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David Geller

3 Ways To Raise Cash With Little Inventory

It’s like having a ‘sugar mama’ to bail you out.

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DOES YOUR STORE have a “sugar mama”?

Let me explain what I mean. Let’s say you and your spouse both earn a yearly salary of $50,000 each (after taxes). Your total expenses are $95,000, and so you can pay everyone and save $5,000 in a year. Life is good.

But then you adopt a child, and total expenses are now $120,000. To make ends meet, you start charging on your credit cards. You no longer can save any money, and your debt starts piling up. Life’s not so good.

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So your spouse, who was a receptionist in a doctor’s office, finally graduates nursing school and gets a job as a nurse at $80,000 net a year. Now household income is $130,000 and you’re ahead of the game once again.

Thank goodness for your sugar mama (or sugar daddy, as the case may be).

This is your jewelry store to a T. How so? You spend more than you can afford on inventory. You can go into most POS programs and analyze sales by category and price point. A good store should have a yearly turn of about 1.

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Take diamond fashion earrings, for example. In a year, you sell 24 pieces. Typically, you would expect in the coming year to stock 24 as well. But the report shows your stock level is not 24 pieces but 42 pieces, almost 2 years’ worth. If you sold all 24 pieces again this year, the total retail sales are not enough to pay the vendor’s bill for the 42 pieces you bought. So how does a store pay for more “things” than it has enough income to pay the bill?

Easily one-half to three-quarters of the debt in most stores is due to buying too much. So how does a store keep from going under with this problem? Easy: Your store has a sugar mama!
Your sugar mama is:

  1. Profits from shop sales, which require very little inventory.
  2. Sales and profits from selling scrap gold.

Welcome back, my ever-loving sugar mama! I forgot all about you from 2010!

You see, if you want to sell a $1,000 ring at keystone, you might have to carry hundreds of thousands of dollars’ worth of inventory to provide the client with a strong selection, all to make a profit of $500 on that ring (and any others you sell). OMG! But when you make a custom design ring for $1,000, the inventory required might only be a measly $6,000. Same goes for any repair.

Back to your other sugar mama: buying and selling gold. All it takes to make money is about $6,000 in your checkbook, and you can send the items immediately to a refiner or dealer and get a check in two weeks.

That said, having a “sugar mama” in the form of gold buying, custom design or repairs shouldn’t relax you from controlling spending in your store. Make money when it comes in, but also get rid of most inventory over a year old. That will reduce your debt and increase your bank account without affecting sales volume.

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David Geller is a 14th-generation bench jeweler who produces The Geller Blue Book To Jewelry Repair Pricing. David is the “go-to guy” for setting up QuickBooks for a jewelry store. Reach him at [email protected].

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