Dashboard

By Robert Counts robert@countsbusinessconsulting.com and Chad Counts crcounts@countsbusinessconsulting.com

Three Things You Must Do To Grow & Survive: Part 1 Increasing Inventory

he most important dollars you spend every month are the dollars that are spent on inventory. Unfortunately for many, the most important dollars to spend are the last dollars you spend. Meaning, we are buying based on what our bank account allows instead of what we have to buy to meet our customer demand and make money. Every single operation has a minimum number of future sales that they need to purchase for every month. The number that determines your inventory floor is the gross profit needed to cover your monthly operating expense. If you know your expected operating expenses then

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There is no point in having a sales goal without an in- ventory budget to match.

you know the gross profit you need to purchase in order to start making money. You must set your minimum buying budget for inventory at that level while planning to spend above that amount on a regular basis to achieve the desired amount of profit. This is how your budg- et for inventory should be established. If you do not buy with this in mind, you will struggle to maintain consistent growth and profits. Furthermore, you

risk backing yourself into a corner of buy- ing limited inventory and seeing your inventory value slowly dwindle until you are out of business. In order to grow and survive in auto recycling there must be continual, persistent and steady increase in inventory value. To get more sales you must have more inventory!

Even in the short term, we cannot tell you how many companies we have looked at where they have a slow month in sales only to look back and realize that purchasing had been off the last month or two. If you are buying according to your sales and request history you should see 20- to 30-percent of your in-stock sales come from what you have purchased in the last 90 days. This type of buying will yield between 45- to 60-percent of your in-stock sales the first six months they are at your facility. Inventory is the beginning and end of any company’s survival story. If you can- not master inventory then you will strug- gle to exist as a business in this market sector. Even in planning for employees and expenses, you must start with how many vehicles you expect to purchase, inventory, process, sell and deliver. Inventory flow is the metronome that determines the pace of everything else in your business.

Anything this vital to your livelihood ought to be the first expenditure you budget for, and most certainly, not the last! There is no point in having a sales goal without an inventory budget to match.

CBCDashboard and CBC support salvage and recycling business owners to improve and grow through PRP Profit Teams, Inde-

pendent Owners' Groups, On-Site Consulting, and Online Consulting using CBCDashboard: personnel, buying, in- ventory, income, sales activity, operations, and financials. Contact Chad Counts at (512) 963-4626 and Robert Counts at (512) 653-6915. Visit www.cbcdashboard.com and www.countsbusinessconsulting.com.

14 Automotive Recycling | November-December 2015