My wife likes “Pawn Stars,” on the History Channel. She watches the antics of Rick Harrison, the “old man,” “Big Hoss,” and my favorite, “Chumlee,” deal with people who bring odd things to sell them. One aspect these pawn stars consider in a potential purchase, is whether they can sell it. I really can’t tell by looking at the TV, but it seems there is a lot of inventory that sits in that shop. My interest always perks up when Rick speaks to the camera. Behind him are always the same four guitars. One of them looks like a vintage Fender Stratocaster. Now, I have been a Gibson man my whole life, but I would like to add a nice 1960s era Strat to my collection, depending on his price.
In any event, the guitars, and whatever the stars have on display, may be wasting money. It would be interesting to run metrics and see what the “number of days inventory ratio.” In other words, how long does this stuff stick around before they sell it? If your ratio is too high, you have tied up your working capital (or debt) in inventory. The longer inventory stays around, the less return your investment in that inventory.
In regards to inventory, I came across this article 9 Tips on Managing Inventory by Katie Morell. She gave some good advice on moving inventory. However, before you read her column think of another option spelled out in, The Long Tail by Chris Anderson. Chris analyzes Rhapsody Music, Amazon, and other such companies that avoid the “brick and mortar” set up, with inventory that is held by others, or is digital inventory.
Now, you may not have products that has to be stored, but is ALL of your inventory imprisoned in your brick and mortar building, or can you eliminate some by changing your business plan? If you can removal some line of inventory from your custodial care, you solve a whole host of issues: Pilfering, rent, utilities, security, insurance, etc.
Still, I would like to see if Rick is willing to sell that Strat at a discount. The longer it sits around, the more money he loses.