If you have a small business and you sell products then it is important to pay attention to and manage inventory for your small business. What does this mean? It means I have to pay attention to my profit margins on each of my product lines in order to make sure that the gross profit is sufficient to pay the cost and overhead associated with the sale of my products. I also need to make sure that the profit on my products is sufficient to pay me for the time I have to put in managing the entire inventory process. So how do I do that? Of course most small businesses are using QuickBooks to track and manage your inventory. Some are using outside programs.
Here’s the thing most programs don’t make it easy for you to to with your inventory. There is not usually in my experience a quick and easy way to both analyze and updated multiple aspects of my product line information quickly and easily. So I developed a template a number of years ago to help my friend out who sold promotional products. We traded services, actually. If I had charged him full price it would have cost him about $900 for my time. I cut that in half for him and he gave me some promotional products in exchange for the design of this template. So what does it do that is so special? If you go online and search for a “Margin Calculator” you will get a lot of free templates that enable you to enter a product’s cost and price and you will get back the Gross profit % and Markup %. Mine does much more. Of course it gives you all of that but it also lets you lay out a list of up to 100 products at once with cost and price and everything else calculated. Then it lets you choose from among 5 different scenarios to change information based on varying criteria. So if you know a prospect has a budget of $18,000 to spend with you, and when you drop in the products (s)he wants the total selling price comes to $20,000 then there are several ways you can make it work and the different scenarios address those different options. For example you can think in terms of your gross profit margin and there is a scenario that lets you adjust the Gross Profit Margin in terms of the percentage and my Margin Calculator will either adjust the quantity or the selling price to make it work for you. Could you do this yourself? Of course you could and if you are only looking at one product then you probably should, but what if you are looking at an order from a customer with 20 different products? This will save you a ton of time.
The main point behind this is to spend the time analyzing your product lines, and this is how some of my clients who are doing in excess of $5MM in annual sales are dong it. Each one individually to see if you are charging enough, if you can negotiate better pricing from your suppliers, and when necessary to see how you can manipulate the product information from every possible angle in order to properly plan that order and ensure that you get the sale by making it more attractive to the prospects. The same is true in terms of using this MS Excel Template to plan and manage your product lines (ie not for a specific order). In the video (below) I show you how to run a report which can be exported into Excel then copied and pasted into this template with the cost and price. From there you set all of your quantities at ‘1’ and you can look at each individual product in your item list in QuickBooks. Of course you can run reports in QuickBooks that let you look at this, but the difference here is after looking you can very quickly manipulate the information and see what that looks like, before you make the change permanently in QuickBooks. So you can adjust your Gross Profit % on every product across the board to be 50% (let’s say) and the template will give you the new selling price on every single one of your products. Then you can go into QuickBooks and start making the changes there. I will go over what that looks like in another web cast later this week. In the meantime…
Please enjoy the video, please comment below and let me know if you found this helpful and of course if you have questions use that comment box so that others can benefit from the answers!