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Working out your business’ budget for buying stock

Before you set off to visit your wholesaler, you need to work out a budget to suit your business' needs and means. Although the need to budget carefully is essential in almost all aspects of business startups, it is particularly important when it comes to buying stock.

Working out how much you need of a certain product and how much money to set aside can be a tricky balance to strike.

It is important to work out the demand and profitability of each product before you decide how much to buy. Purchasing too few supplies to satisfy customer demand or keep your business running smoothly, and you will suffer financially.

On the other hand, if you buy too much unwanted stock, not only will you have a room full of rotting rhubarb or dusty DVDs, you will also be nursing a nasty, not to mention unnecessary, dent in your wallet.

It's also wise to keep some money back. If you don't you might miss a bargain or neglect other essential areas of your business.

Of the two scenarios, over-spending is the least preferable, as you won't be able to correct your order next time if your firm suffers serious financial damage. So, when working out your budget, err on the side of caution.

How much you buy in one go depends on what you purchasing the stock for. If you have a large high street outlet, then you are going to need to buy far more stock than an individual trading part-time from home.

Most wholesalers have fairly low minimum orders from £50-£300 and this means that traders can buy in fairly small quantities initially. This is recommended so you can check that you can actually sell the products – there is nothing worse than being stuck with a large quantity of stock that you can't sell, especially if you have invested all of your capital into it.

When working out your budget, err on the side of caution.


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