Online Business Benefits Pt 4

This post was written by Tony-Online on March 25, 2010
Posted Under: Uncategorized

Another issue you must consider with respect to selling goods online is the cost of carrying inventory in stock. When I worked in the corporate manufacturing sector with fortune 500 American companies, there was an ongoing debate in the industry over how much it cost to maintain, carry, hold inventory on hand. The numbers ranged from a low of 18% to 35% of the value the inventory. Put another way, the cost of carrying every ten thousand dollars worth of inventory ranges from a low of $1,800 to a high of $3,500 per year.

These numbers will make more sense to you when you consider the cost of things such as material handling – your time to move stuff around or the time expended by your paid employees, the cost of utilities – heat, power, and air conditioning. You also have to consider your cost of damaged goods, items that become obsolete – better and cheaper alternatives become available.

There are real estate costs related to the amount of space on your property you devote to the storage of inventory, real estate taxes, and the cost of rent if you are using another site, fire and theft insurance.

I’m sure you get the picture. It isn’t simply a matter of saying that you’ll take advantage of half the space in your double garage because you’re not utilizing it for anything else. These are all real costs that you would want to consider when preparing your income taxes for the business.

So, before making any irreversible decisions about the nature of the business you plan to operate, a small amount of think time devoted up front can save you a lot of money later on.

There are many advantages, now becoming obvious to you, in having an outside party, a fulfillment company looking after filling your orders for hard product. By reducing the profit you make operating this business, the outside company has many of the headaches, while you are free to work on the business. An important lesson to take away to day is that you must minimize the amount of your time spent working IN the business and maximize the amount of your time spent working ON the business. This copies what successful people do.

Stay tuned.

An original blog written by Tony Neilson and published at www.strategicbusinesscreationonline.com March 25/10

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