But then comes the inevitable: “Where did all the cash go?” Suddenly, you can’t pay your team, cover rent, or manage daily operations. Overcommitting to inventory leaves you cash-strapped and stressed, sometimes forcing you into a fire sale just to recover some money. It’s a trap no one sees coming—until they’re in it.
The Covid-19 Inventory Shock
Overstocking happens easier than you think. Demand spikes, and your instinct is to load up on products. Better safe than sorry, right? Well, not always.
Remember how some businesses overstocked during COVID-19, expecting the demand surge to last? Once things settled down, they were stuck with warehouses full of unsold goods. It’s like hitting the gym for a week and deciding to build a home gym—sometimes, it’s just too much, too soon.
Managing Markdowns and Taking Your Medicine
So, you’re facing an inventory overload. Now what?
The key is to have a solid markdown management plan. Don’t think of price cuts as just a loss—it’s a strategy to free up cash flow and make room for new products. Start by analyzing your inventory and sales data to see where you can make smart price reductions. The goal is to clear out the old, make space for the new, and keep your cash flow healthy.
Let’s be real: markdowns aren’t fun. No one likes slashing prices, but sometimes it’s the best way to save your business. Without them, you’re stuck with dead stock that ties up your cash and leaves you struggling to pay for essentials like payroll and rent.
Think of markdowns as necessary medicine for your business. It might hurt a little now, but in the long run, you’ll be healthier—freeing up cash and getting rid of products that aren’t moving.
How to Manage Markdowns Effectively
Managing markdowns doesn’t have to be chaotic. Here are a few tips to make the process smoother:
- Do regular inventory audits. This helps you stay on top of what’s moving and what’s not.
- Set a markdown schedule. This prevents excess inventory from piling up and becoming a bigger problem.
- Leverage data analytics. Use data to find the right price cuts that will still protect your margins.
- Run smart promotions. A well-timed sale can help you clear unsellable stock and free up cash quickly.
Final Thoughts: Making Markdowns Work for You
Markdowns might seem like a hit to your bottom line, but they’re crucial to keeping your business running smoothly. By staying on top of your inventory, setting a markdown schedule, and using data to drive pricing decisions, you can turn excess stock into cash flow.
Need a little help managing all of this? Luckily, there are platforms like Growthsayer—they can streamline the process and help keep your business on track for the long haul.
