My kiln also limited the amount of items I could fire.
When I started a buying and selling business I was liberated from these limitations.
I realized that the the only limitations are the ones I set myself. It is like a farmer who goes out to sow a field. If the farmer sows a field of 1 hectare he will reap a harvest of 1 hectare. He can fertilize aggressively and get a slightly larger crop. On the other hand we get a farmer who plants 100 hectares. His returns can be 100 times bigger.
So the bottom line is in the size of your thinking. If you limit yourself by planting just a hectare you will reap what you have sown. We have a limit of R300 to avoid the low order fee of R150. Some customers complain about this and say that R300 is too much for them to spend. I have often wondered about this statement. If you use a markup of 100% you will sell this stock for R600. If you use a 200% mark-up you will sell the items for R900. I do not recommend such a high mark-up. It will be detrimental for future business. Customers are clever and they know how to look up information. If they buy something for a high price and later discover they could buy it for much cheaper elsewhere they will feel cheated and avoid your store in the future.
I recently shopped around for a remote control. I found one priced at R150. I decided to look further and found the same remote control for R59.00 at the steel merchant. I needed 4 remotes. This is a savings of R396.00. I have very negative feelings about the store where I saw the more expensive remote. I have told about 4 people of my findings and they are also negative about this store.
So how do I avoid this negativity. Use a standard mark-up. If you buy an item cheaply you must mark it up cheaply. We often make the mistake to think that an item has an unlimited price. To give you an example. We sell a single pearl bracelet for around R10 plus VAT. The same item was seen at a market for R120.00. Imagine where the people will buy next time. You have to keep close records on your best sellers and buy these all the time. Many of us get caught up in buying from reps that pressurize us into buying. And so our cash flow goes out into dead stock that sits on our shelves. I keep very precise reports on sales and know at any given time how many of each items sells per month. If it sells well I make sure that I stock it again. Money is made between supply and demand. If an item is in demand you will make money when you can get supply. We just struggle because our supply period might sometimes be too long apart. I stock up every 3 months. We try and buy only items that we know moves fast.
So let us get back to some predictions. If I need an income of R30 000 per month I need to buy R60 000 worth of goods if I have a mark-up of 100%. This means I will get in R60 000 and I will make a profit of R30 000 and still have R30 000 to buy more items. If I only bought items worth R10 000 and have a mark up of 100% I will only make R10 000 and be short R20000 to pay all my bills and have quality of life. You must spend money to make money. Set a larger target and get enough funds to make your business healthy.
So let us summarize.
- Buy enough quick sellers
- Use a low mark-up
- Set yourself targets on how much to buy
- Force yourself to buy enough to make the business viable
- Say no to the wrong products
- Source your own products from suppliers with a good track record
- Work on turnover rather than profit to avoid long term harm
Good luck.
Gerdus
PS: Avoid buying one of a sort. Buyers do not take you serious when you only have one of an item on the shelve. Discount all items that gets to ones and twos. Rather stock less but stock deeper. (buy more of each item)
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