Making inventory sexy again

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Hey baby, is that a diamond in your pocket or is it a lot of diamonds because you overordered diamonds and now you have too many on hand without designs to set them into or customers to sell them to? 

We have all done it – gone to a gem show, or a gem website and our eyes were bigger than our stomachs or we saw what all of our friends were buying and decided why not? Why shouldn’t I buy a couple of opals that I will never use because I hate setting opals but I think that maybe, just this once, I will actually use them (nervously looks at my unused opal collection)?

Inventory is vital, but only if it’s bringing money into your business

Inventory is good for us, it is what brings the money into our businesses when we make sales. And it is also a cash flow killer – two things that can be true at the same time.

See, inventory (aka raw materials and also finished jewelry) is what we need to have on hand to make and sell jewelry. But it isn’t like other expenses, it’s like, a cool expense.

Until you use your raw materials, they sit on your books and you don’t get to write them off until you sell a piece of jewelry made from them

Myths and half myths about your jewelry inventory

Among the many myths and incomplete truths that float around the jewelry industry is the “spend money to make money” myth. This leads us down the path of overspending, not following a budget and spending indiscriminately.

The very unspoken truth is that even when it comes to our materials, a budget is key to not overspending in our businesses and also leads to greater focus and success in sales.

It’s hard to resist the siren song of gemstones and gold and silver. It is the easiest thing in our businesses to justify our spending on our materials. We NEED it.

But a little bit of focus, a smidgen of budgeting, or even a soupcon of evaluation can give us lots of extra breathing room in our businesses.

But how do we get there?

Here are a few concrete things you can do to get a clear view of your inventory and rethink your spending:

Have a system:

• Is it an Excel spreadsheet? Is it a system like Craftybase, Benchworks or some kind of custom database? Is it a list on paper? However it makes sense to measure your inventory, make it a habit to always record when you place an order, and to remove the materials when you sell a piece.

• Is this easy? Once it’s set up, yes. In the process of setting it all up you might feel like crap, and that’s normal.

Break the habits that Amazon built in you:

• When I canceled my Amazon Prime account 5 years ago on account of their shitty labor practices, it had a little side benefit – I spent less money. No longer adding a little extra thingamabob “just because” cut out a lot of extraneous spending.

• The same idea applies when you’re ordering metals and gems – resist the impulse buys. Those small impulse buys can add up. After all, what can it hurt to add an extra $50 to our order, that’s nothing, right? RIGHT?!?

Have a plan for your materials:

• In that previous example, spending that extra $50 with each order without a plan for how you’ll use it really adds up. And if you don’t have a plan to use it and sell it within a year or two (I’m getting to that), then that $50 just sits in your business, mocking you.

• Unsold inventory literally costs you money. Seriously. If you report inventory on your taxes, anything unsold means you pay more in taxes. 

Think like a retail store:

• I looked it up! Standard inventory turnover rates for things that are NOT jewelry is around 10.8 in a year.

  • OK, so let’s say you aren’t me and you didn’t work retail for years. What does this mean? It means that a store will sell through their stock 10+ times in a year.

  • Jewelry is different. (Told you I was getting to that) For our industry it’s more like 1-2 times per year. The reasons are myriad, but price point has a lot to do with it.
    It is easier to sell lots of items under $50 than it is to sell the same number of items over $100. Meaning, we might have the same inventory on hand for more than a year – this is normal, but not ideal.

  • This is why we might hold inventory for more than a year, even though that’s not as standard in most other product industries.

• Ideally, when you go to Tucson and buy stones, you would want to make those stones into jewelry in the space of a year or less. And sell it too!

“Have a budget!” “Make a sales plan!” “Curtail your impulse buys!” How is this sexy? Because the results are a beefier cash flow, more money in your pocket, greater ease, more breathing room in your budget to execute your bigger plans.

What questions do you have about inventory? Drop them in the comments!

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