With a microbusiness, unlike larger ventures, every penny counts. Therefore, Ending any period with the dreaded 'dead inventory' will always be a financial nightmare. This concept literally refers to those products that, after entering the warehouse or warehouse of the business, remain motionless, without finding a buyer to give them life. In other words, it is the merchandise that refuses to leave the shelves and be sold. These products become a heavy burden on the entrepreneur's pocket.
The accumulation of dead inventory is a latent risk, but sometimes identifying it is not so simple and requires mirconegocios founders to learn to identify key signals and understand their implications in order to safeguard their financial health.
First, having products that do not sell and take up valuable physical space in the warehouse or counter. Due to the size of these businesses, they cannot afford to waste it., especially when there is merchandise that generates more demand and more income. On the other hand, many products have a limited useful life, either because they are perishable products or because we are talking about industries that change according to consumer trends.
This adds additional financial pressure to the microbusiness, since they not only lose the sales value of those products, but also the money invested in their acquisition.and even the opportunity to generate income from other products.
Two keys to avoid dead inventory
Maintaining an adequate, balanced and dynamic inventory is essential for financial health and above all to ensure the long-term sustainability of businesses.
The ability to effectively forecast and manage the flow of goods becomes a critical skill for entrepreneurs, allowing them to not only avoid unnecessary financial losses but also remain agile and adaptive in an ever-changing business environment.
To do this, I share two tips to avoid dead inventory.
1) Demand analysis and inventory rotation
One of the most effective strategies to avoid dead inventory is to conduct constant demand and inventory turnover analysis.
This involves knowing which products sell more or less, those that are most in demand in certain seasons, and even identifying those that have never been sold.
This will allow the entrepreneur to plan his inventory purchases much better, having a balanced inventory and avoiding dead inventory. Microbusinesses must also stay on top of market trends and adapt their inventory accordingly.
2) Strategic promotions and discounts
Another effective tactic is to use strategic promotions and discounts to move stagnant merchandise.
Offering special deals or attractive discounts on that inventory that doesn't move can encourage customers to purchase products that would otherwise sit on shelves collecting dust.
This strategy not only helps get rid of dead inventory but can also generate a boost in overall sales, attract new customers and encourage the loyalty of existing ones, taking advantage of an otherwise adverse situation.
Alberto Bonetti Friaz CEO and co-founder of YoFio. He has more than 25 years of experience holding C-level positions in leading banks and fintechs in LATAM. He led and was part of the founding team of Banco Promerica in the Dominican Republic growing a small credit card operation from scratch to becoming the sixth largest credit card issuer in the country. As CRO at YellowPepper's, he was a vital part of the VISA acquisition a few years later.