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  Home Page » News » Columnists » Bottom Line » Your Inventory Is More Than Factfinding

Your inventory is more than fact-finding

by Dan Bowser
We’re coming up on the end of the year, and many businesses will soon be faced with the task of taking inventory.

Many business owners take this activity lightly. Some don’t even take inventory, but instead, estimate the year-end total of goods in stock. They tend to think of taking inventory as a fact-finding process and aren’t aware that it is also a fact-facing process.

Only by taking an inventory can the owner accurately know the profit or loss for the year. Only by taking an inventory can the owner gain an accurate picture of damaged, shelf-worn, obsolete or unsalable merchandise.

However, there is a higher level of inventory-taking or fact-facing that may be even more important to the business owner. I’m referring not to taking the measure of goods for sale, but of taking the measure of the business itself. Let’s take a look at this higher-level process.

As mentioned above, profit or loss cannot be known until an accurate inventory is taken. To rely on an estimate or to use last year’s value is to kid yourself about the operating results of your business. Even worse, it means you are flying blind when it comes to knowing how your pricing or inventory-control procedures are working.

In a similar manner, failing to inventory, or calculate, the return on your investment in your business is to leave you clueless about how you are really doing. Being in business is a risky endeavor. Failing to obtain an adequate return on your investment means you are not being compensated for taking the risk of being in business. This means your risk of failure is greater, the value of your business is reduced or nonexistent and your ability to sell it is difficult or impossible.

Just as merchandise can become shelf-worn or out-of-date, so can a business become shabby and unattractive. I’m not referring just to the paint-up, cleanup types of items, although they are quite important. Is equipment modern and up to date? Are you using technology to improve the experience for your customers? Are your employees trained to render valuable service? Do you continue to train your employees? For example, a friend recently told me he no longer patronizes a restaurant where he was a long-standing customer because the waitstaff is no longer courteous or knowledgeable about menu items. They are either not properly trained or not properly supervised. Either way, the business loses.

Have you been in a Starbucks lately? If so, did the barista ask how your day is going so far? I confess I react positively to a genuine inquiry such as this. Clearly, Starbucks is learning from the current economic downturn and is training its employees to improve the experience for their customers. If you own an independent coffee house, what are you doing to provide an even better experience?

There are many additional ways to “inventory” your business. A good way to begin is to talk to customers about their view of your business. The experience may be painful or embarrassing. It will almost certainly be enlightening and profitable.

Bowser@BusinessValueInsights.com'>Bowser@BusinessValueInsights.com Dan Bowser is president of  Value Insights, Inc. of Durango and Chandler, Ariz.