This transcript was generated from the episode audio and may contain minor errors.
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How much inventory should you keep on hand? If you are selling a physical product, it's kind of one of the oldest dilemmas. In fact, in the physical product businesses, how much inventory should you hang onto? If you make too much inventory, you waste money, you waste storage space, you might also be putting yourself at risk. If sales decline or if something goes out of fashion or there's something that's updated.
So that's always a risk. But of course, if you make too little, you keep too little stock on hand, you miss out on sales. That's the challenge we're gonna hear about today from a caller, Naomi. She runs a one-woman skincare brand and she wants to grow, but without overcommitting to inventory, she can't afford or store. So how do you solve this?
Is there a scientific way? Is there an intuitive way? Might there be a bridge between those two concepts? In today's episode, let's look at practical strategies for managing stock when you are a small business owner or a side hustler, not ready to operate like a big brand. I love this question.
I'll bring you the detailed version from Naomi and my answer right after this quick shout out to our sponsor. I always appreciate our sponsors and I appreciate you, our listeners. [Music]
Hey Chris, I'm Naomi from St. Paul, Minnesota. I run a small side hustle selling handmade skincare products, mostly body scrubs and lip balms.
I make everything myself. And while sales have been growing, I'm struggling with inventory. Sometimes I make too much and it sits around for weeks. Other times I sell out faster than expected and can't keep up with the demand. Since I have limited space and a tight budget, I don't want to overstock, but I also hate turning customers away.
What's the right amount of inventory to keep on hand when you're still growing? And how do I find that balance? [Music]
Naomi, here's the short answer. You want to keep just enough inventory to fulfill expected orders and a bit of a buffer, but not more than you can store or sell within a short window. So to get more specific about that, a key metric will be understanding your average weekly or monthly sales.
And even if your sales vary, look at your past couple of months, two to three months, calculate an average. If you sell 30 lip balms a month, then making a batch of 40 gives you a 33% buffer. Helps cover unexpected surges without locking up too much money and unused product. Of course, your numbers will be different, but the point is to cover maybe about a month's worth of sales and then a bit of a buffer. I also think it's helpful to introduce limited runs on purpose.
So instead of trying to match demand, you flip the script a little and you just say, like I'm making 25 of these this month, or maybe it's 250 or 2,500, whatever it is, first come, first served, and that builds urgency. It helps you avoid overproduction. It is good to sell out sometimes, like to run out of stuff and tell people, hey, just demand exceeded supply. We're gonna make something new next month. That just kind of gets people interested in buying more quickly, as opposed to just being a fan or being a customer, but not really responding with much urgency.
So you can scale that over time based on demand and your customers will begin to expect it. You're kind of tweaking customer behavior. It might also be helpful in your case, Naomi, to consider perishability just because skincare products have a shelf life. So much easier if you're selling something that doesn't have this factor, of course. I always think food businesses in particular, even more than beauty, perhaps, they have just so much complexity to them compared to other products or other industries or categories.
So if you're making items that might expire, that's even more reason to avoid big inventory builds. You want to just try to predict based on those sales and also based on anything else you have coming up in the calendar. Some businesses are seasonal, so that's something to be aware of as well. Inventory management really is not about getting it perfect. It's about being intentional and adaptable.
Ultimately, the goal is to stay in control, to not feel panicked, to not miss out on a big opportunity, but also not to kind of drive yourself crazy with having too much stock around and getting into all the problems associated with that. As mentioned, I hope that's helpful to somebody. Listeners, let me know if you have a question. You can also download every single episode from the podcast, from the archives. In fact, 3,115 episodes at the moment, all completely available for download free at the website, sidehustleschool.com.
You can ask a question there. You can see detailed notes for every episode, all kinds of stuff. And of course, subscribe or follow wherever you get your podcasts for new episodes. That's all for now. My name is Chris Guillebeau.
This is "Side Hustle School." [Music]
from The Onward Project.
