The inventory storage in your warehouse is one of the many necessary expenses that you should consider while creating a business plan. It helps in determining the amount of money you would need to start a business.
How to Estimate a Start-up Inventory Cost?
Inventory cost estimation is, of course, a difficult thing for the new retailers.
On your request, vendors and suppliers will send you the catalogs with the dealer price list for establishing your business. Hence, getting an accurate estimate is essential so that you can show it to the bank or finance companies if you are looking for a loan.
You have to know some basic facts to estimate your inventory cost:
· What product lines you are going to stock with your business?
· How many items would you need to stock to start the store?
· What will be MSRP Manufacturer Suggested Retail Price?
You should also know that the typical retail mark-up price for a product run between 30% and 40% of the actual cost of the product, depending upon the industry segment. Remember, higher mark-ups are possible with the hand-crafted and luxury merchandise.
Let us take an example:
So, you want to stock 20 sweatshirts from popular brands in your inventory.
If regular selling price of a sweatshirt is $60, the mark-up price will be = $60 x .40 = $24 (as per 40% retail mark-up percentage)
Wholesale price of the sweatshirt = $60 - $24 = $36
Wholesale cost of 20 sweatshirts = $36 x 24 = $864
So, your inventory may cost up to $864 for 20 sweatshirts.
Now, pay attention to these two points:
· Be consistent with the above research process and estimates for all the products you are planning to sell.
· Also, consider factors like shipping, handling, and other relevant expenses to obtain the merchandise.
Doing industry research and checking out reports from trade associations can help you get an insight into what mark-up price your retail segment uses.
Always remember that the plan may have differences from actual revenues and expenditures. So, always keep a marginal capital for risk coverage.
Now, when you are ready with your retail business, I will always suggest you to use inventory management software. It will help you to manage your orders, inventory, bills, accounts, reports, and everything that accounts important and needs security in your business. Here are a few of them that will help you to manage your stocks well, along with providing many other benefits.
3. Zoho Inventory
4. NetSuite ERP
You can try any of these according to your business needs and get to the successful management of your inventory, warehouses, and customers.