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When buying inventory, which of these questions are “most” important to ask?

• Can I lower my cost for a larger order?

• Can I get a discount for early payment?

• Can I reorder this product if I run out?

• Is this a product my competition sells?

• Will I have greater leverage with this supplier if I buy a lot of their product?

• Is this a “cool” product and will I gain customer credibility for selling it?

• Can I get some vendor rebates, spiffs, trips, prizes, awards or cool T-shirts?

None of them !!!

““Who ordered Who ordered this junk ?!?!?”this junk ?!?!?”

“What” and “How Many” to buy depends ONLY on your answers to these

questions:

• Can I sell this product ?• Will I make a profit ? • How quick can I sell it ?• How fast will I have to

pay my vendor for it ?

(1) Can I Sell This Product?

Is this product really marketable, useable and/or in demand ?

Will “your” customers want to buy this product?

Is your sales rep having a slow month and looking for a sucker?

(2) Will I make a Profit?

Selling Price $ 1,000 100%

Cost (incl. freight) ( 600) 60%

Gross Profit $ 400 40%

(3) How Quick Can I Sell It?The answer: as soon as possible!! Think in

terms of 1-120 days; think twice about buying goods that will take longer than 4 to 6 months to sell.

Remember the dozen or so costs (the product cost, freight-in, insurance, rent, storage, inter-store transportation, setup, accounting, data entry & tracking, flooring & financing, property tax, breakage, security, shrink, physical inv., +1

more) that accumulate from aging inventory $100 cost = $130 one year later!

(4) Vendor Payment Terms?

You must be able to sell most of the product (if not all) “before” your vendor’s payment due date!!

Otherwise, you’ll have cash flow shortages, requiring you to either (a) borrow or invest more money, (b) string your vendors out, or (c) say “good-bye”

The Objective…“ To sell it, at the highest gross profit,

in the least amount of time, and never pay

for it. ”

Alan’s “Rule of Thumb”

for buying inventory

Alan’s “Rule of Thumb”

“ Buy the product ONLY IF you know you can sell it in “X” days or less, where “X” is

equal to 360 days times your gross profit percent. ”

STEP 1 - CALCULATE YOUR G.P. %Selling price 800$ 100%Cost of good sold 600 75%

GROSS PROFIT 200$ 25%

STEP 2 - CALCULATE THE DAYS TO SELLNo. of days in the year 360 x Gross Profit Percent (%) per above 25%

# OF DAYS TO SELL THE PRODUCT 90

STEP 3 - NOW MAKE THE DECISION:If you can sell it in 90 days or less, BUY IT !

If you can't or aren't sure, DON'T BUY IT !!

Alan’s “Rule of Thumb”

Here are three takeaways from The Key to Buying Music Product Inventory presented by Alan Friedman. Bring these ideas to back to your business and see what results you generate!

Takeaway 1: The Four Important Questions: (1) Can I sell it?, (2) Will I make a profit?, (3) How quickly can I sell it?, and (4) How quickly do I have to pay for it?

Takeaway 2: Choose another product or reduce the amount you buy until you get the right answers to the four questions

Takeaway 3: Always’ use Alan’s “Rule of Thumb”

Top Three Top Three TakeawaysTakeaways

Any

Questions?

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