Tips for Managing Inventory in a Small Business
4 mins read

Tips for Managing Inventory in a Small Business

For any small business selling physical products, keeping inventory levels on point is crucial, yet challenging. Too much and you are stuck with cash tied up in unsold goods. Too little and you risk turning customers away with empty shelves. Striking that perfect balance requires careful planning and diligent monitoring right from the very start.

Forecasting Fundamentals

The first step is forecasting how much inventory you will likely need for your first few months or selling seasons. Underestimating leads to disappointing stock-outs, while overestimating creates excess you may struggle to store or sell. Look at industry benchmarks, analyze demand patterns, and have a solid marketing plan. But also build in a small buffer to allow for the unexpected.

For example, if industry data shows retailers like you typically sell 500 units in your first three months, you might order 550 to be safe. Or purchase a variety of products like wholesale sunglasses from a supplier like Olympic Eyewear in smaller starter quantities until real demand emerges.

Counting is Key

Once you have opened, perpetually knowing your exact inventory levels is non-negotiable. Manually counting stock is time-consuming and prone to costly errors. Implement a simple inventory tracking system that logs real-time stock levels as sales are made and new merchandise arrives. This provides an accurate, constantly updated count.

With automated tracking, you immediately see which items are running low versus becoming potential dead-stock. This allows proactive reordering, transferring between locations, or adjusting prices to clear excess before it’s too late. The time savings and mistake prevention alone make investing in inventory tracking software worthwhile.

Seasonal Cycles

For many small businesses, sales ebb and flow with the seasons and holidays. Having too little hot product for peak periods is the quickest way to disappoint customers and leave money on the table. But being stuck with piles of excess seasonal stock is equally undesirable and expensive.

The solution is precisely forecasting seasonal demands, ordering incrementally as needed, then marking down surplus at the season’s end to avoid carryover. Use historical data, monitor sell-through rates, and routinely adjust on-hand totals throughout each seasonal cycle. With experience, you will get better at nailing those peak stocking levels.

Minimizing Surprises

No matter how disciplined your inventory management is, surprises are inevitable. A freak weather event, unexpected supplier shortage, or shift in customer tastes can suddenly throw product levels out of whack. Having flexibility and backup plans is crucial.

One strategy is maintaining a list of pre-approved alternate vendors for securing replacement goods quickly. Another is negotiating favorable cancellation terms with suppliers for adjusting orders mid-stream.

Getting Back in Sync

If your inventory oversight was lacking and merchandise piles up, it’s crucial to get proactive. Liquidating excess stock should become the top priority before it bleeds you dry in storage fees, decreases in value over time, or opportunity costs from tied up capital.

Identify any dead stock that definitely won’t sell, bite the bullet, and sell it to a liquidator at a severe loss if needed. For slow movers you believe can eventually go, map out a targeted promotions plan with deep discounts, upsells, and bundles to systemically work through the backlog.

Space-Saving Ideas

Inventory management gets exponentially harder as your business and stock grows but your space stays fixed. After maximizing vertical storage, look into barebones options like utilizing low-cost self-storage units for overstock housing.


Effectively managing inventory as a small business owner requires looking ahead, analyzing trends, and being nimble enough to adjust quickly to changes. Develop a comprehensive assessment cadence for routinely re-evaluating appropriate stock levels. Leave no room for inventory mismanagement to derail your dreams of success.